5 Things to Know About Farm Equipment Leases

Running a farm and investing in all the necessary equipment can be a costly endeavor. Because farm income is oftentimes unpredictable, some farmers are choosing leases over buying farm equipment.

To determine if this option is right for you, here are some things you need to consider about farm equipment leases.

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1. Leasing can be budget-friendly — According to Fastline Front Page, leasing equipment can be an attractive option if your monthly cash flow is extremely tight or unpredictable. The lower monthly payments are easier to manage and, if your situation improves over the short term, you can often buy the equipment outright once the lease is up.

2. Leases offer tax advantages — While both purchasing equipment and leasing equipment offer some tax advantages, Midatlantic Farm Credit says leasing offers faster write-offs because 100 percent of the lease payments are tax deductible over the life of the lease.

3. Accurate base hours are important — Living the Country Life explains that a lease agreement will contain the number of hours the equipment is expected to be used. Having a clear understanding of how much you’ll use the equipment is important because if you overestimate the base hours and use less, you will not be reimbursed for that time. Conversely, if you use the equipment for more hours than agreed upon in your lease contract, you will be charged for the overage.

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4. Consider your technological needs — Since leasing equipment means you are not tied to it for a long period of time, Fastline Front Page says it might be a better option for farmers who desire or demand the latest technology.

5. Leases cost more — When you crunch the numbers, you will find that leases almost always cost more in the long run compared to the cumulative loan payments you would have if you bought your equipment. However, Midatlantic Farm Credit says this may not be the primary concern if you are more interested in freeing up short-term cash flow.

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