You’re in the market for a replacement trailer – do you buy a new one or go for a used trailer?
The decision has wider implications than simply cost, so we’re going to look at the pros and cons of each and give you some advice in the bargain.
Buying a New Trailer
Buying a new piece of equipment has several distinct advantages. First of all, you get to maximize the depreciation deductible against your tax profits which means the IRS gets to subsidize your purchase. You also get equipment which no-one else has used before, so wear and tear is going to be non-existent which means maintenance issues should be zero too. Buying new means you can source equipment which is specifically fitted with the options you specify for your business needs, and also you will enjoy the full benefit of any manufacturer’s warranties and financing deals. You also get equipment which looks new and this helps your industry image, especially with customers who like to see shiny new trucks and trailers hauling their goods around the country.
The flip side of buying new is that it is more expensive. You will have to fund all of the price or raise more credit/lease finance which either will drain your cash reserves or leave you with a higher operating cost base to work from.
The advantages of buying a used trailer are really the flip side of buying a new one.
First of all, you will not need to pay as much for used as you will for new. if you are buying a five year old trailer, you will be acquiring an asset which has lost most of it’s depreciable value and typically this means you can acquire the trailer for a fraction of the cost of a new one (take a look at this used truck for sale as an example). Another benefit is that at this moment in time, the used truck and trailer market is a buyer’s market, and there is a lot of equipment available which is at a depressed price but is also in very good condition. Arranging financing and leasing is typically as easy as for a new unit (don’t believe the stories about new trailers being easier to get financing on).
The downside of buying a used trailer is that you will not enjoy the full manufacturer’s warranty, though this can be offset by buying equipment with a service and maintenance history and ensuring you put in place service contracts. You will also not benefit from such a large tax deductible, but then you will not be outlaying anywhere near as much money as for a new trailer.