Used Equipment in 2021 Part 2

By | June 8, 2021

My last post was about used equipment, and how there’s an advantage to getting the equipment now (as opposed to supply chain slowdowns making you wait.) 

equipment leasing advice

I even mentioned financing used equipment, and also went a step further and added in that we finance private party deals (aka user to user, or in simpler terms, buying a used piece of equipment from anyone who isn’t an authorized or “official” dealer.)

And since I mentioned that, I want to mention this for anyone interested: before you talk to your lender about used equipment, do some homework. Because in the end, it’s Caveat Emptor. Here are some tips:

If possible, buy used equipment from a reputable dealer. 

Buying used equipment from a reputable dealer is akin to buying a used car from a well-known automobile dealership – they will likely stand behind the sale with two very important assurances. The obvious one being some type of warranty (even a short one); the not-so-obvious one is that a reputable dealer has probably conducted a UCC search looking for past liens. They also will likely attempt to make certain the equipment is able to be sold in the first place.  

Note that I am using words like “probably” and “likely” here. So be diligent and ask about these things, and even ask what happens if an old lien crops up – will your dealer stand behind the equipment? A reputable dealer should.

Buying from a reputable dealer (especially one that’s an “authorized reseller” or similar) can minimize most of the risk of buying used equipment. 

The rest of these tips are more for buying used equipment from private sellers and/or someone selling on consignment (like a broker). It still may be an excellent deal, but it also means the risk is increased. 

If at all possible, trace the paperwork to the original sale/owner. 

Having a clear paper trail all the way back to the original sale is something you should try and get, so a proper UCC search can be conducted. Now, in the case of long-lived equipment, tracing the sale back to the original owner may be impossible. But it definitely helps to have a paper trail back to the original sale from the manufacturer. And, of course, if you are buying equipment from the original owner, all the better. 

Make sure the equipment CAN be sold in the first place. 

This is trickier than it appears, and even if you have assurances, it can still be murky (which is why buying from a dealer or someone you implicitly trust is recommended). 

For example, if the seller of the equipment has an outstanding bank loan, it’s very likely the equipment is under a blanket lien, whether the seller is aware of this or not. And while it’s probable nobody will show up to halt the sale of the equipment, legally, the bank will still have claim to it. You will want this (and any other) lien cleared / released before buying, period. And again, this is why multiple previous owners can be problematic – if any of them had a bank loan or such, the equipment could have an old lien that nobody is aware of.  

We’ve also seen instances where partners (or spouses) had a falling out, and equipment was sold that should not have been. Again, even if you buy it and have a receipt, you may not be the legal owner. 

Don’t buy from a craigslist seller who only wants cash.

I’d like to think I don’t need to say that, but I do. Just don’t do it. And if the serial number is filed off… yea, run away. 

The biggest reason to be diligent when buying used equipment is in the end, you’re on the hook for it. Old liens that nobody knew about or an unauthorized sale could mean you lose the equipment, yet still owe your lender for it. And let’s be honest: any situation where you’d lose the equipment is already a messy one legally – good luck getting your money back.

The tips we’ve outlined above can help, but in the end, are not legal advice, and cannot guarantee anything. 

Used equipment is typically an excellent choice, and we love financing it. But be diligent and understand the possible pitfalls and risk.

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