Leasing vs. buying agricultural machinery

 

When operating an agriculture business, every decision you make is important, and everything you decide to spend money on matters. It is, therefore, essential to think about what you need to purchase outright so as to ensure your company can thrive, while also being aware of what you can lease to keep operations ticking over. So, with that in mind, what are the key things you need to be aware of when choosing between buying and leasing your agricultural machinery? What are the benefits, what are the potential cons, and how can you ensure that you make the right choices to bring about business growth? In this article, we look at leasing vs. buying agricultural machinery.

1. Are you happy to cover all maintenance expenses if you buy outright?

A great example to consider here is a bulldozer. You will, undoubtedly, need a bulldozer to carry out some of your business’ day-to-day functions, but given that brand new bulldozers are expensive, it may be a better option to lease than buy. This will allow you to update your bulldozer as and when necessary, upgrading to a new one without having to worry about selling your old one beforehand. Another perk is that most hire contracts will come with some maintenance provision, so you won’t have to worry about the expenses associated with upkeep and repairs. The same can’t be said for any bulldozers you buy outright, although buying machinery does offer some benefits, including writing off parts of the machinery on your taxes and gaining equity.

2. Are you in a position to make monthly payments?

If your business’ income fluctuates, and you cannot accurately predict how much profit you are going to make from one month to the next, then maybe committing to paying off an item via a lease is not something you should contemplate. You should also consider the length of the agreement as it allows you to spread the cost over a period of time which suits your business needs – and whether this is something you can afford.

3. What is your credit situation?

It could be that, if you have a poor credit rating either personally or as a business, your purchasing options will be limited. This will also likely impact how you are able to get hold of funds, how much you might have to pay back if you are given a loan, and how your credit score looks in the long-term.

4. Leasing vs. buying a tractor

It can be difficult weighing up the options when it comes to either leasing or purchasing a vehicle outright. The key is, really, how you want to manage your business cash flow. If you want to buy a tractor outright, this would require a large upfront investment, but could mean you save money in the long run. However, leasing gives you a more flexible finance solution to securing the equipment you need without affecting your cash flow, allowing you to manage other business expenses such as employee wages, business rates, utility bills etc. Again, as we have already stated, be very aware of your finances before you make a decision because the last thing you need is to purchase a tractor and then find out that you can’t actually afford it.

Leasing vs. buying agricultural machinery – where to find out more

If you’re looking at leasing as a way to obtain machinery for your agricultural business, please visit our Lease vs Buy page to find out more about the solutions we can help you with.

Or please get in touch to find out how we can help with your machinery leasing requirements.