Choosing Between Used and New Restaurant Equipment - A Comprehensive Guide for Startups

The initial days of opening a restaurant can be daunting, especially when it comes to managing working capital. One of the critical decisions you need to make is choosing between used and new restaurant equipment. This choice can significantly impact your startup costs and the long-term health of your business. In this guide, we will explore the pros and cons of both options to help you make an informed decision.

Lower Start-Up Costs and Tax Advantages

One of the primary reasons to choose used equipment is the immediate financial relief it offers. When you buy used, you are leveraging capital that would otherwise be burnt on purchasing new items. However, it's important to understand that the dealer from whom you purchase used equipment likely obtained it from someone who didn't prioritize cost savings. This means there is a potential upside in that the dealer might be willing to buy back the equipment once you close your business and resell it. Therefore, used equipment can be a smart financial move.

Another significant factor to consider is the tax advantages of depreciation. Before making any purchase, you need to consult with your accountant to understand the depreciation expenses of new vs. used equipment. Once your restaurant is operational, the amount you can depreciate in a fiscal year will be the main governing factor in your equipment purchases. Your accountant’s advice is critical in determining whether to buy new or used.

Brand-Specific Considerations

The choice between new and used often depends on the specific brand. For example, buying used Hobart equipment can be more economical. However, for other brand names, it is generally recommended to buy new, except for refrigeration equipment, which can be a good choice for used items. With small wares, inspection plays a significant role, and it is crucial to ensure the dealer is reputable.

The Pros and Cons of Buying New or Used Equipment

Buying New:

Pros: Longer equipment lifespan in most cases. Latest technology and advancements. Less risk of equipment breaking down. Warranty on equipment. Reduction in downtime if equipment breaks. Cons: Higher initial upfront costs. Higher costs for slightly used versus new models.

Buying Used:

Pros: Significant cost savings by equipping your kitchen with high-end equipment. Existence of like-new equipment with warranties. Environmental benefits due to less waste. Tax deductions on new and used kitchen equipment. Used equipment will depreciate slower than new equipment. Cons: Equipment may come from unknown suppliers, unknown quality. Older equipment is likely outdated. No guarantees on warranties. Equipment condition may be below standard, issues not discovered during testing.

When to Choose Used vs. New Equipment

The decision between used and new equipment ultimately depends on your financial situation. New equipment generally offers more long-term value, less need for maintenance, and less worry about equipment failure. However, for startups, buying used equipment can be a great alternative, especially if done with caution and from a reputable supplier. If you have the funds to buy new, it is usually the best option. However, if you are on a tight budget, used equipment can be a practical choice for many types of kitchen equipment, particularly if you do a thorough inspection and verify the supplier's reliability.

Conclusion: Choosing between used and new restaurant equipment requires a careful analysis of your financial situation, the potential tax benefits, and the specific needs of your kitchen. By weighing the pros and cons, you can make an informed decision that will benefit your restaurant's bottom line and long-term success.