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June 21, 2023

Is Farm Equipment Leasing Right for You? 

Knowing when to buy or lease farm equipment is a tough call.

Many farmers who are looking to upgrade their operation have trouble deciding if farm equipment leasing is the best financial move. Leasing farm equipment or infrastructure gives landowners access to upgrades that can make them more profitable without high upfront costs. But some choose the path of ownership to have more flexibility of use.

In this article, we’ll break down the pros and cons of farm equipment leasing and empower you with the knowledge you need to make the right decision for your unique operation.  

What Kinds of Farm Infrastructure and Equipment Can Be Leased?

Farm infrastructure and equipment leases give farmers an alternative option to owning tools that enhance their operation, providing flexibility through optionality and cost savings. At the end of the lease term, the farmer has the option to return the equipment, renew it, or potentially purchase it.  

The complete list of eligible farm equipment and infrastructure leasing options would be exhaustive, but the following are some of the most commonly leased items: 

  • Alternative energy assets 
  • Chemical applicators 
  • Combines 
  • Commodity storage 
  • Dairy automation 
  • Dairy parlors 
  • Drain tile 
  • Harvesters 
  • Irrigation equipment 
  • Livestock facilities 
  • Logging equipment 
  • Processing infrastructure 
  • Property vehicles 
  • Tractors 
  • Wine tanks and barrels 
  • And more 

Farm Equipment Leasing vs. Buying

When deciding between buying or leasing farm equipment, it’s useful to compare the pros and cons of each option.  

THE PROS 

Farm Equipment Leasing Farm Equipment Buying 
Optionality: Embrace a range of alternatives beyond long-term ownership. With AgAmerica’s leasing program, you have the freedom to choose from options such as buying, trading, renewing, or returning equipment, providing you with flexibility and control over your assets. 
Tax Benefits: Enjoy the advantage of deducting farm equipment lease payments as overhead expenses from your corporate income, providing potential tax benefits. 
Depreciation Tolerance: By leasing equipment instead of owning it, you are shielded from the risk of losing equity on depreciating assets, ensuring your financial stability. 
Balance Sheet Management: Unlike long-term debts or liabilities, farm equipment leases do not appear as such on your financial statements.  
Reduced Capital Requirement: Farm equipment leases require minimal upfront costs compared to equipment ownership. Most leases require a down payment of 10 percent or less, with the first month’s payment due upon closing. 
Expedites Growth: Farm equipment leasing makes growing your operation easier with a smaller down payment.  
Ownership: Purchasing equipment provides farmers with long-term ownership and the ability to build equity in the asset. 
Equipment Customization: Buying allows for more flexibility in selecting specific features and customizations tailored to the farm’s unique needs. 
Potential Resale Value: Owned equipment can be sold to generate cash or traded in for newer models, providing potential return on investment. 
No Restrictions: There are no usage restrictions imposed by leasing agreements, allowing farmers to use the equipment as needed. 

THE CONS 

Farm Equipment Leasing Farm Equipment Buying 
Long-term Costs: While leasing can be cost-effective in the short term, over an extended period, lease payments may exceed the cost of purchasing the equipment. 
No Ownership: Farmers don’t own the leased equipment, limiting their ability to build equity or sell the equipment for cash. 
Restrictions and Penalties: Leasing agreements may have restrictions on usage, mileage, or modifications. Early termination of a lease may result in penalties or additional fees. 
Dependency on Lessor: Farmers rely on the lessor to maintain and supply the leased equipment. 
High Upfront Costs: Buying farm equipment requires a significant upfront investment, which can strain a farm’s financial resources. 
Outdated Technology: As equipment ages, new technological advancements may render purchased equipment less efficient or outdated. 
Maintenance and Repairs: Farmers are responsible for all maintenance and repair costs, which can be expensive, especially for older equipment. 
Financing Challenges: Securing financing for equipment purchases may be more complex than leasing, especially for smaller or newer farm operations. 
Risk of Depreciation: Equipment values can depreciate over time, potentially reducing the resale or trade-in value of owned equipment. 

The Benefits of AgAmerica’s Farm Equipment Leasing Program

The current economic environment is locking up capital for equipment providers, limiting their ability to provide leasing options for farmers. That’s why AgAmerica created a comprehensive leasing product that can be used not only for farm equipment, but for facilities and alternative energy assets as well.

Along with the flexibility in use, we can provide flexibility in payments to create a leasing loan structure that fits your budget. We can also provide flexibility in loan types as needed to meet your changing needs. For example, if you decide to buy leased equipment or infrastructure outright, you’re able to do so with AgAmerica’s spectrum of financing options beyond leasing.

Through AgAmerica’s leasing program, farmers can explore new avenues of growth, upgrade their equipment, and enhance their operational efficiency without the constraints of long-term ownership. Unlike other lenders, we don’t own your equipment. Instead, we work with you and your third-party asset provider to give you greater financial security through optionality.  

Other benefits of our farm equipment and infrastructure leasing program include: 

  • No down payment required to close*
  • Flexible lease term lengths
  • Payments to fit your budget
  • The option to buy the equipment or renew at the end of the lease

*Subject to eligibility.

Farm Smarter with AgAmerica’s New Equipment Leasing Options

At AgAmerica, we are committed to empowering farmers and fueling the success of rural America. Through our farm equipment leasing program, we provide accessible and customized financing solutions that address the unique challenges faced by agricultural businesses.  

With our nationwide presence and extensive knowledge of the agricultural industry, AgAmerica is the go-to lender to support farms of all sizes.  

Start achieving your goals and learn more about our farm equipment financing options today. 

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