Do Your Homework

Buying a used material handler can offer recyclers a number of advantages in the current economic climate, including immediate availability and a lower purchase price. However, buying used does not come without its risks, and recyclers can benefit from doing their homework before purchasing a used material handler.
In a Q&A with Recycling Today, Michigan Cat’s Terry Erickson, Western region sales manager; Bob Neumann, used equipment manager; and Jordan Hodges, used equipment marketing manager, offer their perspectives on the potential benefits and drawbacks of purchasing used material handlers. They also provide suggestions on the questions recyclers should ask when shopping for used equipment as well as insight into the common mistakes recyclers can make when buying used.

Recycling Today (RT): What advantages can recyclers gain by purchasing used material handling equipment?

Michigan Cat (MC): As with most product families, the most apparent initial advantage for recyclers purchasing used material handling equipment is in reducing upfront capital outlay. In such challenging economic times even the most healthy organizations have to judiciously weigh the cost-benefit analysis of every expenditure. With such extreme pressures to maintain positive cash flow, the opportunity to acquire a used piece at half the price of a new machine can be extremely attractive and advantageous for buyers.
More so, immediate availability is an option at times unique to the used market. Market volatility is at unprecedented levels and many buyers don’t have the capital to sit on non-operating assets. Consequently, it can be extremely difficult for organizations that suddenly need to ramp up production or that win a job that requires an immediate start date. Often there isn’t time to wait on ordering a new material handler from the manufacturer, whose production may be delayed even more so than normal based on market conditions and lack of demand. That catch-22 scenario can be a huge stimulus driving buyers toward used pieces.
In addition, some dealers and manufacturers provide rebuild options for their machines, significantly increasing the quality of the “second life” of the equipment. Certified machine rebuilds provide a like-new machine for a fraction of the cost. The certified rebuilt machines provide a lower cost per hour while maintaining uptime.

RT: What are the possible drawbacks associated with purchasing used material handling equipment?

MC: One potential drawback is the variance in condition of used material handlers in the marketplace. It is imperative to recognize that certain industries are much harder on equipment than others and two models of the same make, age and hours can be at opposite ends of the quality spectrum depending on such issues as the environment the machine operated in and to what level of proficiency it was maintained. With a used piece there is a greater probability of worn parts, faulty components and other deficiencies simply from wear and tear, and there is always a greater potential for machine downtime depending on the overall condition.

RT: How can recyclers assure they are getting the best machine for their money when they are buying used?

MC: Gathering as much history as possible is the most crucial step in determining what lies inside the machine. All used pieces have a “story” and conducting the due diligence to obtain a machine’s “story” is the key ingredient when outward appearances and aesthetics can be deceiving.
Working with a dealer that has experience in the scrap and recycling industries offers one of the most beneficial means for navigating the sometimes murky or incomplete chapters available in a machine’s history in that they often have unique resources, contacts and tools to provide the buyer the truest picture of the piece they are examining.

RT: What are the critical questions recyclers need to ask when shopping for used material handling equipment?

MC: Key variables that recyclers need to ask questions about and be especially cognizant of when shopping include:
• Oil sample history;
• Service history;
• First-rate inspections from certified technicians;
• The machine’s original specs;
• Global market conditions regarding equipment;
• Engine, component, attachment condition/history; and
• Rebuild history.

RT: What should a recycler look for in a used equipment vendor?

MC: When working with a used equipment vendor, recyclers should look for:
• Integrity, integrity, integrity;
• A proven track record of experience within the industry along with a larger understanding of and concern for the buyer’s larger objectives and business goals;
• An organization possessing parts and service capabilities specific to the material handler market; and
• Their reputation within the greater used equipment marketplace.

RT: What options do vendors offer for extended warranties on used material handling equipment?

MC: Vendors offering the most comprehensive product support resources and abilities can offer:
• Power train warranties;
• Full machine warranties; and
• Customized maintenance and repair contracts.

RT: What is the most common mistake you see recyclers make when buying used material handling equipment?

MC: First and foremost is the mistake of purchasing a machine when the customer does not either seek out or receive an accurate appraisal of the machine’s actual condition. In relation, regardless of the condition, when customers neglect to develop strong maintenance programs to keep the machine running efficiently they will unquestionably run into problems down the road.

RT: What financing options are available to recyclers seeking used equipment? Is it easier to finance a used equipment purchase than a new equipment purchase in today’s market?

MC: Traditional installment sales contracts and lease products are almost always available with many dealers currently providing low interest rates. While not a financing instrument by definition, the present economic climate dictates that accelerated depreciation and tax deferral tools such as Section 179 must be part of any discussion about financing large purchases. (See “Healthy Incentive” in the April 2009 issue of Recycling Today.) Despite the influx of federal stimulus dollars, many banks are still exceptionally risk-averse. The hurdles to jump over to obtain financing for both new and used equipment can be equally daunting for organizations or individuals in even the strongest of financial health.

More information on Michigan Cat, based in Novi, Mich., can be found at www.michigancat.com.