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Key factors to consider about leasing: Facilities, equipment, vehiclesKey factors to consider about leasing: Facilities, equipment, vehicles

Leasing can help mitigate some risks by helping with cash flow.

September 1, 2023

3 Min Read
Tractor ploughing a field on a farm
LEASE OPTIONS: Through Farm Credit Leasing, farmers can use a lease for most equipment and vehicle needs for farms or agribusinesses. Richard Newstead/Getty Images

by Tyson Lemon

Both experienced and beginning farmers need new machinery and equipment to maximize the farm’s potential, and they don’t always have the cash flow necessary to buy these crucial updates.

In many cases, leasing can often provide a solution. Among the many benefits of leasing, some of the key factors might be:

  • zero down payment

  • quicker depreciation than with a typical loan payment

  • flexible payment schedules

  • simple application and easy approval process

  • lease-to-own options

What can be leased?

Every leasing company may be different. Through Farm Credit Leasing, farmers can use a lease for most equipment and vehicle needs for farm or agribusiness, new or used, including: 

  • machine sheds and storage buildings

  • grain bins and handling facilities

  • livestock and dairy facilities

  • pole barns and farm shops

  • climate-controlled buildings

  • greenhouses

  • tractors

  • irrigation systems

  • processing and packing equipment

  • fertilizer spreaders

  • fleet vehicles

  • solar projects

That’s right, barns and buildings are included. You can even lease buildings such as packing sheds and production facilities.

Of special note is that with a building of less than $500,000, the building itself is all the collateral needed with a Farm Credit lease, which means you can have the building you need without leveraging your other assets like the land it sits on. You can even lease a building on land rented from someone else.

When it comes to vehicles, because Farm Credit leasing buys direct from auto manufacturers like Ford, GM and Dodge, it provides savings for leasing fleet, basic or customer vehicles like trucks, cars, over-the-road haulers and even ATVs — perfect for farmers who need to manage their farm to get their produce to wholesalers quickly.

Saving money, leveraging risk

Farming has its unique challenges and risks. Farmers deal with threats such as Mother Nature, crop disease and pests. Leasing can help mitigate some of these risks by helping you with your cash flow. 

With a lease, customers can preserve working capital. Leasing can provide 100% financing with no down payment required. Along with this helping people save money for other expenses, it still allows the ability to get the equipment and facilities needed to grow the business.

Lease payments can be tailored to fit the customer, including monthly, quarterly, semiannually and even seasonally. 

Tax advantages

When it comes to paying taxes, business owners are always looking for ways to put themselves in a better financial position, and leases are another tool that can help. Leasing can offer a variety of tax advantages. Not only may lease payments be fully deductible, but expensing lease payments over the term may reduce taxable income.

Tax rules can change every year. By utilizing a lease, a borrower can know exactly what expenses to plan for over a longer period. It’s often best to take the tax advantage when the opportunity is there.

It is also important to note leasing also allows owners to seamlessly transfer leased assets to the next generation. This keeps the asset out of the estate, which offers tax benefits. At the time the residual on a lease comes due, the next generation can purchase the assets for the residual amount.

Expert support

When looking at options, it is beneficial for your financial partner to understand the different types of farm businesses, as many can benefit from an accelerated write-off.

When you’re looking at options, it’s important to work with an expert who understands how a lease agreement might benefit the business.

Lemon is a regional vice president of sales and customer relations for GreenStone Farm Credit Services.

Source: GreenStone Farm Credit Services

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