A used excavator can represent a significant saving compared with buying new.
For a civil contractor, earthmoving business, landscaper or construction operator in Toowoomba, the right used machine can also mean taking on work that would otherwise require hired equipment or subcontractors.
But used equipment finance isn’t simply a matter of finding the excavator, agreeing on a price and asking a lender to fund it.
The machine itself matters.
Its age, hours, condition, value, seller and intended use can all become relevant to the finance transaction.
If you’ve found an excavator you want to buy, there are several things worth establishing before you commit.
Start With the Machine
When we look at equipment finance, we need to understand exactly what is being purchased.
For an excavator, that includes information such as:
make and model
year of manufacture
purchase price
operating hours
seller
whether it is being purchased from a dealer, privately or at auction
serial or identification details
how the machine will be used in the business
A five-year-old excavator with moderate hours being purchased from an established equipment dealer is a different transaction from a much older machine with high hours being purchased privately.
That doesn’t automatically make one financeable and the other unfinanceable.
It means we need to understand the asset before deciding how to approach the finance.
Used Equipment Can Still Have Years of Productive Work Ahead
Age alone doesn’t tell you whether a machine is useful.
A well-maintained used excavator may have substantial productive life remaining.
For a business, that’s the important part.
What work will the machine perform?
How frequently will it be used?
Will owning it replace equipment hire?
Will it allow the business to complete work internally that is currently subcontracted?
Will it allow you to tender for different jobs?
Will it replace an existing machine that is becoming unreliable?
The reason for buying the excavator helps put the finance decision into a commercial context.
Hours Matter, but They Don’t Tell the Whole Story
Operating hours are one of the obvious things buyers look at when comparing used machinery.
But two excavators showing similar hours can have very different histories.
How the machine has been operated, maintained and serviced matters.
A machine’s condition isn’t something a finance approval determines for you.
The business buying the equipment should complete its own appropriate inspections and due diligence.
That can include reviewing maintenance and service information and obtaining specialist mechanical advice where appropriate.
Finance answers the question of how the purchase may be funded.
It doesn’t replace deciding whether the excavator itself is a good machine to buy.
Who Is Selling It?
The seller changes the transaction.
You might be buying from:
an equipment dealer
another business
a private seller
an auction house
Each type of purchase can involve different documentation, verification and settlement requirements.
If you’re buying privately, ownership of the equipment needs to be established.
You also need to know whether there are existing security interests registered over the asset.
For equipment purchases, checking the Personal Property Securities Register can be an important part of due diligence.
Be Careful With Equipment Carrying Existing Finance
A business can sell machinery while finance or another security interest is still associated with it.
That doesn’t mean you should simply pay the seller and assume they’ll deal with it afterwards.
If an existing security interest applies to the excavator, it needs to be understood and appropriately dealt with as part of the transaction.
This becomes particularly important with private sales.
Before settlement, the asset, seller and ownership need to be properly identified and the required security position addressed.
Buying at Auction? Do the Finance Work Before You Bid
Auctions create a different problem.
Once the hammer falls, the time for casually investigating finance may be over.
Auction terms can require deposits and settlement within specified periods.
That’s why a business considering an excavator at auction should investigate its finance position before bidding.
Understand:
the auction conditions
buyer’s premiums and other costs
deposit requirements
settlement timeframe
details of the machine
whether the proposed asset fits relevant lender requirements
how much you’re prepared to spend
The excitement of an auction can make it easy to focus on winning the machine rather than the total transaction.
Set your numbers first.
The Purchase Price Isn’t the Only Cost
An excavator advertised for $90,000 doesn’t necessarily mean $90,000 is the complete cost of putting it to work.
Depending on the purchase, there could also be:
auction or buyer fees
transport
attachments
servicing
repairs
registration where applicable
insurance
modifications
additional buckets or implements
Some of those expenses may need to be paid separately from the equipment finance.
Knowing the full acquisition cost helps you understand how much cash the business will need even if finance is available for the machine itself.
Should You Use Cash or Finance?
This is a business decision, not simply a lending question.
A business may have enough money in the bank to purchase the excavator outright.
But what happens to working capital after the payment is made?
Cash may also be needed for wages, fuel, materials, insurance, tax obligations, repairs and the ordinary costs of completing work before customers pay.
On the other hand, borrowing has a cost.
The fact that finance is available doesn’t automatically mean using finance is preferable to using cash.
The question is what funding approach makes sense for the business after considering both the cost of borrowing and the value of retaining liquidity.
Match the Finance to the Asset
A productive asset should be considered over the period you expect it to work in the business.
If you’re buying an excavator that you expect to replace relatively quickly, that should form part of the finance discussion.
If you’re purchasing a machine you expect to operate for many years, the considerations may be different.
Loan term, repayments and any balloon or residual structure should be looked at in the context of the asset and the business.
The smallest possible repayment isn’t necessarily the objective.
The objective is a structure that makes commercial sense.
What If You’re Replacing an Existing Excavator?
Replacing a machine creates another set of numbers.
What is the existing excavator worth?
Is finance still owing on it?
Will you trade it, sell it privately or retain it as a second machine?
If there is existing finance, obtain a current payout figure.
Then you can establish whether the machine has equity, whether there is a shortfall and what the actual funding requirement for the replacement looks like.
This is particularly useful before negotiating a trade.
A trade-in allowance can look attractive until it’s considered alongside the outstanding payout and the purchase price of the replacement machine.
What If You Want to Keep the Old Machine Too?
Sometimes buying another excavator isn’t a replacement.
It’s expansion.
Perhaps the existing machine is fully utilised and another operator could keep a second machine working.
Maybe the business is hiring equipment regularly and wants to bring that capacity in-house.
Perhaps a new contract requires additional machinery.
In that situation, the finance conversation changes.
We’re no longer simply replacing one productive asset with another. We’re looking at an additional financial commitment and what the extra machine is expected to contribute to the business.
That is where understanding the reason for the purchase becomes important.
What Will a Lender Want to Understand?
Requirements vary between lenders and applications.
Depending on the transaction, the assessment may involve information about:
the business
trading history
turnover or income
existing commitments
the directors or applicants
the excavator
purchase price
seller
proposed finance amount
intended use of the equipment
The documentation required can also vary.
Some established businesses and transactions may fit streamlined assessment pathways with certain lenders, while others require more detailed financial information.
“Low doc” doesn’t mean “no assessment”.
The lender still needs to determine that the application fits its requirements.
What If the Excavator Is Older?
Older machinery doesn’t automatically mean finance is unavailable.
However, age can narrow the lender options.
The lender may consider the age of the equipment now as well as its expected age at the end of the proposed finance term.
This is one reason to investigate the finance before committing to an older machine.
The cheapest excavator to purchase isn’t necessarily the easiest one to finance, nor is it necessarily the least expensive machine for the business to own.
Purchase price, condition, expected life, repairs and finance all need to be considered together.
Equipment Should Earn Its Place in the Business
Before financing another excavator, I like to understand why the business wants it.
Not because every machine needs a complicated business case.
But because the answer tells us a lot.
“We’re spending thousands every month hiring one.”
“We’ve just won work that needs another machine.”
“Our existing excavator is costing too much in downtime.”
“We’re subcontracting work we could do ourselves.”
“We need a smaller machine for residential sites.”
“We need greater capacity.”
Those are business reasons for purchasing equipment.
Once we understand the reason, we can look at the transaction and finance in context rather than treating the excavator as nothing more than security for a loan.
Used Excavator Finance in Toowoomba
Thrive Broking assists businesses in Toowoomba and surrounding areas with finance for eligible new and used equipment, including excavators and other earthmoving machinery.
If you’ve already found the machine, send us the details.
If you’re considering several machines, we can start with the approximate purchase amount and what the equipment needs to do for the business.
We’ll look at the business, the asset and the proposed transaction before investigating available lender options.
Because with equipment finance, the question isn’t only whether you can buy the machine.
It’s whether the machine and the finance behind it make sense for the work you’re planning to do.
All finance is subject to lender eligibility, assessment, approval and applicable terms and conditions.