Should You Purchase Your Farming Equipment?
Farming equipment isn’t an area where people toss money around willy-nilly. This kind of equipment rarely comes cheap, and the stuff that does usually doesn’t last too long. For those reasons, it’s important to remember that you don’t have to own every single piece of machinery — there are many reasons why leasing or renting could be good options as well.
Buy What’s Important
There is some equipment you will want to own based on the kind of farming you do. Items you’ll use year after year and that play a major part on the farm, like tractors, are the kind of equipment you should invest in. There are three main things to consider when deciding if you want to buy an item: how you plan to use it, how many hours or miles you’ll put on it, and how many years you’ll need it for.
If you know you’ll need to use the equipment basic operations on a daily basis for years to come, then you should definitely buy it new. Those types of items tend to be the most expensive, but they do come with some perks.
Most new equipment comes with warranties. That can be huge, especially for yearly maintenance, because with farming it’s always best to realize that problems pop up when you don’t expect them. With a warranty for some of your more expensive, necessary pieces, you’ll have less to worry about.
The thing that throws most people off of buying new is the price, and that makes sense. It’s pretty intimidating to spend that kind of money on anything. This is an area where financing can help, along with tax breaks. Section 179 of the IRS Depreciation, Depletion and Amortization code allows for tax breaks based on the purchase of farm equipment. Make use of it!
Of course, there are some things you should be able to buy used. If you plan to buy something outright, this can be a good option. However, depending on who the seller is, you may be taking on some extra risks. Big-ticket items like tractors and sprayers can be bought used, but they’ll usually come without a warranty. That can be a detriment, but you might get lucky and find a great one.
The other problem is that you don’t always know what you’re buying. That’s an easy one to avoid if you can buy from a reputable buyer and check their credentials. Usually, if it’s a company, the Better Business Bureau is a good place to start. If you can’t find reviews on them from others, you may want to keep looking around.
For items you’ll need to use for a season but are out of your current price range, leasing can be a good choice. While leasing is a great option for many items, it’s not good for everything. Keep an eye out for what you really need.
The most obvious benefit to leasing a large item is a lower price than buying something new. Leasing also allows you to trade equipment back in when you no longer need it or want an upgrade — typically every three to five years. If you have equipment that you only need for that long, then leasing could be perfect.
There are also some lease agreements that allow you to own the equipment if you decide that’s the best option for you. In the meantime, payments made on an operating lease are usually fully deductible, just like purchasing the equipment. This is a great way to try new equipment without having to commit to a purchase. That can be a huge advantage when looking into something new.
Rent What You Can
Rental equipment will almost always come in handy. A decent rental should come with some kind of warranty to help protect you against any costs related to equipment malfunction. Renting is great for if you only need to use an item a few times during the season, or if you want to try out a new kind of equipment before you commit to buying it.
If you need to rent the equipment for a whole season, you’ll want to go through a professional dealer. However, if you only need it to accomplish one task, you might be able to rent it from another farmer. No matter who you rent from, make sure you inspect the item thoroughly. You don’t want to go through the trouble of getting it to the farm only to realize it won’t work the way you need it to!
Photo by Fotolia/Vitaly Krivosheev
Keep an eye out for new ideas popping up, including some for renting farm equipment. You can now rent large equipment by the day, which could be exactly what you need. Other innovative ideas are sure to emerge soon.
How you go about getting your farm equipment obviously depends on a lot of different factors. You can’t always use only one method. There are perks and disadvantages to each, so you have to determine your particular needs and what you want from the equipment before making your decision.
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