It’s said that seasoned wood burns hotter, implying that old things work better. The same can be applied to business equipment and tools that have already been used. If a used machine does its job well, you don’t have to purchase a new one for the same role.

You can finance it at better rates and avoid paying the higher interest rates required for new equipment. However, there are some caveats in used equipment financing you must understand to ensure your investment is safe and it doesn’t become another headache. 

Keep reading to know the pros and cons of used equipment financing and experience the maximum return on this investment.

Why Used Equipment Financing Makes Sense

Used equipment financing is a commercial loan or lease to acquire pre-owned assets for business. It is a strategic approach that saves your working capital and gets you operational gear without the tag of ‘brand-new’. 

Businesses prefer taking loans or leases for essential tools because paying up front leaves them cash-strapped. That’s why the equipment finance industry grew by 3.1% in 2024 despite tougher lending conditions.

Here are four high-impact reasons that make this financing a smart choice: 

Keep Your Cash in the Bank 

Paying for a large asset outright can create an “equipment poor, cash poor” situation. That’s when used equipment financing makes sense because it completely side-steps this trap. You can convert a six-figure lump sum into monthly payments and keep your working capital free to fund expenses, stock inventory, or handle emergencies. 

Avoid Big Value Drops 

New assets lose 20-40% of their value once you start using them. So when you finance a used asset, you buy it after the original owner has taken that painful initial loss. It means that you pay for the machine based on its true production value, not its “new” premium. 

Get Equipment Faster

New machinery may make you wait for manufacturing and delivery, but used equipment is mostly ready to deploy. If you finance it and put it to work immediately, you reduce the opportunity cost of waiting. All this turns the acquisition into immediate revenue generation.

Pros & Cons of Used Equipment Financing 

Buying used equipment comes with advantages and disadvantages, just like any other purchase. And since the decision should be based on your resources and limitations, let’s look at its pros and cons in detail:

Pros 

  • Bigger Savings: With used equipment financing, you effectively pay a fraction of the cost for an asset that still delivers 90% of the function. It’s common to see price tags up to 70% lower than new with used things, and those massive savings go straight back into your business’s bottom line.
  • Cheaper Fees: Since a used asset has a lower declared value, you benefit from reduced expenses beyond the purchase price. Lower valuations mostly mean smaller taxes (like sales tax) and less expensive insurance premiums. Used equipment qualifies for the Section 179 tax deduction if it’s new to your business. Eventually, you can deduct its full cost in the year you start using it, instead of spreading the deduction.
  • Ready for Work: A machine that has been on the market is a known quantity, and technicians are already trained to service it. This means you’ll face lower downtime compared to learning and repairing a new model. 
  • Simpler Approval: The amount you need to borrow is smaller in used equipment financing, so the perceived risk to the lender is reduced. As a result, you go through a faster approval process.

Cons

  • Higher Repair Risk: Used means used. So even if the price is lower, the probability of unexpected component failure is there. You must budget for the possibility that a repair may be needed sooner than on a new machine. 
  • Shorter Loan Term: Lenders base loan duration on the estimated useful life of the asset. And because a used machine has a shorter remaining lifespan, lenders may require a shorter repayment schedule than they would for a new piece of equipment. 

How to Maximize ROI for Used Equipment Financing

ROI (Return on Investment) of a used machine must be managed with some smart steps. At this point, the biggest mistake is treating a used asset the same way you would a new one. If you don’t want that great deal to become a budget-breaking liability, follow these tips:

Get an Outside Expert to Price It

Before committing to a used piece of equipment, hire a third-party expert to give you a formal appraisal of the equipment’s valuation. It’ll make sure that you are financing the actual market value, not an inflated price. Also, you must demand the full maintenance and repair log from the previous owner to validate the machine’s remaining productive lifespan.

Get Your Tax Breaks

Used equipment qualifies for some tax benefits that reduce your net cost. Speak with your accountant about taking advantage of fast tax write-offs, like the Section 179 deduction. It’ll help you expense the purchase price of the equipment in the year you buy it and reduce your taxable income.

Pay Off the Loan Before the Machine Dies

The golden rule of equipment financing is matching the loan term to the asset’s life. You must repay the full loan during the machine’s expected useful life. The absolute worst financial scenario is still paying a monthly bill for a piece of equipment that is broken down and sitting idle. So, manage the loan to capture a window of profitable use after the debt is cleared.

Keep a Digital File of Everything

Your asset’s resale value largely depends on its documentation, so create a digital folder for every service record, repair receipt, and inspection report. This easily transferable history is undeniable proof of the machine’s condition and can boost its resale value when it’s time to trade up.

Conclusion 

Used equipment financing from a credible lender like ROK Financial sets your business up for immediate revenue generation. You don’t have to arrange money to buy new tools/machinery because the lender covers it for you. 

If your business also requires operational equipment, let us know, and we’ll design a doable loan plus payment plan for you. Our approvals and conditions depend on the loan in question, so reach out and find a solution meant only for you.

FAQs

Is there an age limit for equipment I can fund?

Lenders prioritize the asset’s remaining useful life. Generally, the equipment must be expected to hold its value and remain productive until the end of the 15 to 20-year repayment window.

Does my business credit score matter as much as other loans?

No. Since the equipment acts as collateral, financing is asset-based, and lenders focus more on its proven value.

Are there any types of used equipment lenders won’t finance?

Yes. Lenders avoid specialized machinery with limited resale value. They prefer hard assets (industrial, construction) and place strict limits on quickly depreciating items like older technology.