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Be Wise About Buying Used
November 1, 2008 By: Kristin Smith Paperboard PackagingBuyer beware. Perhaps nowhere is the old adage more relevant in the paperboard industry than when it comes to buying used equipment. With all the consolidation going on, used equipment prices continue to become more and more favorable, and quality used equipment more and more available.
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Combined with the sluggish state of the economy these days, used equipment may have a more appealing price tag to box makers than something brand new. A box maker can save at least half of the investment costs when buying used versus buying new.
But there is a price to pay for buying used even if you are saving a significant amount of money. There are no guarantees and usually no warranties, not to mention the potential for unknown repair costs and obsolete parts. But as long as you take precautions, the payoff of buying used can be worth it.
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"Overall, the savings will significantly outweigh the potential risks," says Jim Schiffman, owner of Global Equipment U.S.A., Vernon Hills, Ill.
Aside from the obvious savings in being able to make plant upgrades for less money, there is also less lead time associated with used equipment. In the several months it may take to get a brand new piece of equipment ordered, made to your specifications, and installed, a used machine can be available almost immediately. This can mean the difference between landing an important contract or losing out to the competition by not being able to meet a customer's needs quickly enough.
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Another potential benefit Schiffman notes is that there is greater reliability in older simpler machines than some of the more sophisticated new machines. They may not offer some of the high-speed setup features, he explains, but they are mechanically solid and keep "clunking along."
Older equipment may also be easier for veteran maintenance mechanics to work on. "The learning curve is lessened," says Dave Coleman, marketing director of American International Machinery, Oak Creek, Wis.
Where to Start
"The obvious issues that need to be addressed are age, condition, make, model and how is the used equipment equipped," Coleman says. "When purchasing used, you basically get whatever equipment is with the machine when originally purchased. In some cases, the machine may be on its second or third owner."
It all comes down to what Keith Umlauf, vice president of sales of The Haire Group, Merrillville, Ind., says are the three "must haves" when beginning the purchasing process: trust, communication, and time. If you take care of that part of the equation at the beginning, you can greatly reduce the likelihood of issues later on.
Umlauf says the best way to start is to begin one-on-one dialogue with a reputable broker or seller. He recommends having a time table: "I am going to need a flexo folder-gluer in the next three months." Also, get the key players at the company involved. Ask the production manager how soon the upgrade needs to be ready to go. Work with the cfo to budget the purchase.
Umlauf says the biggest mistake is not leaving enough time to find the right tool for the job. A company ends up making compromises in equipment capabilities so it doesn't lose out on that short-term deal.
A smart manager will solicit the help of the maintenance manager and give a close on-site inspection. Remember, you are going to have to live with your purchase for 10, 20, even 30 years, so you don't want to rush into it, he cautions.
"We pretty much insist as their agent to get them to invest time and personnel to go in and make a learned decision," Umlauf says.
Where to Go for Help
Full-service used machinery brokers are called upon by the sellers to help them find homes for their surplus equipment. It's the broker's job to locate buyers. They do their homework by taking a look at the machinery and helping to set the sale price. They can provide recommendations and assistance, and will help guide the process for a buyer.
A reputable broker will be aware of what is available in the marketplace or what may be coming available soon. Some brokers publish market guides, have websites and are able to email video and pictures instantly to a potential buyer.
Another option is to use a stocking dealer. Often times these companies own the equipment and will have the machines in their shops to evaluate what work is needed. If the machine has been worked on by the dealer, then in many cases, a limited warranty will be included.
Many companies are out there that may be able to assist a buyer in making an informed decision, but the ultimate responsibility for that purchase is that of the buyer.
"When a used piece of equipment is purchased, fits the need and is a positive asset to production, then it was a success," Coleman says. "On the other hand, if the opposite is the outcome and the machine has issues, then it is in the best interest of the seller to assist the buyer to correct or right the situation. All in all, it is up to the buyer to investigate the history of the machine, with full assistance from the seller."
