Lease or Buy?
It’s the most wonderful time of the year: the end of harvest. Hopefully that’s the case for most of you, but if it’s not, we are still here cheering for you to cross the finish line! As the end of the season approaches and balance sheets are due, you might be thinking about what purchases you’re going to be making in the near future. I’m sure your current combine was perfect the past few months and all of your preparation and maintenance paid off; but just in case it didn’t, and you can’t stand to look at giant hunk of you-know-what any longer, let me try to help ease your pain.
So let’s get right to it… should you lease or buy? This is a great question, and a lot of salesmen might try to trick you into thinking owning a pretty new machine is the best thing for you. Let me tell you a little secret – they’re wrong (surprise!). If you’re not already subscribed to Grainews, I suggest you do that as soon as you’re finished here. Enough messing around; here’s what you need to know.
Sure, leasing equipment has beneficial “tax purposes,” but it also saves you money. If you lease a combine for $10,000 a year, you’ll get an annual write-off of the full $10K a year over the life of the lease. But if you buy, you can only deduct 30% of the annual cost off of an already declining balance thanks to depreciation. You’ll eventually get to a point where you fully deduct that $100K, but it’ll take you a lot longer than if you leased. Personally, I think leasing is a better option just because of the type of farming we do nowadays.
With the number of farms and farmers decreasing but the same amount of land being cultivated, combines are taking longer, harder beatings than in years prior. You need something you can trust, and sometimes a tired combine just won’t cut it. By doing a few year lease, you can make sure you’re able to stay in the field longer and also up-to-date with the latest technology – win, win!
In the end, it all comes down to you and your preferences. If you love your combine and want to build more equity, buying may be the best decision for your operation. If you want to save a little and keep an updated shed, leasing might be the right way to go. Either way, you (and your accountant) know the right call for your operation. Whatever you do, Mud Hog supports you!