Purchasing Imported Equipment - The Currency Exchange Rate and Cost

      The currency exchange rate can have a significant impact on the purchase price of equipment. July 11, 2002

Plans to improve efficiency or upgrade existing facilities often include the purchase of new equipment. Many business owners do their homework before purchasing, visiting tradeshows and showrooms and observing machines in a real-world shop environment.

An often overlooked aspect of this process, however, is the currency exchange rate. Considering that a majority of the equipment in our industry is manufactured in Europe, the cost of the machine to the North American distributor can go up or down based on the current exchange rate. As the US dollar loses value against the Euro, the cost for European equipment (in U.S. dollars) goes up.

Here are examples of recent exchange rates (for 2002) that illustrate the buying power of one U.S. dollar compared to the Euro:


April 15
.88
April 29
.91
May 10
.92
May 31
.95
June 20
.97
June 26
1.00

Consider the following hypothetical example. A North American distributor handles the "Euro Widget Machine". When the exchange rate is equal (one U.S. dollar equals one Euro), the cost to the U.S. distributor is $100,000.00. Assuming the U.S. distributor's profit margin is 20%, the final cost to the end user can vary significantly based on the exchange rate.


US Dollar
Euro Rate
Distributor Cost
Price at 20% Margin
$1.00
.88
88,000.00
110,000.00
$1.00
.96
96,000.00
120,000.00
$1.00
1.00
100,000.00
125,000.00

Had you intended to buy a "Euro Widget Machine" in April 2002, but delayed your decision until the end of June, the distributor's cost would have increased 12,000.00 US dollars and the price you paid would have increased 15,000 U.S. dollars - all due to delaying a decision by nine weeks (and bad timing in the foreign exchange rates).

- The Staff at WOODWEB



Would you like to add information to this article?
Interested in writing or submitting an article?
Have a question about this article?


Have you reviewed the related Knowledge Base areas below?
  • KnowledgeBase: Business

  • KnowledgeBase: Business: Estimating/Accounting/Profitability

  • KnowledgeBase: Business: Plant Management

  • KnowledgeBase: Knowledge Base


    Would you like to add information to this article? ... Click Here

    If you have a question regarding a Knowledge Base article, your best chance at uncovering an answer is to search the entire Knowledge Base for related articles or to post your question at the appropriate WOODWEB Forum. Before posting your message, be sure to
    review our Forum Guidelines.

    Questions entered in the Knowledge Base Article comment form will not generate responses! A list of WOODWEB Forums can be found at WOODWEB's Site Map.

    When you post your question at the Forum, be sure to include references to the Knowledge Base article that inspired your question. The more information you provide with your question, the better your chances are of receiving responses.

    Return to beginning of article.



    Refer a Friend || Read This Important Information || Site Map || Privacy Policy || Site User Agreement

    Letters, questions or comments? E-Mail us and let us know what you think. Be sure to review our Frequently Asked Questions page.

    Contact us to discuss advertising or to report problems with this site.

    To report a problem, send an e-mail to our Webmaster

    Copyright © 1996-2017 - WOODWEB ® Inc.
    All rights reserved. No part of this publication may be reproduced in any manner without permission of the Editor.
    Review WOODWEB's Copyright Policy.

    The editors, writers, and staff at WOODWEB try to promote safe practices. What is safe for one woodworker under certain conditions may not be safe for others in different circumstances. Readers should undertake the use of materials and methods discussed at WOODWEB after considerate evaluation, and at their own risk.

    WOODWEB, Inc.
    335 Bedell Road
    Montrose, PA 18801

    Contact WOODWEB











  • WOODWEB - the leading resource for professional woodworkers


      Home » Knowledge Base » Knowledge Base Article