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Right after buying farmland, the most expensive investment is equipment. With it being so expensive, the big question is whether it’s worth to buy it or lease it. The reality is that it depends on each person’s situation. Here is a simple guide to determine whether to lease or buy farm equipment.
Comfort In Buying
The reason buying is so common in farming equipment is Canadian farmers are used to it. Leasing equipment – let alone farming equipment – is still relatively new. Going back to tradition, people feel comfort from ownership and avoiding contracts when it comes to equipment.
Paired with leasing – which in its nature has particular conditions and other complications – it makes sense why people are hesitant to embrace leasing farming equipment.
What’s The Best Option
As mentioned before, each one has its merits and downsides. The deciding factor is people’s situation and how a lease or a purchase of equipment will affect them. There are several factors to consider when picking between the two options. Some are:
- Pricing: leasing will be less expensive and simpler in budgeting rather than buying. Even when financing to buy farming equipment, lease payments are often lower than loan payments.
- Cash flow: Leasing has predictable pricing that everyone can work with.
- Timely: When growing season starts, farmers need reliable equipment. What increases reliability is not only warranties but technician support – something that leasing can offer.
- Short-term use: Leasing also has its appeal if farmers know they’re going to replace equipment in a few years or upgrade it. Leasing condenses payments for that time, making it easier than buying equipment every time.
- Recurring expenses: Leasing means that businesses will end up paying for the equipment all the time. Even though the price point is lower, it doesn’t give peace of mind compared to paying off equipment in a single payment.
- Repairs and maintenance: For leases, the dealership is responsible for all of those expenses, so farmers don’t have to worry about it. This removes a lot of time-honoured traditions on farms.
- Costs: When leasing, it’s important to keep in mind that it’s a financing contract. There will be other costs associated to it, and it’s worth finding out what they are.
There’s Always Hybrid Deals
With all these considerations in mind, one consideration farmers can make is a combination of the two – choosing to lease some equipment and buy others. These can be ideal for farmers in situations where a lot of maintenances is needed – such as sprayers. Ensuring the cost is covered by someone else while keeping new equipment for a period of time is a sensible idea.
Farmland is expensive, but what’s more crucial is the equipment that’s used on that land. Farmers’ decisions matter and it all starts with whether to purchase equipment outright or to have it leased. There are several factors involved, but when farmers make the necessary considerations and apply them to their unique situation, a solution will present itself.
Get started leasing or financing the equipment you need. Contact Yellowhead Equipment Finance today to get started. We’ll help you identify your eligibility, work with you to understand your options, and work with appropriate lenders to get the best solutions for your financing needs.