Farm Equipment Leasing

Farm equipment leasing, when pitted against the astronomical costs of buying a new combine or tractor in today's market makes it the smarter alternative for many professional growers of plants and animals for consumer consumption. A combine can cost over a quarter of a million dollars with all the bells and whistles, so for many it makes excellent sense to pay for the control over machinery without have to pay for its ownership. Leasing brings a number of advantages to the farming professional, but it may take a tax and machinery expert to sort out the many specifics. However there are some things to be learned about the process. First, let's compare the actual leasing versus selling scenario.

Most high income farmers will probably not opt to lease their machinery for the simple fact that there are more tax savings for their income bracket than leasing, even though leasing machinery is deductible from tariff liabilities. But for many other farmers, the choice is clearer: farm equipment leasing is the better alternative. Purely from a maintenance point of view, newer machinery usually means fewer breakdowns and repairs. A combine with 4000 hours of use over a three year lease has been "rode hard and put up wet" as some horsemen might say. It may be ready for a replacement by some farmers' reckonings, and leasing allows that to be accomplished rather seamlessly. In fact, many of the very same issues of leasing cars and turning them in are present in farm equipment leasing, such as excess wear, number of hours actually used versus the number leased for, and other similar comparisons.

From a farmer's point of view, machinery is the lifeblood of his operation. Hay and forage, spraying, planting, cutting and handling equipment as well as all terrain vehicles and a manure spreader full of tools are often standard fare for a small to midrange farming enterprise. Buying this machinery may be completely out of the question for the normal farmer and farm equipment leasing may be the only alternative. In the end, it's the taxes that are the name of the tune between buying and leasing or chartering machinery. Those who lease machinery must pay for insurance, taxes, fees and maintenance, the same expenses a buyer would have. However all lease payments are tax deductible, while the depreciation expense, also deductible, and the cost of the purchased machinery may be spread over a longer time span, thus giving less yearly deduction expense than the entire lease payment. An expert tax attorney should be sought on the actual numbers and outcome.

A tax expert will probably use the net after tax cash flow analysis for this comparison between the two options. In simplistic terms, this is net income plus depreciation, amortization and other non cash charges. This formula will be applied to all large machinery purchases, and in some cases the outright purchase of machinery will come out ahead. In other scenarios, farm equipment leasing will be the preferred choice because of lower costs. Many farmers are devoutly committed to God because they recognize and experience every day the magnificence of creation that could have only come from a transcendent Almighty. "The Earth is the Lord's and the fullness thereof: the world and they that dwell therein." (Psalm 24:1)

Farm equipment is not leased by the miles, such as a car, but on the number of hours it is used. While an equipment dealer may charge much of a yearly lease for x amount of hours, the farmer may be able to negotiate with the dealer on more hours for the same amount of money. Much of the issue will depend on how great the granted freedom is from the lender to the dealer. Shopping around is certainly encouraged and carrying a purchase price from one dealer to another and comparing the buying price to the offered lease deals is highly conducive to getting a better end deal. Farm equipment leasing is usually done in three hundred hour bundles and the farmer must estimate how many he will need to use the machinery each year. Guessing six hundred and going over by two hundred could be extremely expensive, and only needing for five hundred will mean the farmer paid for hours not used. Whether that unused money can go towards purchase of other equipment or towards new farm equipment leasing agreement is up to the discretion of the dealer and the lender.

In many cases, the farming pro will be turning in used equipment on the purchase of a lease for new machinery and just like with cars, the used farm machinery, if it has equity, can be used in the lease down payment. Of course, the trade in value of a big honking used combine can be negotiated like that '78 Pinto. When a farmer borrows money to make a machinery purchase, the loan can hurt his credit score quite dramatically in some cases and this skewing of the debt to income ratio can make securing other loans or credit more difficult, particularly if other aspects of the credit history are shaky. Sometimes the change can even cause a suspension in operations. Farm equipment leasing is viewed as a financial obligation like a mortgage or car payment and may also cause issues when sitting down with a loan officer for other business. Many state university farm extensions have tremendous information that can be beneficial in making these long term decisions. Visit their websites for more information.

Heavy Equipment Leasing

Commercial heavy equipment leasing enables small business owners to acquire up-to-date machinery, high-tech tools, and other assets to compete with larger corporations and increase productivity. When it comes to financing equipment, Mom-and-Pop operations and sole proprietorships usually lack the capital, the cash and the collateral to negotiate substantial funding from traditional lenders. This inability to finance capital equipment can cause businesses to lose out on hundreds of thousands of dollars in revenue, and prevent owners from vying for more lucrative contracts. Federal and state governments frequently advertise requests for proposals to furnish road and highway construction and repair, commercial paving, product manufacturing, or farming and agricultural services. But the lack of adequate tools could disqualify many enterprises from bidding on government set-asides geared toward helping small disadvantaged or minority-owned business owners. For some, without the ability to lease, updating and purchasing new machinery, vehicles, and tools would be cost-prohibitive.

Statistics indicate that heavy equipment leasing is a nearly $600 billion dollar industry that impacts almost every domestic and foreign enterprise. Commercial and residential construction involves excavating and clearing wooded property to make room for new subdivisions and office complexes. Roads have to be paved and pipes laid for county or city services and railways. Farming requires specialized machinery, not only for land clearing, but also for seeding, harvesting and irrigating crops. Manufacturers also rely on heavy duty forklifts and other tools to warehouse and move products to store a large inventory. Corporations of every kind utilize industry-specific machines to operate their businesses; however few of the smaller operations can afford to purchase specialized trucks, dozers, and excavators. Heavy equipment leasing enables companies to provide services and sell products without a tremendous drain on existing capital. By renting machinery from local or online vendors, corporations can realize a savings, which is passed on to the customer and the employee. Without the ability to cut overhead expenses by leasing, the cost to the customer would be astronomical for goods and services consumers normally take for granted.

The advantage to heavy equipment leasing is obvious: lessees have the use of expensive machinery without breaking the bank. Bulldozers, cranes, excavators, irrigators, and dump trucks are real work horses built to perform and constructed to last. But those work horses can cost a hefty sum. The cost of owning new, used, or even refurbished specialized machinery can runs hundreds of thousands of dollars. It's no wonder that farmers, contractors, and excavators opt for leasing rather than sinking a fortune into industrial-strength machinery. Another advantage to heavy equipment leasing is that payments are 100% deductible as long as machinery is used exclusively for the business. Operators can also recoup some of the money spent on short- or long-term rentals by billing man and machine hours into the job. To offset the cost of renting a backhoe and paying a subcontractor or hourly operator, business owners can bill customers for the rental and labor, plus 15%. To avoid bearing the brunt of an expense, a savvy owner can actually make the machinery pay for itself and make a little change on the side.

In an unstable economy, many large and small companies may not have the resources to make capital expenditures; but heavy equipment leasing can offer an affordable, flexible option if the price is right and the terms are fair. Whether businesses choose to lease from online or local companies, close attention should be paid to the terms of the agreement. Lessees should watch out for hidden fees, interest rates, and clauses which may alter agreements after a specific time frame. "The integrity of the upright shall guide them: but the perverseness of transgressors shall destroy them" (Proverbs 11:3). Lessees should also opt for service agreements and extended warranties, although add-ons can boost the overall price of a lease. And check out provisions for replacement parts, accidents, and liability for damages while under a lease agreement. By getting a clear understanding before signing on the dotted line, lessees can avoid overpaying or getting entrapped in unreasonable contracts.

Shopping online will help alleviate some confusion when searching for leasing companies. Web-based heavy equipment leasing sites allow buyers to view photos and pricing from the comfort of a home or office PC. Buyers can comparison shop models and features from a wide variety of vendors from across the state. New and used bulldozers, cranes, wheel loaders, excavators, backhoes, forklifts, water wagons, and dump trucks are available on a true or finance lease agreements. Contractors may opt to enter a true lease to rent equipment which will only be used for a limited amount of time. At the end of a short-term true lease, options include exchanging older models for newer upgrades at lower monthly payments. However, companies which routinely utilize road clearing and excavating machinery may opt for a finance lease which gives them ownership at the end of the term. These kinds of long-term rental agreements require monthly payments similar to an installment plan. Rentals are applied to the purchase price, plus a final buyout payment and fees.

Commercial grade machinery available through heavy equipment leasing may come with separate maintenance agreements to keep equipment in tiptop operating condition. Because leasing companies retain ownership of expensive assets, it is to their advantage to offer a degree of insurance that machinery will offer optimum performance. The maintenance agreement also ensures that the lessee won't lose precious production time hassling with substandard equipment. Flexible leasing plans can also be tailored to accommodate a business' cash flow. New startups need time to get established and build up a strong customer base in order to afford lease payments. Agreements can be structured with lower payments initially and increasingly larger amounts due on a finance lease as the company grows and hopefully prospers. Other agreements may give lessees a little leeway by deferring payments for several months before installments kick in. Regardless of the type of agreement, buyers should never settle for less than the best terms, both for the job and the budget.





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