Should you lease or buy your agriculture building?

You’ve been shopping for that new agriculture building for months and you’ve finally decided to get it. Now you face a tough question: should you lease or buy?

Each business is different, and you should factor in your financial situation and business goals before making your decision. To get you started, here’s a quick overview of the advantages and different tax deductions for each choice.

Leasing Advantages

Leasing leaves your cash reserves and lines of credit untouched. You’ll spread the building’s cost over years with monthly, semi-annual or annual payments; and you’ll own the building once the lease is complete.

Leasing Disadvantages

With leasing, as with any financing option, you’ll end up paying more compared to a purchase. How much more you’ll pay depends on the interest rate and length of term.

Tax Deductions if You Lease

With leasing, you can potentially claim your building’s deductions in the short run. For example, leasing your building may allow you to deduct 100 per cent of your total lease payments over the term of your lease. Make sure you always speak with your accountant about your tax options before acquiring any equipment.

Buying Advantages

Buying is simple. You shop for your agriculture building, pay your dealer and the building is yours. You won’t need to complete an application, provide financial information, negotiate terms or sign a contract like you would with a lease.

Buying Disadvantages

You’ll incur a hefty upfront cost that could tie up your cash or lines of credit when you buy your building. Depending on your situation, that may limit your financial capacity for other business expenses.

Tax Deductions if You Buy

Agriculture buildings generally depreciate at a slower rate than other equipment, so you’ll claim your tax deductions over decades. But again, make sure you always speak with your accountant before making any equipment leasing decision.

Your Decision

We can look at each choice like this: leasing equals more financial flexibility and tax deductions in the short term while buying equals a simpler acquisition process and tax deductions in the long term. Neither one is necessarily better, but rather, your operation’s finances and goals should determine your choice.