When Does Leasing Tractors Make Sense?

Have you considered leasing a tractor for your operation but are on the fence about it? There are several factors to consider when deciding whether it makes more sense to lease vs. purchasing tractors for your farm operation:

Leasing vs. Owning a Tractor

  • Leases can offer nice cash flows to have a fixed cost to operate equipment. Does not show up as a liability on the balance sheet, and puts a value on it at the end of lease.
  • Lease payments are an “expense” vs. owning and depreciating the whole value of the equipment. Check with your accountant to see which is better for you.
  • Not all leases are equal. There might be 2 identical tractors, one having a lower payment, BUT the purchase option at lease end could be much higher. So be sure to look at the “big picture” and not just the payment amount.
  • Leases still require customers to cover equipment with insurance, similar to owning the equipment.
  • Lease companies will also charge the customer Property Tax, similar to owning the equipment. This could also just be built into the lease, so be sure to ask and compare.
  • Tax tip – if you are quoting a lease and can have it end / returned by December 31st instead of early the next year, you will likely avoid property taxes on it for the next year. Check with your county for property tax dates to be taxed.

Questions to Ask when Leasing Tractors

  • What happens at the end of the lease? Are you obligated to purchase the equipment at the end, or do you have the ability to return it? Does the purchase price at the lease end look attractive today? If you do return it, what are you liable for?
  • What all is included with the lease? If the lease is a tractor with guidance on it, does it come with any subscriptions on it? If you want to upgrade it to an RTK network, how does that factor in?
  • What is the warranty coverage? If something breaks, you need to know who is responsible for payment. If you are leasing a new unit, it will usually come with new factory warranty, but that may not last through the duration of the lease. Consider extended warranty coverage options if offered.

If you have any questions regarding leases, or are interested in leasing equipment for your business, please contact us. Leasing can be a great option for you. Please consider everything mentioned here, and not just the cheapest payment you can get up front.

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