When starting up a farm, one of the first decisions you'll need to make is whether to buy or lease the equipment you'll need. Owning farm equipment has its advantages for farmers. You can sell the equipment when you want to upgrade to new equipment, and you don't have to make monthly lease payments. Leasing farm equipment, however, is the better option if you're just beginning a new farm. Here are the advantages of leasing equipment for new farmers.
You Don't Have to Tie Up Capital
When beginning a farm, you have a limited amount of capital. If you buy your farm equipment, a lot of your financial resources will be tied up in the equipment. If you lease, you won't need to pay for your equipment outright—and you'll be able to use your financial capital to grow your farm in other ways, such as acquiring more land to farm or hiring an extra employee to help with chores.
Leasing at first doesn't prohibit you from buying farm equipment later on. Once your lease is up—and your farm is turning a profit—you can invest in your own equipment.
You Can Try Out Equipment
Leasing also lets you try out equipment to make sure it's exactly what you want. If you purchase your equipment outright, you likely won't be able to sell it for the same price you paid. It'll depreciate, and you'll need to keep it for many years before you've fully recouped your investment. Even if you don't like the equipment, you'll likely be stuck with it for a long time.
By leasing your equipment, you can get different equipment sooner. If you don't like the equipment you lease, you can change it when your lease is up. In some cases, a farm equipment dealer may even let you switch to a different lease as long as you continue to lease from them.
Once you know what features you want your farm equipment to have, you'll be able to choose the best equipment to buy. Without any experience farming, though, it's difficult to know just what you want. Leasing lets you try out equipment first, and then you can either purchase or lease different equipment after you've been farming for a little bit.
You'll Have a Knowledgeable Resource
When you're first starting up a farm, you might find yourself facing problems that you don't know how to solve. For instance, you might have to get a tractor unstuck or need to get a hay bailer unclogged. While helping with issues like this isn't typically in farm equipment lease agreements, farm equipment dealers usually have a lot of experience dealing with equipment-related issues. They're often happy to give farmers who lease their equipment a few suggestions when the farmers are having difficulties.
For more information, contact professionals like Clark Tractor & Supply.