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February 6, 2016

Money Minute: Should You Repair or Trade in for New Farm Equipment?

The equipment and machinery used on a farm are as important as the inner cogs and gears of a clock, and everything can grind to a screeching halt on any ag operation when an important piece of equipment is in need of repair. At such a point in time, a farmer or rancher will need to consider whether it makes sense to repair the piece of equipment or to trade it in for new equipment.

The question of repair vs. trading in for new farm equipment isn’t one that’s easily answered. Ag operations need to take the following factors into consideration.

  • The age, hours, and condition of the machine. Observably, a piece of farm machinery that is old doesn’t necessarily mean that it is in bad repair, but you must consider how likely the piece of machinery is to need costly repairs again in the future. Generally, the more hours or use on a piece of equipment, the nearer it is to the end of its life.
  • The availability of superior equipment. At times, buying a new piece of equipment will vastly improve your operation over the outdated machinery that has broken down. In such instances, buying new will have benefits above and beyond simple reliability. Newer equipment might be more efficient, have lower fuel costs, use newer technology, etc.
  • Changes in the operation. If your operation has outgrown the machinery that’s in need of repairs, then buying something that is better suited to handle the increased workload is a smart move. The same is true if the farm’s needs have decreased and aren’t likely to increase; buying a new, smaller piece of equipment that costs less to operate is likely a better option.
  • Importance to the ag operation. Some pieces of equipment might not be able to be out of commission for extended periods of time. If a reliable piece of machinery is needed, and repairs may be lengthy, then new equipment might be the way to go.
  • The state of the ag equipment market. Like any market, the market for ag equipment fluctuates. It could easily change to affect the cost and availability of equipment and affecting the decision to buy new or replace.

You can find replacement strategies at the Iowa State University Extension and Outreach page, Ag Decision Maker. Additionally, ensuring that you maintain your ag operation’s borrowing capacity is especially important for being able to take advantage of deals and opportunities when it comes to ag equipment and more. As land loan specialists, we help every ag business to grow and thrive with our low-interest rates, long amortizations, and outstanding 10-year line of credit.

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