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
April 29
May 10
May 31
June 20
June 26

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

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

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