When going into business, it’s often much cheaper, initially, to purchase used equipment. But over time, this used equipment may cost you more money, or it may last well beyond its typical lifespan and be a steal.
There’s always going to be a debate between which is better new or used restaurant equipment.
But we’re going to help you understand when buying new vs used equipment is ideal.
Advantages and Disadvantages of Buying New Equipment
New equipment is new, and this means that the equipment should be:
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Fully operational
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Free from defects
You have a certain level of peace of mind when you choose new equipment over used equipment.
5 Reasons to Only Buy New Restaurant Equipment
When buying only new equipment, you’ll benefit from:
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Longer equipment lifespan in most cases
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Latest technology and advancements
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Less of a risk of equipment breaking down
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Warranty on equipment
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Reduction in downtime if equipment breaks
Buying new allows you to rely on your equipment for longer. But there are also some disadvantages to buying new, too:
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Higher initial upfront costs
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Higher costs for slightly used versus new models
Cost is going to be the main disadvantage because the initial purchase prices for a new piece of equipment will always be higher. But there is the net advantage of replacing the old equipment with new equipment, too.
What does this mean?
Net advantage may be broken down as such:
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Old equipment costs over 5 years is:
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Operating cost of $5,000
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Depreciation cost of $1,000
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Total costs of $4,000
Based off of this model, we can see that the total cost of running an older stove may be $4,000 (these numbers are completely arbitrary).
The net costs of replacing the new stove may be:
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New equipment cost over 5 years is:
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Initial cost of $2,300
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Operating cost of $3,000
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Depreciation expense of $1,000
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Sale of old stove for $700
Based on this, the total costs for the new equipment would be $3,600 with the net advantage of replacing the old stove being $4,000 - $3,600 = $400. In this case, over the long-term, it’s more feasible to purchase the new stove because it will save the restaurant money.
There is also the idea that it is better not to replace old equipment if it is not fully depreciated, but this depends on the current state of the equipment. When the equipment is low-maintenance and operating like new, it may be better to hold on to the equipment rather than replacing it. Otherwise, if maintenance and upkeep are high, it may be best to purchase new even if the item is not fully depreciated.
Tax advantages are one of the advantages of purchasing new equipment.
Advantages and Disadvantages of Buying Used Equipment
We’ve discussed why buying new restaurant equipment is a better idea, but there are a lot of advantages to buying used, too. Of course, if the equipment being purchased isn’t mechanical or electrical in nature, buying used may not be an issue.
Most issues occur when buying used appliances, stoves or other equipment that is prone to mechanical or electrical issues.
It often comes down to a decision between buying new equipment and repairing old equipment. This is where the net advantage, outlined above, will help a business understand what is better for them over the long-term.
When buying used, you’ll find that there are several reasons to do so.
5 Reasons to Only Buy Used Restaurant Equipment
Used equipment will benefit the buyer in several ways, including:
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Saving money. A main reason for the debate between used and new restaurant equipment is money-related. A restaurant may be able to outfit their entire kitchen with high-end equipment if they choose to buy used instead of new.
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Like-new equipment does exist, and this equipment may be a good option if you’re just starting out. When buying like-new, you’re purchasing slightly used equipment that may even come with a warranty.
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Less waste. You're choosing to be environmentally-friendly when buying used.
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Tax deductions do exist on new and used kitchen equipment under the current IRS Tax Code.
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Used equipment will depreciate slower than new equipment.
Since a large portion of food service businesses fail within their first year (roughly 30%), there are benefits to buying used equipment. These used items may allow for enough money to be leftover for adequate marketing and hiring of employees.
There's also no harm in buying used equipment as a backup for current or new equipment that, if ceased operation, could cause a restaurant to suffer financial losses.
The issue with choosing used equipment is that:
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A lot of equipment will come from an unknown supplier, so you never know what you’re receiving. Lack of proper standards and possible reliability or trust can lead you to purchase an item that may not work or may be grossly misrepresented.
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Old equipment is likely outdated, so you’re not able to offer the best possible equipment to employees.
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Warranties may or may not exist. This means that if a piece of equipment has a defect or breaks, you may not have any other course to remedy the problem aside from out-of-pocket expenses.
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You may be inheriting someone else’s problem. The condition of the equipment may be below standard, and there’s a chance that even after testing, the issue is sporadic and didn’t present during testing.
Hidden financial costs may also exist, such as the unit was just repaired, but it has been repaired numerous times in the last month. The seller may not relay this information to you, so while the equipment works today, you may need to have it repaired in the very near-future.
Should you choose used or new equipment?
It depends on your financial situation. New equipment should offer more long-term value, less upkeep and less worry that something may go wrong with the equipment. There’s a big difference between new and used commercial kitchen equipment, and if used means a month and not years, it may be a good buy.
Generally, if the business has the finances to do so, buying new is the best option.
Commercial Equipment: Quote and Advice
Get professional advice and estimates on the necessary equipment as well as a list of supplies needed to start a restaurant.
Richard
tel: 718-369-0600
richard@mcdonaldpaper.com