Buying smart

PART I:
IS IT TIME FOR NEW EQUIPMENT?

Purchasing equipment can be a lot like purchasing a car: intimidating and, in many cases, just as expensive. But before you decide what to purchase, you need to determine whether to purchase. Consider, for example, your old pickup truck. You must confront the question of whether it's time to spend money on a newer, more dependable model, or enjoy your paid-for equipment for a while longer, but possibly at the expense of reliability and productivity. Obviously, every situation is different, but certain basic rules always apply. You'll need to sit down with pen and paper and decide for yourself whether to scrap your equipment or keep it on life support for a while longer.

What's your current equipment worth?

The first part of this process is to know what your current equipment is worth. To decide on a value, you can use various means. You can use a price guide (see box, “Pricing used equipment,” page 22); call your local dealer and ask them the trade-in value; or scan newspaper or Internet ads to find the price of similar model/year equipment.

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If you find an identical piece of equipment in the newspaper, remember that there is a difference between asking price and selling price. Normally, you should take off 10 percent from the asking price to get a reasonable selling price. If the equipment was designed for residential use, but you find it has been used commercially, take off another 25 percent. The equipment will have endured more wear and tear than the manufacturer intended.

Now, should you repair or replace?

Now let's look at an example. The table on page 20 lists the equipment for a small grounds-care company. The owner is trying to decide what to keep and what to upgrade. “Jim” started this company about 6 years ago with an older John Deere mower and has taken on a few more mowers since then. Recently, Jim has begun investing in commercial-grade equipment.

In the table, Downtime represents the number of days that you wanted to use your equipment but it was not functioning, not necessarily total days in the repair shop. Downtime puts you at risk of much more than just not having the mower available on a particular day. Besides the potential for immediate revenue loss, it could also lead to losing customers and using up your day taking your equipment to repair shops.

Cost of Repairs for the last 12-month period should not include normal maintenance such as oil, filter changes or blade sharpening. It would be more accurate if you could average the cost of repairs for the previous 2 years.

This chart includes information that should make some decisions fairly obvious. This owner spent three times more on repairs for his Homelite chain saw than the saw is worth. Besides that, it was down for 7 days that he actually needed it (and it's his only chainsaw). The Echo trimmer has cost him more than twice its current worth in repairs. Both the Snapper and John Deere mowers have had excessive repairs and downtime compared to their worth, as well.

Even though Jim has only recently started to invest in commercial-grade equipment, he has already seen less downtime and less repair costs with that equipment. After examining his equipment in this way, Jim decided to trade in his Homelite chain saw, John Deere mower, Snapper mower and Echo trimmer for newer, commercial-grade units.

Consider all factors

Evaluating your equipment is somewhat subjective. You must consider other factors besides worth, downtime and repairs. For example, whereas Jim had only one Snapper mower, if he had owned 4 or 5 similar models, he would not have been as anxious to trade this one in. Having a uniform fleet has advantages, including interchangeable parts.

Attachments can play a large part in your decision, too. If Jim had an expensive rotary tiller attachment for his John Deere, he might have kept the tractor just for the tiller attachment (or at least selected a newer mower that would adapt to the attachment).

PART II:
PURCHASING AND FINANCING NEW EQUIPMENT

So now you've made the decision that it's time to take the plunge and obtain a new (or used) piece of equipment. You have many options available to you. Your cash flow, credit and equipment needs will determine which plan is best. Here are some questions you should consider before purchasing new equipment.

  • Do you have a trade? Just because your old mower threw a rod or fell into the lake, do not dismiss the idea of trading it towards a new machine. There could still be quite a few salvageable parts; a worn out mower may make a nice down payment on new equipment.

  • Do you already know what you want? Most power-equipment buyers tend to stay brand-loyal. If you had reasonable service from a Toro dealer and the equipment was trustworthy, you will likely choose another Toro. Likewise, if you are comfortable with a particular dealer, you are likely to stick with them.

    This logic is not going to lead you too far astray, but it tends to limit the number of brands and models you end up considering. There are many quality brands available today. Only after you see a wider range of models will you fully grasp what's available and what best fits your needs.

    That leads to the most important part of purchasing: doing your homework. If you don't know what you want, or even if you think you do, there are various ways to find out about the different models available. Naturally, you'll want to visit with local dealers. But there are other avenues to pursue.

  • Attend a trade show. Most major cities have a “Lawn and Flower Show” (or something similar) each spring that will bring out the local dealers of power equipment. This is the perfect time to compare models next to one another and look for the best deal or financing. Often, great deals can be found at these shows. Dealers often offer discounts, and sometimes the manufacturers themselves are there, willing to deal direct.

    Here's a tip for shopping at shows. The last day of the show, especially towards the end of the day, can be a great time to make a deal on a show demo. Manufacturers frequently would rather sell a piece of equipment at little or no profit than pack it up and haul it back to the factory. You might not be able to replace your whole fleet this way, but many great deals have been had in the closing minutes of trade shows.

  • Shop the Internet. The Internet is a great place to research all the newest models and various options. For example: Jacobsen makes 28 different models for the year 2001. At the local lawn and garden show I attended this year, they only brought in 10 models. If I hadn't checked out the Internet, I might not have known they make a Turbo 4-wheel-drive version. Likewise, all the optional attachments are listed on the Internet. So even if you don't intend to purchase via the Internet, it's still a great way to do research.

    With the Internet, you can shop most dealers in the country. Many will be offering discounts and others may be going out of business. Some of them deal in volume sales. I've known people who spent an afternoon working one dealer against another until they got the cheapest possible price. Sometimes you can work these deals out so that delivery is made through a local dealer.

    Also consider shopping the Internet through e-business portals. Several of them focus on the green industry, and they may be a source of some good bargains.

  • Newspapers, trade journals and want ads. Don't dismiss these possibilities. I've seen great deals in local newspapers. Also, check the auction and bankruptcy sections. If you decide to try your hand at an auction, make sure you bring a valuation guide with you. If a 1998 Heckendorn 91553 comes up on the auction block, will you know that it is only worth $7,800? Also, how will you know if an engine or transmission has been swapped? Valuation guides will tell you the standard engine, horsepower, transmission type and other information you need before you purchase the equipment.

    Using a combination of these ideas will reap you the biggest benefits. Don't just talk to one or two local dealers. Do some research on the Internet and find the best deal on the equipment you want. Attend a trade show, and check the newspapers.

  • Dealers. Let's not forget about the most obvious place to look — the dealer. Not all dealers are the same. It will certainly be worth it to drive the extra 20 or 30 minutes to find a dealer you can relate to. Make sure they have a good parts and service department and that their technicians are “factory-trained” or otherwise qualified to service equipment.

    There are tradeoffs with dealerships. I've found that many times the smaller dealerships are less likely to discount their products, but their customer service tends to be better. The larger dealers, on the other hand, often have a better inventory with more parts and accessories in stock.

    These are just generalities, though. The only way to check out a dealer is to stop and go in. And don't forget to check with your local Better Business Bureau before making a major purchase at a dealer that's new to you.

    I purchased a trimmer from a small dealership a few years ago, and they still send me monthly mailers and call me each spring to check on how the trimmer is doing. I feel like I adopted one of their children! If you're a “bottom-line” personality, service that “goes the extra mile” in this way may not be as important to you. However, many people will gladly pay extra for it. So to some degree, the importance of good service is a subjective matter. At the least, your dealer should be dependable, honest and competent.

    Finally, you must remember that some dealers may give higher priority to customers who buy their equipment from them. Saving a few bucks by purchasing equipment somewhere else might not be worth the difficulty of getting critical repairs done in a timely manner. If that seems unfair to you, consider who you would give priority to when you're too busy to do it all. Would you really delay servicing a long-term client for the sake of someone new to you? Not likely.

Paying the bill

You have decided on the model of mower you want (the fun part); now comes the hard part. How are you going to pay for it? Many manufacturers offer special rates and financing. If you want to purchase their mower, they will try to find a way to finance you. Because financing packages can vary, it's smart to put this factor into the overall purchasing equation. Below is a sampling of deals I've seen recently.

  • Straight 6.9 percent revolving fixed-rate APR. This (or some other, similar rate) is a good deal if you don't have the cash and your only other choice is using a major credit card at 18 percent or higher. Restrictions often apply to deals like this, such as a minimum purchase amount, only applicable for new equipment, etc. Expect a monthly payment of about $310 on a $10,000 purchase over 3 years with a deal like this.

  • Six months same-as-cash program. Again, this would be a great incentive if you were waiting for a tax refund or expecting your cash to pay for the purchase to come in through the summer's work.

    Actually, this is a good program even when you have the cash readily available. The advantage is twofold. One is that if a dispute arises regarding the equipment (such as warranty coverage), you have some leverage because you haven't paid for the equipment yet. The second advantage is that you can leave your money invested for 6 months and earn interest on it.

    Most dealers offer something like “Low 9.8 percent APR, no down payment and first payment only after the loan finalizes.” A deal like this might be the best you can swing at any given time, and it really is not too bad. It certainly beats many credit-card rates.

  • Other finance deal variations. Other common offers from equipment dealers are something like 13.95 or 14.95 percent APR, no payment for 120 days, 0 percent down payment, no interest for 120 days or no payment for 180 days. These may be good deals, but remember to find out if “no interest” really means “no interest.” In some cases, no interest for 180 days means that on day 181, if you haven't paid off the equipment, interest is charged retroactive to day one. Be sure to ask.

One major manufacturer offers a 6-pack of payment coupons. Whenever you want, you can submit a coupon instead of your monthly payment. In essence this is the same as 6 months free, but with this deal, you get to choose the free months. For seasonal equipment, this might be helpful for some. Remember to check and see if you will still be paying interest for that additional time. If so, it may not be as good a deal as you thought.

Leasing

As mowers have gotten more expensive, the more practical way for some to afford them is to lease. The advantage of leasing is that after your 2- or 3-year lease is over, you give back the mower. If you use your equipment intensively and would probably replace it every 2 years anyway, then leasing is something you should consider. A $10,000 piece of equipment leased for 2 years (at 8.75 percent) would come to about $480 per month. This particular deal has a $1 buyout at the end of the lease. In essence, you are buying the equipment. You should have a tax professional tell you if there is some advantage to you having a “lease” instead of a “loan.”

Used equipment

To start a grounds-care business with a truck, trailer, mowers, trimmers, edgers and so forth can easily set you back $50,000 or more. All it would take is a severe drought to lose most of your customers. If that kind of vulnerability bothers you, there are other options. Sometimes you can find great deals in slightly used equipment. This means you don't have to lay out as much capital up front, which leaves you less vulnerable to difficult business situations.

No matter what you decide, basic common sense applies to purchasing mowers just as in any business transaction. Read the fine print and ask questions. If you don't understand the contract, ask someone who is knowledgeable in this area to look it over. For major purchases, such as large tractors or business start-ups, don't be afraid to have a lawyer look at it.

Purchasing power equipment is not the chore it used to be. With trade shows, the Internet, magazines and other sources, you now have much more information at your disposal. The more information you have, the better decision you can make regarding the equipment you need. Once you have chosen the equipment you want, financing also is easier than ever. Manufacturers and dealers are doing everything they can to keep contracts simple and make their equipment affordable.

Robert Sokol is a Triple Certified ASE Master Mechanic, and an editor in Intertec Publishing's Technical Book Division (Overland Park, Kan.) for Clymer repair guides and ABOS books.

PRICING USED EQUIPMENT

The Grounds Maintenance Equipment Blue Book offers pricing and specifications for power equipment, including riding mowers/lawn and garden tractors (residential and commercial), walk-behind mowers (residential and commercial), compact/utility tractors, golf carts and utility vehicles, snow throwers, rotary tillers, chain saws, edgers and trimmers, blowers and chippers/shredders, along with equipment serial number sequences and manufacturers' addresses. For more information, call 1-800-654-6776, or log on to www.bluebookvalues.com.

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