Used equipment finance for second-hand machinery and kit

With new equipment the term is set mostly by affordability. With used equipment the asset's age drives it. Many lenders cap the age the machine may reach by the final payment, and the cap varies by lender and asset type: robust plant and agricultural machinery is given more room than IT or technology that dates quickly. A ten-year-old excavator may still be fundable over a few years; a ten-year-old diagnostic scanner may not be fundable at all.

Lenders also lend against a proportion of what they believe the machine is worth, not what you have agreed to pay. If you are paying above market value, expect a larger deposit. Hours, mileage, service history and the availability of spare parts all feed into that view. For a sense of how different asset types are treated, see our pages on plant and machinery finance, forklift finance and medical equipment finance.

• Title and existing finance. Used machines are often still subject to finance or a lender's charge. A business buyer does not get the protection a private car buyer has, so if the seller's lender is still owed, it may be able to recover the machine. Ask for a settlement letter and confirm serial numbers against the invoice.
• Identification. Plant should carry a readable serial or product identification number. Machines with removed or altered plates are a warning sign and most lenders will decline them.
• Condition and safety. As the user you are responsible for keeping equipment safe under the Provision and Use of Work Equipment Regulations, and lifting equipment needs current thorough examination records. An independent inspection before purchase protects you and helps the lender.
• VAT. A VAT-registered business seller will usually charge VAT; a private seller will not; vehicles sold under a margin scheme carry VAT you cannot reclaim. Under hire purchase the VAT is normally due at the start, so plan the cash for it.
• Tax relief. Full expensing and the other enhanced first-year allowances apply only to new and unused plant and machinery. Used kit generally relies on the Annual Investment Allowance instead, which is enough for most smaller businesses. See asset finance and capital allowances.

Illustration. An engineering firm agrees to buy a six-year-old CNC machining centre for £80,000 from a competitor that is downsizing. The seller still has finance outstanding on it. The lender asks for an independent valuation, which comes in at £70,000, and a settlement figure from the seller's finance company. At completion the lender pays the seller's finance company first and the balance to the seller, the charge is released, and the buyer puts in a larger deposit to cover the gap between price and valuation. The figures are hypothetical and each lender sets its own terms.

Second-hand kit costs less but can cost more to keep running, and trade sales are often "sold as seen" with little recourse if a fault appears. Shorter terms mean higher monthly payments than the same amount spread over a new machine's life. Finance costs on older assets can also be higher because the lender's security is weaker. A business with credit problems may find a used asset easier to fund than an unsecured loan, as our guide to bad credit asset finance explains, but paying cash for a low-value used item is often simpler than financing it.