5 Advantages of Leasing Ag Equipment
Prepare for Spring Planting Season
With winter (hopefully) coming to an end, farmers are starting to prepare for spring planting season. That means it’s time to make decisions on things such as farm, crop and equipment insurance, purchasing seed, evaluating the cost of crop inputs and analyzing the need for newer, more advanced farm machinery. But for farmers who decide to invest in a new tractor or combine, is leasing or purchasing a better option?
Buying vs. Leasing
One of the first things farmers should consider when buying or leasing is the monthly payments versus how much income will be generated from your operation. In many cases, equipment leasing is going to be a more economical choice than securing a loan.
Two advantages of leasing farm machinery are that the farmer can take depreciation on the equipment and leasing offers a large degree of flexibility for payment terms to help with cash flow needs. When leasing machinery, it could be structured to result in smaller payments than a loan. Depending on whether you lease through a dealer, bank or other lender, you could have a large balloon payment at the end of the lease term or you could choose $1.00 buyout.
Here are some other advantages of leasing Ag equipment:
- Machinery leasing utilizes operating capital instead of investment capital;
- The lease application process is hassle-free and done all-inclusively at one location;
- Capital leases are structured to allow the customer to keep all depreciation including 100% expending on qualifying equipment. These is commonly $1.00 due at lease expiration
- The lessee has full ownership at the end of the payment term if a tax lease is chosen otherwise with a capital lease the lessee has ownership up front so they can take advantage of full depreciation; and
- With 100% financing, there is no capital outlay required
Ready to consider leasing?
When you are ready to consider leasing, you’ll want to research who offers the best leasing options. Choices include leasing through a dealership, large bank or local community bank such as Lincoln Savings Bank. Unlike leasing through a dealership or large bank, when you choose to work with us, we will never charge a termination or prepayment penalty; and unlike a dealership, we are able to coordinate all your agribusiness financing needs.
Lincoln Savings Bank, Member FDIC
Leases and all related servicing are provided through partnerships with other lending institutions.
*Always consult with your tax professional.