The Myths Associated With New Versus Used Machines

I must first make a disclaimer in order to add the most amount of value to this article. Professional courtesy, political correctness and traditional beliefs about copiers will be crossed during this article. However, if I am to truly offer you the best advice on this subject matter, they must be crossed! With that said, I will also provide an explanation each time I cross them. I write this article with one very specific agenda in mind, the customer/prospect’s best interests.

New Versus Used Debate: Some twenty five plus years ago when I entered this industry, there were leaps and bounds in quality and functionality available in newer models.  We were just passing from liquid copiers into powdered toner analog machines. Then, we were quickly changing into the beginnings of connected devices and beginning to change from analog to digital. We then moved into a phase where reducing the consumable’s wear and tear. While at the same time, increasing the quality of the print/copy. As time moved forward, we kept finding new and innovative ways to reduce paper jams, create ease of use, expand features, etc.. but, over the last 10 years, other than a few minor tweaks in ease, quality and functionality, we really haven’t done much to warrant the increased value of a “new” versus slightly used machine.

I can already hear the backlash and fallout I’ll get from those who have their own agendas, own interests begin bashing me with supposed “FAB” (features, advantages and benefits), but, their real anger with my article will be it’s revealing truth! You buy a machine for $20,000 today, and in less than 3 years time it’s worth around $2,000 – $5,000. That’s around $5,000 a year in depreciation.

Let’s Make A Comparison – Let’s say I add a protective service contract with my new purchase, and they charge me around $.075 per copy all inclusive and I do around 10,000 copies a month. Nice even numbers and accurate in today’s average business model. Let’s also say I put this under a lease for 3 years. And my payment is around $660.00 a month on this $20,000 machine we used in our opening example. After my 3 years are over, I will have spent: Service – 10,000 * 36 months * $.075 = $27,000, On the machine I will have spent $660 a month * 36 months = $23,760.  If we add my total investment up, that means in 3 years I spent $50,760.00 to use one copier machine.  Now, let us look at another option. I purchase a used machine for $3,500 that is equal in features and speed to the new one. I make the same amount of copies but instead of spending money on a service agreement, I add all that money to a service account. Here’s what my 14 years of tracking this shows….. Client spends $3,500 on the machine, they spend $4,800 a year($14,400 in 3 years) in consumables and maintenance. At the end of the 3 years they have spent a total of: $17,900. But, let’s say it was not so rosey. The machine had some problems. In fact, let’s say the machine needed replaced every single year. $3,500 * 3 years = $10,500 plus the original consumables of $4,800 per year would mean my worst case scenario would be a total commitment after 3 years of: $28,400. If I compare that figure to the top figure I save $22,360! In fact, that’s almost enough to add another total machine.

Of course, I showed this as worst case scenario. Over the past 14 years, I have added my client’s numbers up and here’s what we’ve found. The client’s commitment rarely surges above 10% over the normal service numbers. meaning, on average the clients were well within a 10% margin of fluctuation over the newer equipment versus the used equipment where service is concerned. The reason why that’s true is because over 90% of service call failures are related to consumable items. therefore, it’s very easy to see how machines that are used rarely need more maintenance calls than brand news ones. The consumable intervals are the same, and if the company taking care of your machines are proactive instead of reactive, then you can manage your machine’s expected attrition rate.  With that known fact, we re-add these numbers using a 10% increase formula. Machine Purchase price $3,500 *.10 = $3,850 / And the total of 3 year’s of consumables is $17,900 * .10 = $15,840. In real numbers, that means over a 3 year period the client using this strategy would pay a total commitment of: $19,690. Basically, less than the original cost of the new machine. 

Conclusion: Companies that lead with new equipment will give you a slew of reasons why new is better. But in truth, the math doesn’t lie. I can buy almost 4 complete machines for the price of my obligation of one new machine. Regardless of the spun numbers these companies attempt to scare you with, the one you should be most frightened over is the large commitment you pay for supposed piece of mind in the new one…. False Statement #1 – Some will tell you that older machines were traded in for a reason. – Response: I always buy machines with less than 200K original copies on them, which is less than their recommended monthly volume. So that’s like finding a used car with 3,500 miles on it.  False Statement #2 – The organizations who sell used machines aren’t professional organizations and don’t do a great job servicing machines. And up time is the most important thing.  Response – The first thing I ask my clients to do when a salesperson uses this myth is to ask them if they also sell used machines. Most salespeople will then start spinning and spewing. But here’s the real answer to that! There are plenty of great organizations out there! If the one you’re using don’t keep your machines running correctly, replace them with a company that does! A new machine or a used machine, it doesn’t matter. In our industry, that machine is like a race car! If your pit crews aren’t giving you the times you need, how shiny the hood is doesn’t matter! Right?  False Statement #3 – The more important parts of this machine aren’t as likely to last on a used machine. Response – I’ve had just as many: motors, control units, sensors, keypads, laser units,  and boards go out on new machines as I have 2 to 3 year old used machines. The truth is, these more important components usually fail for the same reasons, and the slight aging on the used ones isn’t significant enough to make a client pay 3 times the amount of money by purchasing new! Neglect and failure to protect your investments are the two greatest reasons I’ve replaced most of these more important components. The average machine in this range has a lifespan of 10 years or 3 to 5 million copies. It doesn’t take anymore than simple math to see this strategy we’re talking about is in your best interest.

Keep this in mind. The average dealership makes about 60% profit on service agreements. They make less than 20% on new machine sales, yet have convinces themselves this is the best model for you as a client. In truth, I have removed a majority of my clients from service contracts. Had them place that committed money into a service account and in 14 years I’ve never had one client ever walk away with a zero balance in that account. Dealers will tell you they have perfected their service departments by using all these metrics and increased their service response times, decreased your costs and increased your uptime. In truth, there’s no “real” evidence of this at all.. To this day, an average response time is still 4 hours! The average single visit call is still 75% with a 25% need to return with parts. So for all the advertised spin we preach, there’s still a very common basic which remains steady and has for years.

 

The NaySayers! – Every single person who tries to debate this strategy always comes up with the same spin. “Well, our company does better than that! We have a 2 hour response time. Our service costs are lower than that. Our lease rates are better than that. Our machines have better features. blah, blah, blah….. Let me slap down some of these sales slogans really quick so that we can get back to the truth that is the national averages in our industry. – 2 Hour Response times – Are companies who claim that “calling” you is a response! There “physical appearance on premise” still averages out to be 4 hours. – Service Costs Lower – Introductory rate, yes! However, they immediately being raising it by 5% here and 10% there and add on these other smaller admin fees. By the time you get your average 3 year billing, it equals out to the numbers we’ve used here of .075 per copy per 10,000 copies.  Our Lease Rates Are Better Than Your Estimate – Okay, some lease companies do offer a little better, but not by much! And the ones that do, usually have BIG FMV fees, return fees and auto-renew for 2 years clauses in their contracts. I won’t quibble over minute variances on $20,000 that makes less than a $50 to $100 dollar difference overall….

New Versus Used Machines – Again, 90% of the things which break down on machines are consumable related. The other 10% is based upon a machine’s overall life expectancy. If you bought a used car with 3,500 miles on it, how nervous would be that the transmission would go out versus it being new? That’s the kind of fear these dealers who push new are trying to get you to believe in. Adding up the above numbers, let’s say I am wrong. Terribly wrong! Then let’s remember this, if I am wrong, you still only spent $19,690 and have another $31,070 left to correct it. What this really boils down to is the competency of your servicing dealer. If you have a good one, this is the model to follow. If you don’t, why don’t you? Save you and your company a lot of money! Put yourself back into FULL control over the servicing dealer! What do I mean by that? When under service, how many times does your dealer actually come out and service your machine? You pay them monthly, but do they come monthly and proactively service your machine to ensure they catch little failures before they become big ones? Or, do they wait until you call them? Which can sometimes be 6 months later! Put your company in CONTROL… Schedule a cleaning/calibration and paper feed tire replacement quarterly or whatever is necessary based upon your copy volume demand. Are you one of those clients who uses your machine heavily once a quarter, but then hardly uses it at all the other two months? You are the one who gains the greatest value from a per call service, rather than an annual agreement.

Last point – remember, dealers make 60% profit on service agreements! Shouldn’t you be keeping that money? With proper planning and the right strategic purchasing method in place, you will save almost 2/3rds of your current budget on machines. That’s what my over 25 plus years has shown and 14 of those as a dealership owner. Call us today! Let us show you how to implement and take advantage of this type of model. We’ll show you how to streamline your process, buy like machines in multi-machine environments, and even how to park an extra machine in a corner which can be rolled into place in a second, and still save around 2/3rds of your current commitment you spend on new machines.