5 Things to Consider When Buying or Leasing Farm Equipment

5thingsto consider

Investing in farm equipment is one of the most expensive yet most critical aspects to any farming operation. Looking at your options and evaluating your needs are good starting points to your equipment purchase. Previously, we have talked about the difference in buying and leasing farm equipment, as well as how to decide to between buying new or used equipment. Now we’re helping you decide which is best by talking about 5 things you should consider!

1. Determine Budget

  • With the way the grain market has been and with Mother Nature being her crazy self, the belts have tightened on a lot of farms. If money is incredibly tight – leasing may be the better option as payments will typically be smaller. At the end of the lease, in many cases you can opt to buy it if the financials have improved.

2.  What do you plan on using the equipment for?

  • Having equipment in the shed that isn’t earning money and that you are paying on is not ideal. For equipment that you will use frequently or year-round, buying is typically the better option. If you only need this piece for small jobs and very rarely, look into leasing or renting.

3. Compare Financing Plans

  • Buying and leasing farm equipment carry many different financial variables that should be evaluated. Below is the analysis of buying or leasing a tractor.

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4. Evaluate Tax Benefits and effects on taxable income

  • Buying farm equipment typically carries much better tax benefits such as Section 179 write-offs.  Below is a breakdown of a lease vs. purchase example.

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5. Determine Technology needs

  • If you want or need the latest technology, leasing may be the better route for you to take. Buying equipment means you are typically tied to the equipment for several years or longer. Aside from trade-in upgrades, leasing may be your better option.

 

For more help on equipment decisions, check out these sites:

http://www.agmanager.info/farmmgt/machinery/MF2953.pdf

http://aglease101.org/DocLib/docs/NCFMEC-05.pdf

http://sfp.ucdavis.edu/pubs/SFNews/Fall98/farmequip/

 

 

 

One thought on “5 Things to Consider When Buying or Leasing Farm Equipment

  1. This is really helpful info, and you even went so far as to provide a financial analysis. Thank you for doing that. I didn’t know buying equipment can usually carry better tax benefits! My husband and I will have to do more research of course, but we might just buy that bobcat we’ve been looking at. Thank you again.

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