When a contractor needs another excavator, loader or skid steer, the first question is usually which size and brand. The next one, new or used, shapes the payment, the down payment, maintenance costs and how long the machine will earn. Here is how the two compare from a financing point of view.
Terms and down payment
New and late-model machines generally qualify for the longest terms, up to 84 months with some programs, and often lower down payments. Used equipment is financed over shorter terms as it ages, and many lenders limit the term based on the machine's age and hours. A shorter term means a higher monthly payment, even when the price is lower.
Rates
Your business profile drives the rate more than anything else, but the equipment plays a part. Newer machines are lower-risk collateral, so they often price better. Older machines, private-party purchases and auction buys can carry higher rates or need more down.
Monthly payment vs. total cost
A used machine has a lower price, but compare the full picture:
- Payment: longer terms on new equipment can bring the monthly payment closer to a used machine than you'd expect.
- Maintenance: older machines cost more to keep running: undercarriage, hydraulics, pins and bushings.
- Uptime: a machine down on the job holds up a crew and a schedule.
- Emissions systems: newer engines have more complex aftertreatment. Factor in service support near you.
- Resale value: what the machine will be worth when you trade it shapes your true cost of ownership.
Warranty and dealer support
New equipment comes with a manufacturer warranty and often a dealer service relationship, which makes costs more predictable. Certified used machines from dealers may carry limited warranties. Machines from auctions and private sellers usually come as-is.
Buying at auction
Auctions can offer good prices, but payment is usually due quickly. Line up financing before you bid. Know your approved amount and the lender's requirements on age and hours. Inspect the machine or review the inspection report, and keep the lot details handy for the lender.
Renting, buying out or buying
If you're renting a machine month after month, compare the rental cost to a finance payment. Many contractors find that once a machine is used most working days, owning it costs less. Some rental companies offer buyouts that can be financed.
Mixing new and used
Many contractors do both: a new excavator for daily production work, and a good used loader or backhoe for support. Several machines can be financed together, with terms set machine by machine.
Taxes
Equipment purchases may qualify for depreciation benefits such as Section 179 or bonus depreciation, and rules can differ for new and used equipment. Rules change, so talk to your CPA before deciding.
The bottom line
There's no single right answer. It depends on how many hours the machine will run, your service setup, your cash position and how long you'll keep it. Running the numbers on both with real quotes is the best way to decide.
Weighing your options? Send us the machines you're considering and we'll show you how the financing compares. You can also try the payment estimator on our home page.