How to Avoid Expensive Mistakes When Purchasing Big Equipment

When it comes to purchasing large equipment, Matt Lachowitzer—owner and founder of Matt’s Automotive Service Center—knows it’s never just about the price tag. As the owner of a 10-location multi-shop operation—spanning from Minnesota to South Dakota—Lachowitzer has an extensive process for evaluating shop equipment needs and identifying reliable vendors.

Ratchet+Wrench sat down with Lachowitzer to find out the specifics of his process and discover why it’s so important to do research when it comes to big equipment purchases.

Driven to Grow 

Growing up on a farm in Central Minnesota, Lachowitzer always enjoyed tinkering around with the equipment and fixing it.

After graduating, Lachowitzer decided to take on automotive repair. He jumped around working at dealerships for a large part of his career. In 2009, he decided to venture out on his own and founded Matt’s Automotive Service Center.

“Over the last 16 years, it's turned into an MSO,” Lachowitzer says. “It's been quite an endeavor. The addition of shops was natural; we just kept expanding. We had a good grasp on the Fargo (North Dakota) market area, and we continued. I wanted to provide more opportunities for my team members to be able to grow. We've hit all the little cities in South Dakota and Minnesota that needed automotive repair to fit the needs of customers.”

Lachowitzer shops presently reside in Bloomington, Columbia Heights, North Branch, Pine City, and Willmar, Minnesota; and Fargo, Moorhead, South Fargo, and South Moorhead, South Dakota.

“I would say our success is based on how we’ve treated our customers and our team members,” Lachowitzer says. “I think that's the two keys to success in any business, how you treat your customers and how you treat your employees.”  Because of his 16 years of experience as a shop owner, Lachowitzer has a lot of insight into vendors and equipment purchase processes.

Planning with Precision

When budgeting for big equipment purchases, Lachowitzer finds it important to look at what his biggest needs are.

“We typically will identify that in our budgeting meetings,” Lachowitzer says. “We have our budgeting meetings towards the end of every year for the next year. So, if there's any equipment that was earmarked the prior year, that gets risen to the top of the needs list.”

Because Lachowitzer runs a multi-shop operation, his team must be selective when choosing what equipment within the shop needs the most attention.

His team often pays special attention to serviceability when deciding if a piece of equipment needs to be replaced.

“One of the big factors we look at is if it’s beyond its serviceable life,” Lachowitzer says. “Have we had issues where we’ve had to repair it more than once in the last 12 months? That is the big thing that triggers us to start looking at whether we need to replace equipment.”

Along with identifying equipment needs in his annual budgeting meeting, Lachowitzer also ensures that the bigger pieces of equipment are inspected annually.

“It’s important to inspect your equipment to ensure it passes certification,” Lachowitzer says. “If it doesn’t meet certification and safety standards without being repaired profusely, that means it needs to be replaced.”

Vendor Reliability Matters

Once the equipment that needs to be replaced has been identified, Lachowitzer then looks at which vendor to purchase from.

“A lot of the vendors I choose revolve around whether I've done business with the vendor before,” Lachowitzer says. “I also look at how they are taking care of things. Are they reliable? Are they responsive? Have we had any issues with warranties with this vendor in the past? Those are the big ones.”

Shop owners need to answer these questions. With big equipment purchases being such a large investment, it’s important to know what vendor relationships could look like throughout the lifespan of the equipment.

If working with a new vendor, then investigate the company. Many vendors have customer reviews available on their websites. If reviews can’t be found online, word of mouth—talking to other shop owners and technicians—is always a good way to find out vendor capabilities.

In addition to researching vendor reviews, it’s also important to look into the company’s service abilities.

“If a piece of equipment breaks down, that costs the shop money,” Lachowitzer says. “We want to make sure that whoever we buy from is responsive and takes care of us. To me, that’s almost more important than the prices.”

Lastly, shop owners should make sure they thoroughly understand the ins and outs of the vendors’ warranty on the piece of equipment.

“You should understand how that warranty is handled,” Lachowitzer says. “So, if you're looking at a guaranteed warranty but there's no service centers nearby—and you have to bring it in or haul it somewhere to get service—you should consider that.”

To Lease or To Buy?

When deciding whether to purchase or lease big equipment, Lachowitzer recommends considering the tax advantages of both.

“Leasing allows you to keep your cash, and purchasing doesn’t,” Lachowitzer says. “There are tax incentives for both as well. There are 179 deductions and things like that. When you purchase something, you can get a 179 bonus, appreciate it, or you can expense it over five or seven years, compared to a lease.”

 With leases, a shop owner can write off the entire lease payment. They don't have an asset to dispose of, but they get to write off the lease.

The other component Lachowitzer considers is the cash side of things. If a shop owner buys something, they’re financing it. It’s important to look at what the terms look like if the shop is paying cash for it. It’s also important to consider whether the shop has the reserves to build to do it.

“On the leasing side, it’s important to consider if the payment works with what you're doing,” Lachowitzer says. “The biggest thing for every piece of equipment you must ask yourself if it’s a need. Is it going to affect our cash flow if we buy or lease this? What's the objective of what we're trying to accomplish by buying this piece of equipment? So, if it's a new piece of equipment, what's going to be the ROI on adding this piece of equipment to our facility?”

When it comes down to it, shop owners need to do their research. Purchasing large equipment is a big purchase for any shop and—hopefully—a long-term commitment.

Without doing the appropriate research on the shop’s needs and the equipment vendor, shops could get stuck with something for years that doesn’t work for them.