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New or used equipment?

Africa’s construction industry continues to record exponential growth thanks to an upsurge growth of urban centers, infrastructural growth, growth in the mining and industrial sectors, general farming needs and an upcoming real estate and built environment that has come as a result of general growth in economies of African countries.

Africa has 51 cities with more than a million inhabitants in 2010, and only Cairo with more than 10 million people. Africa is expected to have more than 100 cities of one million and above inhabitants and seven cities of more than 10 million come 2040.

This trend has led to a steep rise in the demand for construction machinery and associated equipment. This raise in demand has translated into an exponential rise in the price for these machines. With this in mind coupled with turbulent conditions in the world economic circles, many are opting to procuring used equipment as opposed to new ones.

Why used

From a blank page, buying new equipment may seemly be the obvious choice but in many circumstances, it is just not a practical reality. New equipment may not always be readily available in the local market and companies wishing to buy the machinery may be quoted lead times of six months or more–time that sometime and in most cases they do not have. On the other hand used equipment is available immediately and in many varieties to choose from. Additionally, a knowledgeable and skillful dealer can often locate equipment that is in close proximity to a manufacturer’s plant, which may help in sidestepping potential shipping costs.

Africa in particular faces a number of challenges. Sando T, Johnson, the Regional Executive Director in charge of Africa at Motter Equipment Inc, says the challenges facing the industry in Africa are huge and pressing demands of plants and equipment. He cites poor access to funding, capital and credit as big challenges hindering access to equipment especially for new comers in the industry. He adds that Africa is at a disadvantage in terms of technological advancement as many equipment lack the right skills and expertise to operate and maintain them. They are therefore left to lie idle in most cases

He suggests that to help iron out the risks, a potential buyer should find and work with someone and business entity that understands the customers’ product demand, the financial requirements and expectations, the nature of work and environment, the application and results expectations. Motter in a US-based with an international touch with a 30 year market experience.

 

Probably the greatest benefit associated with buying pre-used is the ability of a manufacturer’s engineers to inspect and examine a pre-owned machine first-hand while it is still installed and running product at its original point of sale. This allows the manufacturers to have a better feel of the machine in terms of what the machine does, what parts it has and its overall condition. This luxury is rarely available for new equipment purchases. Depending on the nature and specifications of the machine, new equipment customers can only depend on either drawings or similar models of the machine that have yet to be manufactured, but not the specific and exact machine in question until it has been delivered. The buyer therefore lacks that chance to have a pre-purchase feel of the equipment.

In evaluating the cost effectiveness of buying used equipment against new ones, the big questions generally rotates around how much will be saved in forgoing new ones for used ones and will “pre-owned” machinery last? In many circumstances, used equipment can save customers as much as half the price of new models, sometimes for machines that are practically brand new or else unused and still in their original conditions. Pre-owned machines can be handed down from companies that never took them out of the original packaging and include everything from fluid beds to capsule polishers. Part of the reason behind this is that used dealers are privy to information that competing manufacturers, packagers and suppliers may not be comfortable sharing with one another. In addition, sales representative for new equipment manufacturers may not be inclined to share information about a six-month-old machine they just finished installing. A used equipment dealer finds this equipment, including one- and two-year-old machines that will soon be disposed off due to changes in contracts. In the long-run, the insider knowledge and experience of a used equipment dealer could ultimately save the company a lot of money.

Financial risk and cash flow are subjects with high consideration whenever a company is considering to purchase. Used equipment allows small companies with small budgetary allocations the latitude to purchase “money making” machines at a substantially reduced investment hence reducing on the financial risk and strains on cash flow. Even bigger companies with bigger capital base can benefit by purchasing used equipment for projects and contracts that require expensive or specialized equipment. Additionally, companies that would exorbitantly spend fees for machines they will dispose off in a year or two can maximize cash flow by purchasing the used one. Although some used machine may require modification, start-up costs and lead times can be less than costs and delays incurred from the purchase of a new machine. In buying used the dealers will attempt to locate purchasers for surplus equipment. Ideally, this increases the cash flow and creates floor space as soon as the project is complete.

In regard to the dilemma of whether the machine will last,” used equipment in most cases prove to have the same long and productive lifespan as a new machine. In fact, many used machines have the reputation of lasting for many years while still out-producing and calling for less maintenance compared new machines.

Ironing out post-sale risks

Despite the economic advantages associated with buying pre-used equipment, some business owners shy away from this money saving option. They fear the risk may over weigh the reward. Micheal Rohmeder, the Founder and CEO of Equippo acknowledge that the equipment business is rather too slow to move especially on the online platform.  He says the online market platform is recording small transactions because of the risks that come with buying abroad and the bureaucratic process of importing. Equipo is a Swiss online start-up that prides itself in giving African buyers direct access to inspected machines and trusted owners. The Equippo online marketplace has a “one-stop” approach – the online prices include direct shipping to many African ports, and every machine is available with an independent expert preshipment inspection and 30 day money back guarantee

These common used equipment buying pitfalls can easily be avoided with a little of the buyer’s extra efforts. Here are some measures that can be undertaken to iron out the risk when buying used equipment at auctions, online, privately or via a dealer.

Buy from a reputable seller

There is need to confirm you are dealing with a reputable and legitimate business when buying equipment from an auction house, dealer or company. Have a look at the company’ public records so as to have information of the company’s history and customer base. Online reviews on Google and facebook give unbiased customer reviews that can be pivotal when making crucial and urgent decision. Customer testimonials act as endorsements from other buyers who have already had a feel of what is offered by the seller. Ritchie Bros,offering both room and live online auction platforms, organizes huge heavy equipment auctions every year. Due to its wide global coverage, Richie Bros has over the years effectively acted as strategic partner for construction and mining businesses that are based on the African continent and beyond. Its site in Dubai (UAE) is a powerful international hub that attracts qualified buyers from over 70 countries.

Besides the auctions Ritchie Bros. added services to make equipment exchange easier and more rewarding for buyers and sellers. With its Private Treaty service, for example, the company helps to find buyers for specialized industrial assets and negotiates the sale. The office in Dubai currently hosts a private sale that features ten unused Caterpillar 793D mining trucks among other high value items.

With hundreds of thousands of international asset transactions every year, Ritchie Bros. has a unique position to establish asset valuations and consult on getting the most return on investment. These services are not exclusive to construction and mining businesses. Financial institutions, leasing companies and governments regularly partner with Ritchie Bros. as well.

Conduct a background check

Check out for the equipment’s serial number or pin to ascertain the right ownership. Subject them to police records to see if they have any theft records. Scandinavian & UK Machines, a major supplier of used mobile concrete batching plants in Europe acknowledges that conducting background checks may be a hard task. This is because most of the business is conducted online hence the buyer has no physical contact with the supplier and the equipment on sale. Lack of enough information is also a major challenge that Scandinavian & UK Machines says may lead potential buyers to fall for unscrupulous companies or fall for substandard equipment.

Ensure clear title

Ensure you buy equipment that has been paid in full money borrowed from financing company or bank to purchase them. The financing company or bank will be named on the title certificate if money is still owed. In case you buy an equipment that is not clear title, you may have forfeit ownership to the lending firm

Inspect before you buy

Test and inspect the equipment before you make up the mind to buy. You can employ the services of a qualified mechanic or experienced operator to conduct both physical and functional inspection on your behalf. If buying online look for sites that have a wide range of equipment photos.

Mrs. Musya Tumanyan, Senior Vice-President at Hoffman International, Inc, a US based company that supplies used equipment in the international market, shares his insights on the challenges encountered when buying used equipment. She says sometimes by the time the equipment and the offered price are evaluated and decision is made, that unit may no longer be on the market. Instead a new but more expensive unit may come up because the cheap units are the first to be sold. She advises potential buyers not to fall for the cheap price trap as this could be a sign of counterfeit. She adds that to avoid falling for rogue suppliers, one should take a close examination of the vendor background.

AmeraMex Intl. is headquartered in Chico, Calif dealing in products built by Taylor Machine Works and Terex Heavy Equipment along with Specialty Sea Port Equipment, mining equipment and earth moving equipment. The company also carries out a large inventory of front-end loaders, scrapers, excavators, backhoes, rock trucks, container handlers, log loaders, trucks and trailers. Grant Gauthier, International Sales manager at the firm shares his insights on the challenges encountered when buying used equipments. He says lack of spare parts is a big challenge as many brands of the equipments are sold and used far from the manufacturer. He also identifies lack of field technical support as a major challenge associated with the use of pre-used equipment.

Conclusively, old is gold, so they say. Making use of pre-used machineries could be more beneficial as opposed to going for the new ones. A buyer should however exhaustingly evaluate among other factors, the nature and scale of work, the working environment and requirements, the nature of workers available in terms of both quality and quantity. Cost implications involved could also be pivotal in determining the way to go.

 

 

 

 

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