December 01, 2016
How to Take the Stress Out of the Equipment Purchasing Equation
By Jamie Kane, Product Marketing Manager, John Deere Financial
One of the most basic, yet arguably most important components of a successful logging business is having reliable equipment to maximize daily productivity and uptime. However, every owner comes to the point where he or she can no longer put off the inevitable: it's time to replace a machine or add a brand new one to the existing fleet.
The process of purchasing new equipment may seem daunting and overwhelming at first, but careful preparation is the best way to take the stress out of the equipment purchasing equation. At John Deere, we recommend setting a strategic plan to make the process as easy as possible, and here are a few tips to get you started.
1. Plan Before the Plan
The worst time to start thinking about buying a new piece of equipment is when a machine begins to give trouble or worse, breaks down completely. In addition to causing unwanted downtime, it can create a panicked, frustrating situation that is undesirable for making big purchases.
Before you get to this point, sketch out a rough plan to help guide these types of decisions. Rather than just flagging immediate replacements, consider the bigger picture and formulate a road map to replace all of your equipment – whether it's next year or in five years. Having this long-term strategy enables rational decisions. It replaces immediate concerns and worries with the confidence to make smart and affordable business decisions.
2. Identify a Replacement Cycle
Part of effective plan development is identifying a replacement cycle for each piece of equipment, considering factors like daily usage, terrain and new technologies. Generally speaking, equipment is typically built to last 10 years or more, depending on specific application and working conditions, however 10 years may be a stretch when it comes to minimizing repairs and downtime. Many customers implement a replacement cycle in the 3-5 year range.
3. New vs. Used – Know What's Best For You
It's important to weigh out the pros and cons of buying new or buying used to be sure you're getting the dependability you need for daily operation with the least amount of downtime possible. While buying equipment, new will certainly put a bigger dent in the bank account, but the peace-of-mind that the machine will run smoothly with far less breakdowns may save you more money in the long run. It's all about what's right for you and your business.
4. Choose a Long-Term Financial Partner
Another way to reduce the stress of the equipment buying process is to pick a financial company you can trust. A few factors to look for when considering your finance company options are stability, reputation and flexibility. Lastly, it's important to work with a company that is familiar with leasing or financing forestry equipment. Industry knowledge is important.
Your business goes through peaks and valleys and may need flexible arrangements for the best cash-flow position. Look for demonstrated flexibility to structure the contract the way you need it – whether it's access to a seasonal payment schedule, securing the best interest rate for an installment plan or utilizing a revolving line of credit account for parts and service offers.
5. Secure Credit Approval
The perception that strict lending requirements have made it nearly impossible to get credit approvals has kept people from pursuing new equipment purchases, despite an abundance of attractive financing options.
Be upfront and honest about your current credit status and business position. In order to make informed decisions, lenders must first gain an understanding of your credit standing, and they are less likely to provide assistance if they uncover unfavorable information on their own. On the other hand, don't hesitate to highlight the bright spots in your business. A good rule of thumb is to provide as much meaningful financial information upfront as possible.
In addition to our competitive rates and flexible terms and payments, we can design any of these special solutions to fit your unique business needs.
Your local dealer can and should play a large role in your equipment purchasing process. Some financing companies offer special payback options or deals to make financing more enticing and beneficial and your dealer can help you uncover those opportunities. Examples of flexible financing options offered by John Deere include:
- Accelerated payments: Starting with a smaller down payment, then making larger payments for the first few months to build equity quickly.
- Alternate collateral: By pledging a "free and clear" machine as additional collateral, you provide increased security with no out-of-pocket costs.
- Skip payments: If you experience a period of decreased workflow, you can avoid monthly equipment cost concerns by scheduling skip payments into your John Deere Financial retail installment finance. The equity you build during your busy season carries over into the downtime.
- Variable-rate contracts: This type of contract generally provides lower payments than a fixed-rate contract, improving your cash flow. And even though rates fluctuate with market changes, your monthly payment will remain the same. If an adjustment is needed, it will be calculated at the final payment.
You have plenty of challenges to address when managing your business every day, but not having the proper equipment to maintain high levels of productivity shouldn't be one of them. If you plan ahead, discuss options with local dealers and partner with a company that will be with you through thick and thin, you can stop worrying about your fleet and get back to running a successful business.