Yes, I’ve been on a used equipment financing kick lately, and why not? It’s 2015, everyone watches their money now (it’s not the spend spend spend 1980’s and 1990’s anymore), and used equipment sometimes makes for a fantastic bargain. Plus, used equipment typically qualifies for a Section 179 deduction, so there’s another feather in its cap.
But there is one aspect of financing used equipment that lenders pay a lot of attention to, and really, so should buyers and sellers. And that’s a crystal clear understanding of not only the used equipment’s condition, but who is responsible for anything going wrong / repairs.
Now most equipment financing companies (like mine) only finance work-specific trucks and do not get involved in used passenger car financing, but it’s worth pointing out that the preowned car industry does an excellent job in this regard. To start, many dealerships will do a “certified preowned” thing, complete with checklists and similar. What this does is it tells the consumer a minimum standard has been met. Then they usually back this preowned certification with a warrantee of sorts. It makes everyone feel comfortable – the buyer, the seller, and the lender as well.
Used equipment sellers (and buyers) should take note. A clear assessment of the equipment’s condition is almost certainly going to be a requirement if financing is involved. Plus, who is responsible when the equipment is plugged in, and instead of purring like a kitten, it shrieks like a tired old tomcat that’s had too much to drink.
Here’s why this matters: when a company buys equipment, and it doesn’t work, the first thing that comes to mind is “well, I’m not paying for this”. But if that equipment was financed, the seller isn’t getting punished, the lender is. And lenders don’t like that (I went over this in a few posts last year about what happens when equipment doesn’t work.)
So whether you are buying or selling used equipment, make sure the condition is clearly stated, and that some kind of maintenance agreement / warrantee is part of the deal. Then everyone wins.