Figuring Out the Right Time to Buy

Contractors need to weigh several factors before getting new equipment, including size, age and the jobs they'll be handling with it
Figuring Out the Right Time to Buy
Dervin Witmer, owner of Dig-It Excavating in Michigan, operates a Caterpillar excavator on a job site where his crew is installing a new septic system. Witmer has a practice of replacing equipment every five years to avoid downtime.

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It is a common question most contractors struggle with: When is it time to make that investment in a new piece of equipment? Sometimes, the answer is obvious: A piece of equipment breaks and repairing it would cost more than buying a newer model. But for many contractors, the decision needs to be carefully weighed.

Dervin Witmer knows the dilemma well. He started Dig-It Excavating in Cassopolis, Michigan, in 2005 with a new pickup truck and a trailer. Today, his excavating services include installing and replacing septic systems, trenching services, foundations and general site prep.

“I rented a mini-excavator in the beginning, but after six to nine months, I realized I was paying more for renting than what it would cost to buy a used piece of equipment,” Witmer says. “I also think if I can make the monthly payment in a couple days of work and I know that work is consistent, then it’s time to buy a machine.”

LOOKING AT SIZE

That logic is especially true when looking at equipment that comes in various sizes. For example, Witmer says contractors should buy the size they believe they will use the most.

“You then work with that piece of equipment or, if you need to, rent another size,” he says. “Again, if you find yourself doing enough business with that other size of equipment, you can think about buying one yourself.”

RENTING VERSUS BUYING

Jacob Sabin, president of Greenfield Services in Puyallup, Washington, also knows the struggle of deciding whether or not it is time to add equipment. Greenfield Services provides a variety of hydroexcavation services, general excavation work, and utility line work, requiring Sabin to have multiple pieces of equipment on hand. He is currently looking at adding a couple of machines to Greenfield Services’ lineup.

Like Witmer, Sabin prefers the option of renting equipment before buying it, but with a twist.

“I really like to look at that rent-to-own purchase option. If I have heavy usage of something after six months, that shows me the demand is there, so I then decide to buy,” says Sabin, who started his business with a pickup truck and some rakes. “With rent-to-own, all of your rental payments go toward your down payment.”

And if the work is not there to justify buying the equipment, Sabin can end the rental agreement and return the machinery to the store.

When it comes to figuring out where to rent equipment from, Witmer opts for a local dealer who sells Caterpillar equipment. “They are close by, and I can also use them for repairs. You want as little downtime as possible with your equipment,” he says. “If it’s not working, you’re not making any money with it.”

THE NEXT STEP

When it does become time to buy equipment, Witmer and Sabin usually opt for used.

“Every five years, I try to turnover my equipment. I don’t want any downtime, and I am getting the best years out of my equipment,” Witmer says, adding that he usually tries selling his equipment himself versus trading it in since “you usually get a better deal that way.”

Greenfield Services’ Sabin tries to purchase equipment that is about a year old. He says the problem with buying new is that the equipment’s value drops significantly once it leaves the lot.
“I just think buying used is a better deal,” Sabin says.



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