When acquiring agricultural machinery for your farm there is an abundance of factors that need to be taken into consideration. You need to spend time assessing the worth of the machine you are thinking about buying in order to determine whether it is going to be truly profitable. If you believe it is, you then need to compare all of the machines against one and other. This can be an extensive process when you consider the huge variety of machines and farming brands available today. Nonetheless, before you even begin to take all of this into account, the first thing you need to decide is whether you should lease the machine or purchase it outright. There is no right or wrong answer when it comes to this choice. It is all about finding what works the best for your situation specifically. Thus, let’s take a look at both options in further detail in order to help you come to the right decision…
Purchasing farm machinery
First and foremost, let’s begin with purchasing farm machinery outright. This is the option most farm owners tend to go for. Why? Because they then have ownership of the machine, and thus they have something to show for the money they have spent. Moreover, if this is a machine you are going to use on a daily basis, in the long run, it is much more cost effective to purchase the agricultural machinery in question.
When opting to go down this route, most farm managers will use equity or they will borrow money in order to finance machine purchases. Not only does the cost of the machine need to be considered, but if you own it you will also be responsible for all other payments. This includes everything from plans from a farm insurance broker, to tax, to repair costs that are not included in the warranty –such as general maintenance.
Leasing farm machinery
Now you have the full picture regarding the purchase of agricultural machinery, but what about leasing it instead? This is ideal for farm managers who do not have the start-up costs to afford to purchase a machine outright. Moreover, if you only require a machine for a set period of time or if you are unsure whether purchasing it would be worthwhile, leasing is a great solution.
So, what exactly is a lease? This is a long term contract between you and the owner of the machine. The contract permits you to use the machine for the length of time stated as long as you make the payments that have been outlined. The contract tends to last between three and five years. Moreover, you have the option to pay monthly, quarterly, yearly and in some instances upfront. It is worth noting that cancelation of the lease can result in a penalty.
Hopefully, you now know all you need to in regards to the choice between purchasing and leasing agricultural machinery. As mentioned, there is no right or wrong answer. It is all about finding the right solution in relation to your situation and your needs specifically. In fact, a lot of farmers go for a lease to buy a machine. This means they lease the machine and at the end of the contract they have the option to purchase it. The lease payments they have made will be deducted off the total price of the machine if they do buy it. Thus this is another option you may wish to consider.