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The Most Important Pieces of Business Equipment to Always Buy New

equipment to buy new

Owning the right business equipment is an essential cost of doing business for many small companies.  Having good business equipment can make the difference between landing a big contract and losing big money. Buying business equipment is a big investment for many small business owners, which is especially true for those who operate a professional services business that depend on reliable, up-to-date equipment to help serve customers. Many small business owners wonder if they should buy new or used business equipment. Is it worth saving money by buying used? Or are there advantages to getting brand new business equipment?

We talked to a few business equipment experts to get their take on this question.

Al Ruggie, 911 Restoration

911 Restoration helps homeowners recover from fires, floods and other destructive emergencies by cleaning, repairing and restoring damaged properties. Running a business that deals with messy, complicated cleanup and repair jobs requires a lot of expensive equipment – and sometimes it’s better to buy new.

“Companies can always take advantage of the old adage, buy it cheap and you buy it twice,” Al Ruggie, PR Director of 911 Restoration, says. “With this in mind, many types of equipment that companies use the most should probably be purchased new instead of used. Think about it in terms of computers. Some people might say that buying a computer new is a waste of money because it will be obsolete once it’s pulled from the box, but this doesn’t take into account the fact that buying a computer used can lead to slower performance or even a crash, which may in the long run cost the company more than the amount that would have been spent on a new machine. Depending on how high up the person is in the company, and how savvy they are with backups and the like, the more potential loss there is from an insufficient machine that crashes and potentially loses a major sale, contact information, company secrets or anything else that might be of value. Servers also fit into this category too.”

Al recommends buying new technology and saving money by buying used office furniture and other non-tech items that are less essential to your business-critical operations. “Companies must take a long view approach to making purchases of technology, and with that in mind, probably stay away from making any used tech purchases all together,” Al says. “But for lots of other things around the office like desks, swivel chairs, cubicles, conference room tables and chairs, the break room refrigerator and even the phones for the whole office can probably be purchased used without anyone ever knowing the difference.”

Laura Canales, CPA

In addition to the daily business operations related to buying business equipment, it’s also important to keep in mind that there are some possible tax advantages when deciding whether to buy used or new equipment. Laura Canales is a Certified Public Accountant in Boise, Idaho who works with business owners to maximize their tax savings by managing their business equipment purchases and deductions. Laura says that business owners need to think about the total picture of buying business equipment.

“When buying business equipment, consider how long you will use it and what happens when you are done using it,” Laura says. “Take a delivery van, for example. If you expect to be using a delivery van in the course of your business for over five years, consider buying new. You will get far more use out of it (assuming you have not bought a lemon) well past the number of years you have to depreciate it for accounting or tax purposes, and you will have a van that is under warranty for any major repairs. From an accounting perspective, any equipment a business owner buys can be depreciated (taking a partial expense of the cost each year) over its useful life and tax regulations state that vehicles generally are expensed over five years. So – after five years, its accounting value on the business owner’s books can be close to $0.00, or the van might have a salvage value (the fair market value of that van at the end of the five years) of maybe a few thousand dollars still on the books. The van still has value to the business owner, either with continued use or as an asset to sell.  With continued use, not replacing it at the five-year mark gives you essentially expense-free transportation for your goods. The salvage value is also a consideration; if you choose to, you can sell that van for more than its book/salvage value to make a profit. Or you can donate the van to a recognized charity and receive an additional tax deduction for the salvage value.”

Some business owners might think that there is an added tax advantage to buying new equipment, but Laura says this is not necessarily true.

“The only tax advantage of buying new equipment instead of used is: bonus depreciation,” Laura says. “If a business owner needs additional deductions or expenses to lower taxable income in a particular year, and buys new equipment in that year, the owner is eligible to expense most or all of that equipment in the year it is purchased. There are dollar amount limits to the deductions and they might change every year. This bonus depreciation is not available for any used equipment.”

Kabbage Takeaway: Buying new business equipment can often give you peace of mind and perhaps save you money in the long run if you can avoid the hassles and repairs that come with used equipment. Especially for business critical machinery or technology – the things you need to protect your key data and deliver your value proposition to customers – new equipment is often best. But don’t be afraid to save money by buying used equipment in non-essential categories like office furniture, appliances and simple machines to keep your business running.

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Kabbage Team

The Kabbage Team is here to not only fund the small business loans you need, but to help you grow your business through free marketing tips, webinars, tools and more. Is there something you'd like us to cover or want to get your small business featured on our blog? Send us a note at content@kabbage.com.

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