Is Leasing agricultural equipment worth it?

Managing an agricultural business can be quite capital-intensive. And with profits generally being seasonal, it’s important to manage your cash flow wisely. You may wonder, then, if it would be better for your business to choose equipment leasing over an outright purchase. Here’s a rundown of both the pros and cons associated with agricultural equipment leasing. These points can help you decide the best choice for your business, both in terms of finances and operations.

Pros of Agricultural Equipment Leasing

The big financial benefit that comes with equipment leasing is the lower upfront costs. Compared to purchasing or borrowing funds, your down payment is often substantially less when you lease. Plus, you can choose how long you want your lease term to last. If you need a certain type of equipment for short-term needs, you can arrange it. That way, you’re not paying for something you’re not using or worrying about where to store it in the off-season.

Equipment leasing also offers a solid tax benefit. Your lease is considered an operational expense, so your monthly payments are tax deductible. You also don’t have to worry about values depreciating over years of ownership.

Which is Better for Your Business: Buying or Leasing? Let Us Show You!

Cons of Agricultural Equipment Leasing

There are a few downsides to leasing your agricultural equipment, although the impact may vary based on your business and situation. The first is that you have to make payments for the entire lease term, even if you don’t need the equipment anymore. If you owned the equipment, you could sell it whenever you want.

You also can’t use leased equipment as collateral for other loans. On the plus side, your equipment is then only tied to the lease agreement. But if you’re looking for ways to qualify for extra financing, leasing equipment won’t help you.

A final issue to consider is that depending on your lease, you may be limited on how many hours you can use the equipment. If you own your equipment, you can use it as you see fit. But if a job takes longer than expected or you end up renting or buying extra land, you may be stuck with limited use of your leased equipment.

The Bottom Line

Agricultural equipment leasing can be an ideal way to meet your farming needs without breaking the bank. Make sure the terms and monthly payments work for you, and you may have found the best way to get your job done quickly and efficiently.