Farmers know there are several nuanced factors that make their operations successful ones. Some of those factors are beyond the farmer’s control—weather and the health of farmers and their animals comes to mind. But one thing a farmer does have some control over is their farm equipment. Specific to this blog, farmers control the way their equipment is acquired.
Having the right equipment makes jobs on the farm easier and faster. In some cases, without certain pieces of farm equipment, tasks would be downright impossible.
Deciding between leasing vs. purchasing farm equipment is one of the most important decisions a farmer can make. There are many key differences between the two paths, and below we detail the benefits of both.
Benefits of Leasing Farm Equipment
Lower Upfront Cost
Leasing gives farmers the opportunity to obtain critical equipment without the large initial investment. Leasing usually calls for no large down payments. Typically, you’ll receive 100 percent financing after providing the first month’s payment.
The structure of a lease can be worked out to match the operational needs of a farm. For example, if the equipment is only seasonal usage, a farmer can procure it for the limited amount of time it is useful.
Maximize Tax Benefits
For tax purposes, true leases can be treated as a business expense and the entire lease payment may be tax deductible. Lease purchase programs provide tax benefits that mirror those for owned equipment, such as depreciation and other eligible deductions.
Most Up-to-Date Equipment
Farming technology is constantly evolving to make tasks faster and easier. Leasing allows farmers to always have the most recent versions of the equipment they require rather than being saddled with a piece of machinery that requires more time and energy than it should.
Maintain financial flexibility and stability by preserving working capital. Leasing can provide 100% financing, including soft costs, with no down payment required, so you can keep more cash on hand. Benefit from fixed rate financing and mitigate rising rates in the future. Leasing can also help manage loan covenants and be another source of financing.
Benefits of Purchasing Farm Equipment
When farmers purchase equipment outright, it allows them to own and completely customize their equipment to fit the needs of their farm.
Like anything else a farmer owns, purchased equipment allows them to build and hold equity that can be used as collateral for future investments.
There are unique circumstances wherein tax benefits are only available after purchasing farm equipment. For instance, Louisiana’s farmers enjoy some tax advantages for certain purchases, like rubber tired farm tractors, cane harvesters, cane loaders and more.
When farmers purchase equipment, they have absolute control over it. Farmers can use their purchased equipment when, where and how they see fit, with no risk of violating terms of a lease, which can be somewhat limiting.
Purchasing equipment can be cost-effective over time, especially if the equipment is something they’ll be using for years to come.
Southern AgCredit is all about helping farmers, and if you’re a farmer in Mississippi or Louisiana, let us help you get the equipment you need. There’s no need to worry, as our expert loan officers will figure out a purchasing plan that works best for you. Fill out the form below for more information.