If you’re in the market to buy some equipment for your business, you might consider buying the equipment used to save money. Now when it comes to equipment financing, there’s a huge difference when buying from a dealer versus a private party. Both dealership equipment financing and private party equipment financing have their ups and downs. Most business owners don’t realize how making the right decision in the beginning can save them time and money.
Dealership Equipment Financing
When buying from a dealer they have more overhead to consider like paying the salesperson, rent, insurance, etc. So with those added expenses they have specific margins they need to make on each sale. Which is why you will usually see higher prices when buying from a dealer.
Some direct benefits of dealership equipment financing, however, include:
- Warranty/Guarantee Options
- Paperwork Arranged by Dealer
- Licensed and Insured
- Typically Faster Process
Private Party Equipment Financing
Comparatively, there are some obvious reasons why someone would prefer private party equipment financing. Here are some examples:
- Better Deals
- Lower Prices
- Better Maintained
- Less Sales Games & Negotiation
Why Do Private Party Sellers Need to Show Proof of Ownership?
I think you would agree; you wouldn’t want to buy something that could possibly be stolen? If you plan on buying from a private party seller, be prepared to have the seller prove ownership. If the equipment is a non-titled piece of equipment there are several ways for the seller to prove ownership.
Depending on which program you are qualified for, these are the different ways the seller can show proof of ownership:
- Original Paid Purchase Invoice from the dealer/vendor
- Copy of an older insurance certificate showing the equipment and the serial number
- Proof of Payment, cleared check, wire transaction being paid to a dealer/vendor
- UCC lien release and a payoff letter from the finance company showing the equipment being paid off
- Previous year’s tax return that shows the equipment & serial number being depreciated on the seller’s taxes
In addition to the seller providing proof of ownership, they might need to supply some photos and complete a form that details the specs on the equipment. There’s a chance where the seller might not be able to provide any of this documentation, and especially if the equipment is older. If that’s the case, it’s best that you find another seller or go to a reputable dealer. Reputable dealers should be licensed and insured, they don’t have to prove ownership most of the time. So the process is faster and easier, but not always cheaper.
Paying for the Equipment
When it comes to paying for the equipment, your equipment financing company will either wire or overnight a check to the dealer. If it’s private party seller they will send out an inspector to inspect the equipment, look at the serial number, and make sure it’s in working order. The inspector will usually come with a check to hand over to the seller and the buyer can leave with the equipment.
Dealership Equipment Financing vs Private Party Equipment Financing
As you can tell, the process is longer and there are more steps needed to complete the private party equipment financing transaction. If you and the seller have the time and proof of ownership, then it just might be the best option – especially if the price is lower.
For others, however, who need some type of guarantee or a quick turn around, dealership equipment financing may be the way to go.
Contact First Capital for an Equipment Financing Consultation
Dealership Equipment Financing vs Private Party Equipment Financing | First Capital Business Finance