| Thursday, June 1st 2023
are looking to acquire new equipment or upgrade current equipment,
leasing has many financial and tax advantages. Here are just
a few benefits to consider when you are looking for financing.
Leasing requires little to no down
One of the greatest advantages of leasing is that it offers
fairly minimal upfront costs. Most traditional financing options
may require a substantial down payment. Depending on the lease
terms, there may be no down payment, one advanced payment,
or a small percentage of the equipment cost.
Leasing conserves your working capital
and preserves your existing credit lines.
Because of the sizable amount of cash required to purchase
new equipment, many farm operations lease equipment to conserve
capital and keep existing bank credit lines available.
Leasing allows 100% financing.
Traditional methods of financing usually do not include "soft"
costs such as installation and freight. A good lease transaction
includes both of these, thereby allowing you to finance the
Leasing offers lower fixed payments
to reduce crop harvest cycle costs.
This is due to the tax benefit transfer and residual. Payments
on a lease are fixed for the entire term of the lease. This
is a distinct advantage in times when many financing transactions
have annual adjustments on interest rates. Knowing in advance
what your payments will be enables you to budget and manage
equipment dollars for a long time.
Leasing offers longer terms.
In lease arrangements, terms are typically up to 84
months. Depending on the equipment, terms may be extended
to even ten years. Many payment structures are
available including monthly, quarterly, semi-annual, annual, etc.
Leasing is flexible and convenient.
Leasing provides greater structuring flexibility to fit your
cash flow needs. In addition, lease payments can be arranged
to match seasonal business and to match earnings generated
by the equipment. The variables in a lease, such as advance
payments, harvest terms, and purchase options, can be customized
to meet your objectives. Also, special lease programs are
Leasing offers tax advantages.
Leasing can lower your tax burden. Depending on how your lease
is structured, you may be able to fully deduct your lease
payments. An operating lease is fully deductible as opposed
to depreciating the value of the equipment as if it were a
capital expenditure. Leasing clearly reduces your net equipment
cost. Consult your tax advisor for details.
Leasing provides flexibility to accounting
For the purpose of financial reporting, leasing is a method
of off balance sheet financing. Leasing strengthens your financial
statements by enhancing ratios.
Leasing gives you different end of
At the end of the lease term, you may purchase the equipment
for as low as $1. If you require lower payments, you could
purchase the equipment for a fixed percentage of the original cost. Other options are available at the end of the
us today for
a free, no obligation "Lease vs. Buy" Analysis.