There are many opportunities to upgrade a machine but only one at the right time—and that’s when buying a new machine will cost you less than running your old machine.
A lot of older machines cost more to run. However, chances are the capital costs of acquiring a new machine will not cost less than the maintenance costs of an older machine. If the newer machine can help you be more efficient or productive than the old machine, then acquiring a new machine becomes more attractive from a financial point of view.
Use the below to determine if a machine is worth keeping or whether you should upgrade to a newer machine.
- Engine hours: How long has the engine of the machine been in operation? Major engine components have lifespans. Replacing certain components, such as the transmission, engine control unit and suspension are expensive. Cylinders, pumps, and tires are expensive. If several of these components are reaching their end of life, you may want to divest it instead of repairing it.
- Machine condition: If key machine components are damaged, replacing the machine may be less expensive than repairing it. Damaged components may also lead to safety issues and decreased productivity. So, replacing a significantly broken machine can be less costly than repairing it.
- Job site conditions have changed: Maybe your excavator works fine when used occasionally but struggles when used for full-time production work. If workload changes in such a way that results in using an older machine more heavily, acquiring a new machine is a better decision than running the old one. Also, if you are now required to perform certain tasks that you weren’t performing before—and your old machine doesn’t have the features or capability—you need to get a new machine.
- New features: Manufacturers sometimes introduce new features on a machine that enhance operations so much that it’s worth the extra investment. The new features may enhance efficiency, productivity, safety, or ease of use. For example, a machine that is easier to operate could help decrease time spent training operators. Safety benefits decrease risk and the need for implementing other safety protocols.
- As part of a winning bid: Contractors can benefit from making the acquisition of new machines as part of their bid. Some customers don’t want beat-up, dirty machines on their property. Some municipalities may want new-looking garbage trucks and snowblowers to avoid complaints from residents. By attaching the equipment purchase to the bid, its cost is covered by a new revenue source.
- Environmental concerns: A lot of customers—especially government agencies—are concerned with the carbon footprint of a project and a property. If the customer outlines environmental specifications as part of the project—and your old machine has a Tier 2 engine—you will need to get a new machine to meet the environmental specifications.
Of course, there are other considerations when deciding whether to purchase a new machine or not. You need to look at your company’s current financial state and the size of your work pipeline. If you’re tight on cash or have insufficient planned work soon, it may be better to hold off on making that purchase.
You also must look at the payment options and the vendor's service. If you can’t find payment options that work for your company or if the service provided by the equipment dealer is underwhelming, you’re probably better off not making the purchase.
Lastly, look for equipment on sale. A lot of equipment dealers will discount equipment at the end of the year to make room for next year’s models. And check equipment auctions. Sometimes a used, newer machine is the best solution.