Leasing vs. buying agriculture equipment

Let’s clear the air right away. There’s no hard and fast rule that says either leasing or buying is ideal.

Some industry preconceived notions favour buying, but both options have their advantages and disadvantages. The more optimal decision will depend on your business and financial situation.

We cover general leasing advantages extensively here, and there’s a solid article outlining the agriculture equipment buying process here. But for the sake of convenience, we’ve compiled the pros and cons to consider when leasing or buying your next piece of Ag equipment.

 

 

Questions to Ask

Now, take a look at your situation. How sensitive is your cash flow or line of credit for equipment purchases? Does your desired equipment have a high rate of obsolescence? What’s your preference - possibly claiming your equipment tax benefits in the short term through leasing or long term through depreciation? How’s your credit situation?

Answer these questions first before you make any leasing or buying decision and always consult your accountant to work the numbers and find out what is right for you.

 

A Real World Example

One of our agriculture customers, Jim Leslie, consistently leases his grain bins with us since they’re ideal for leasing.

Here’s why.

He may have experienced tax advantages over his three, five, or seven-year lease period, rather than a 20-year depreciation period had he made a purchase. By structuring the leasing of his bins over years, rather than a lump-sum purchase, he preserved his capital for crop inputs. He also kept his storage equipment once his lease was finished thanks to a 10 per cent buyout option.

Again, that’s not to say leasing is your ideal financing method, only that it’s more optimal for some Ag businesses depending on their business model, equipment needs and financial situations.

Think leasing is right for your business? Fill out the form below. We’ll contact you right away and discuss your options.