Saving Money With Used Equipment

Be smart when buying or selling.

By Jim Scarboro

I'm sure you remember when the gas market, which is a pretty good barometer of the economy since it touches so many different industries, had everyone looking for ways to keep business alive. The stock market bubble had burst, the U.S. economy was dragging its feet, 9/11 had everyone up in arms. U.S. relations with the Middle East were strained. One of those Middle East countries, Iraq, was and is sitting on the world's second largest oil reserves.

It takes oil to produce steel and to move it, and it is heavy. When oil and transportation costs went up, so did the cost of most of the equipment we use in the gas industry. An already competitive new tank industry, struggling with costs, immediately took the opportunity to raise prices.

1,200 gallon tank before rehab

1,200 gallon tank after

The price of new cryogenic tanks almost doubled in just two years. Not far behind, the used tank market followed suit. Every portion of the hardware we use was affected to some degree.

When the economy bounced back a couple of years ago, distributors regained confidence, and the gas industry recovered quickly. Now it seems as though things are getting back to normal. Almost. Distributors are signing on new business again, and companies that rely on us to support their industries, such as food freezing, welding, medical, etc., also are doing well. There is one major difference that can't be overlooked. The price of supporting hardware such as tanks, vaporizers, pumps, etc., has climbed and is unlikely to return to previous levels.

Companies that were able to maintain an inventory of equipment purchased at lower prices prior to the bump in the economy have a distinct advantage when bidding on new business. Distributors that don't fall into that category should read on. There are some ways to still be competitive.

Use Common Sense
One way to out-bid your competition is to place used equipment. There are many companies that offer used tanks, rebuilt pumps, rebuilt trailers, etc. You must be willing to follow a few guidelines, though, to make sure you don't end up getting stung (see chart). When buying used equipment, use the same common sense you would use when buying a used car, house or any other second-hand item you might buy.

Stay Flexible and Creative
Another way to get a competitive advantage (especially for smaller distributors) is to look at the contract you are offering your customer. Be flexible! If you are trying to get an edge on a gas contract, be creative.

Here's one example: Offer the customer a contract for five years, during which time you supply the gas and lease them a tank. After five years, they have paid off a five-year lease purchase with a $1.00 buy-out at the end. They then own the tank, thereby reducing their payment after five years to just the gas portion of the contract. You give up the rental on the tank after five years, but at least you get the gas business. You end up with a happy customer who is more likely to continue purchasing their gas from you.

Atypical Equipment
Another way to control cost is to consider equipment that meets the requirement for a given project, although it may not be the item you would normally prefer to buy. These items may be available more readily and probably for less money. An example is a used 250 psi tank with an aluminum inner material. Not a choice if you think you will need it for oxygen service, but perfectly acceptable for nitrogen or argon service.

The Used Market
Currently, the used tank market is booming. We in the business can sell tanks as fast as we can find them. The flip side of the coin is if you need a tank, it may not be as easy as it once was to find. There are waiting lists and standing orders for the most popular ones. Don't get stuck trying to find one at the last minute. If you have the ability to do so, try to maintain enough inventory to take care of expected business. Some of the companies that sell used tanks may be willing to store tanks for you if they are paid for in advance. This may save you the expense of moving the tank twice. Even new tanks may have a considerable waiting period. The main thing is, don't wait until the last minute.

If you are shopping to upgrade existing equipment, companies may be more willing to work a trade. It's a great time to turn your unused assets into cash. Many companies will be happy to buy your used equipment. Just remember that the great deal is when all parties involved walk away happy. You get a fair price, the buyer gets it at a price low enough so that they can make necessary repairs and sell it for a profit at a price that also saves the end-user money.

The used market varies and is extremely unpredictable. When bidding on new business, unless you already have the equipment, you are going to have to buy new equipment to fill the order. If you do get lucky and find used equipment on short notice, consider it to be icing on the cake. I predict that for at least the rest of the year, used equipment, and in some cases new equipment, will be in short supply.