Monday, August 11, 2014
Deciding whether it is better to lease or buy farm machinery– What option should you choose?
Machinery plays a remarkable role in modern day farming. If you take a look at the way in which the industry has progressed over the years it is well and truly astounding. It has gone from being a sector whereby tasks were all carried out by hand, to one whereby there is truly a phenomenal number of machines to choose from. When it comes to buying farm machinery for your farm there are many different factors you need to take into consideration. This includes everything from running costs, to the company you get the machine from, to the topography and size of your farm, and much, much more. Nonetheless, one thing you need to decide is whether it is a good idea to purchase the machine in question at all, i.e. would it be a better solution to lease it instead? In this post we will take a look at both options in order to help you make up your mind. So, keep on reading to find out all you need to know…
Let’s begin by discussing the prospect of buying the farm machinery in question outright. In these instances a farm
manager will use equity or they will secure some sort of finance option in
order to accommodate the purchase of the machine. If you go down this route,
the machine in question will be one hundred per cent yours and as a result you
are responsible for literally everything to do with it – this includes
everything from the cost of running the machine, to making loan repayments if
applicable, to tax, to insurance, and much, much more. Nonetheless, at the end
of the day, the farm machinery is yours and therefore you are making an
investment. You know that your money is being spent on something you can call
your own and for a lot of farm managers this is extremely important.
On the other hand, instead of purchasing
farm machinery you could opt to lease it instead. In this instance there will
be a contract set up with the company that owns the machine. You will agree to
use it exclusively for a set period of time, i.e. five months. During this
period you will be responsible for the likes of running costs, yet the company
that owns the machine will take care of tax and such like. As touched upon, one
of the reasons people do not like leasing is because they feel as if their
money is essentially going down the drain because they will have nothing to
show for it. However, it is worth pointing out the fact that you can get lease
to buy deals. In this instance, you have the option to buy the machine once
your contract is up. If you decide to do so, the amount you have paid towards
renting the machine so far will be deducted off the overall cost of it. So this
is something you may wish to think about. But, why does leasing generate a
significant amount of appeal? Well, this option is great for start-ups and
small businesses that do not have big budgets. They may find it difficult to
deal with the large investment they will require in order to buy the machine in
question. Moreover, a lot of people lease machines if they are going to be
using the machine extensively and thereby it would be inefficient to buy it
outright.
Carefully consider all of the points that
have been mentioned in this post and you should be able to come to the right
conclusion regarding whether you should buy or lease the farm machinery you
have in mind.
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