Purchasing and Leasing Farm Equipment
Most farm equipment is still acquired through some type of purchase arrangement. The farmer obtains title to the machine and adds it to the farm depreciation schedule. The purchase can be financed in several ways. The simplest type of transaction is an outright purchase. The operator and dealer negotiate an acceptable price for the machine and the operator pays cash. There may also be an allowance for a trade-in item, which represents another area of negotiation. In many cases at least part of the cash paid is supplied by a third party lender, who will usually require that the machine that is purchased be pledged as loan collateral. A rental agreement is distinguished from a lease by the duration of the control period. Leases typically permit the farmer to control the equipment for one or more years, while rental agreements typically last for less than one year. For long-term control of equipment, leasing is also a popular choice. Leasing plans offer a large degree of flexibility for payment terms. Farm machinery dealers, manufacturers, Farm Credit Services and independent finance companies all offer lease opportunities.