A Good Buy?

For a recycler or who is considering expanding into the information destruction industry, the decision whether to buy a new or used shred truck most often hinges on cash flow. But entrepreneurs should consider a number of other factors beyond a truck’s price tag, including maintenance history and growth potential, when shopping for a used shred truck.

"Price is the main reason to consider used equipment," says Brian Drew, sales manager for Shredfast Inc., an Airway Heights, Wash.-based manufacturer of shred trucks. "A start-up business needs every opportunity to preserve start-up capital. But initial capital equipment price is only a portion of the operating cost." He adds, "It could be a wise decision for a start-up business to enter with a well-maintained used vehicle, but probably unwise to sacrifice performance, reliability and efficiency that new units should offer."

Mike Oden, director of sales and marketing for Axo Shredders Corp., a shredding equipment manufacturer based in Kitchener, Ontario, encourages entrepreneurs to look closely at the numbers. "When it comes down to it, most entrepreneurs are looking at cash flow and monthly payments," he says of shred truck acquisitions. "If the new equipment is slightly higher in price but secures a lower [interest] rate, the difference in monthly payments between a three-year-old truck and a new one may be negligible."

However, entrepreneurs can find substantial savings when purchasing used shred trucks if they do their homework first, says Les Katich, sales manager of ShredSupply Inc., a Spokane, Wash.-based company that specializes in used shred trucks. "Just like consumer vehicles, the first person or company to drive the truck off the lot takes the biggest loss against the equipment. Purchasing used can potentially save you upward of $100,000 and keep your overhead costs down tremendously." He advises, "Make a well-educated investment and don’t base everything on price or promises."

MAINTENANCE MATTERS

When purchasing a used shred truck, original equipment manufacturers (OEMs) and financing professionals stress the importance of getting a second opinion concerning the vehicle’s roadworthiness. Oden suggests involving a third party, such as a shredding repair service, to examine the vehicle in question, including the chassis and the shredding equipment. "It is still a very big decision to buy a nearly new truck. Get a second opinion unless you have first-hand knowledge of the truck in question," he suggests.

When dealing with a used equipment vendor rather than an OEM, Chris Hawn, director of business development, waste division, for Archdale, N.C.-based Vecoplan LLC, a shredding equipment manufacturer, suggests asking for references. "Talk to the new truck manufacturers about used truck suppliers and do your due diligence," he says. "I always suggest looking at the chassis and getting documentation on the servicing of the equipment, including the shredder hours and any events that went on with the truck. Track down the VIN (vehicle identification number) and go to the OEM to see if there is a record they can bring to your attention." He adds, "When it comes to service and support that we supplied, we can look it up."

In addition to requesting detailed records from the OEM pertaining to the chassis and the shredder, Paul Garfunkel of Intek Truck & Equipment Leasing, Roseland, N.J., advises recyclers in the market for used shred trucks to request a Carfax report for the vehicle they are considering. Garfunkel also suggests having an independent garage examine the vehicle for potential problems.

A garage should perform a compression/leak down test of the engine to examine for leaks in the valves or piston rings, says Joe Roberto, vice president of sales and marketing for Shred-Tech, Cambridge, Ontario. Shred-Tech manufactures mobile and plant-based shredding equipment. The engine oil and transmission fluid also should be sampled and tested to look for wear in the gears, transmission and crank case bearings, he says.

Drew stresses the importance of obtaining a vehicle’s maintenance history and warns buyers to look out for progressive damage, or small problems that go unresolved that could potentially lead to a catastrophic failure, as well as unresolved recalls. "If not maintained properly, it doesn’t matter how good the price looks on the front end," he adds.

It’s also important to consider the vehicle’s features. "The first thing we suggest is asking the same questions you would for new trucks: how reliable is the technology (new technology isn’t always the most reliable); what is the throughput and load capacity; what type of materials will it shred; will it fit your current need; how much is the maintenance annually; if major components break, what will the costs be to fix them, etc." Katich says. He also suggests that buyers educate themselves about parts availability for used equipment, particularly in the case of older shredding technology.

Entrepreneurs also should consider the growth potential the vehicle offers. "If you purchase too small of a truck, it’s possible you will outgrow it before paying it down and that could stunt your company’s growth for future equipment acquisitions," Katich adds.

Roberto also advises viewing used trucks in person. "Never buy a shred truck without seeing it in person," he says. "Get on a plane and look at the truck. Take it to a local truck center and have them inspect it." Roberto says a chassis inspection generally will run from $150 to $200.

Jack Donley of Shred Quick, a document destruction firm based in Sarasota, Fla., bought a used shred truck through ShredSupply because of his relationship with Rocky Rajewski, ShredSupply’s president. "We had an immediate need and went to the dealer we had confidence in and [who had] a reputation for reliability," he says.

Shred Quick was having mechanical problems with a new truck it had purchased and turned to the used truck market because of the immediate availability and lower cost, Donley says. "It cost less than 40 percent of a new truck," he says of the used truck the company purchased.

When shopping for a used truck, Donley suggests inquiring about the vehicle’s mileage and the total hours on the equipment as well as what has transpired since the vehicle was last serviced.

Examining a shred truck involves looking beyond the odometer reading. "The odometer is not always a true indicator of how much use the engine has had," Roberto cautions, as it does not reflect the engine idle time required for shredding. He suggests taking the shredder hours into account as well to get a truer picture of the engine’s use.

Document destruction professionals also should keep in mind that used equipment is generally not covered by a warranty because of its age. Most shred trucks available for resale are five or more years old, according to sources. For those destruction professionals who would like the protection of a warranty, rebuilt equipment could be an attractive option.

TAKE TWO

Vecoplan’s Hawn advises recyclers to talk to the manufacture of the shred truck they are most interested in to see if any used vehicles are available directly through the OEM. In such cases, the manufacturer may be able to recondition the vehicle’s shredder and offer a 30- to 90-day warranty on the equipment, he says.

Roberto also recommends reconditioning a used truck’s shredder at the time of purchase. At Shred-Tech, all shredder knives and shafts are replaced during reconditioning, and a 90-day warranty is offered on those components. The reconditioning cost can be factored into the overall cost and bundled into the financing deal, he adds.

"It’s my strong recommendation to do anything that needs to be done on the truck when buying the truck," Roberto says. This can range from new tires to shredder reconditioning to chassis work.

Katich says there are some situations where ShredSupply is able to provide a limited warranty on the used shred trucks it sells, including an 18-month warranty on the chassis. (See Equipment Report, "ShredSupply Offers Chassis Warranty on Used Trucks," page 123.)

NEW TERRAIN

Both the new and used truck markets have changed in the last year in light of the recession, as OEMs responded to the downturn by lowering prices on their new vehicles, which in turn pushed pricing on used shred trucks downward, Garfunkel says.

"The used shredding truck market is quite a bit different right now for a variety of reasons. Obviously the economy is part of that," says David Murray, president of Evergreen Financial Inc., Portland, Ore. "Half the trucks I financed were used in a given year in the past, but two-thirds of start-ups were buying used in ’08 and ’07," he adds.

Murray says a few late-model shred trucks are becoming available because some entrepreneurs who may have purchased more shred truck than they needed are anxious to get out of the investment rather than allow the time they need to grow into the vehicle.

Some sources also caution against purchasing late-model trucks without thoroughly investigating them. "Often a great price on near-new equipment is a forced sale or removing a problem," Drew says. "I don’t believe ‘getting a steal of a deal’ is ever as good as it seems."

Katich urges recyclers to be vigilant. "When an industry grows as rapidly as ours, it always brings out the ‘quick money sharks’ that you need to be careful of. Usually, if the deal is ‘too good to be true,’ then it is, and you need to watch out. We tell buyers to do their homework and check numerous references before investing any money into a truck or even entering the shredding industry. Regardless of the price you pay for the truck, it will not make you any money unless it can be put into service immediately."

DeAnne Toto is managing editor of Recycling Today and can be reached at dtoto@gie.net.  This article first appeared in Storage & Destruction Business, a sister publication to Recycling Today.