Equipment & Machinery Leasing Specialists

What Are Equipment Leasing Specialists?

Equipment leasing specialists are financing companies that purchase equipment and lease it to farms for monthly payments. Unlike traditional loans where you own the equipment, leasing provides use of machinery without large capital outlays or long-term ownership commitments. Agricultural leasing companies understand farm equipment and seasonal cash flows.

Why Consider Leasing

Dairy farms need substantial equipment—tractors, loaders, mixers, feed wagons, and more. Purchasing this equipment ties up working capital and can strain balance sheets. Leasing preserves capital, provides predictable monthly costs, and offers flexibility that ownership doesn't.

Key Benefits

• Preserve capital: Minimal down payment keeps cash available for other uses
• Predictable costs: Fixed monthly payments simplify budgeting
• Updated equipment: Easier to upgrade to newer technology
• Tax advantages: Lease payments may be fully deductible as operating expenses
• Balance sheet benefits: Operating leases may not appear as debt
• Flexibility: Options to purchase, return, or upgrade at lease end

Types of Leases

Operating Lease (True Lease)

You use the equipment but don't own it. Payments are fully deductible. At lease end, you can return the equipment, purchase it at fair market value, or extend the lease.

Finance Lease (Capital Lease)

Structured more like a loan with a purchase option at the end. You claim depreciation and interest deductions. Ownership transfers or is expected to transfer at end of term.

Fair Market Value (FMV) Lease

Lower monthly payments with option to purchase at fair market value at end of term. Good for equipment you may not want to keep long-term.

$1 Buyout Lease

Higher monthly payments but you own the equipment for $1 at the end. Functions like a loan with lease tax treatment.

When Leasing Makes Sense

Consider leasing if:

• You want to preserve cash for other investments
• Equipment technology changes rapidly
• You prefer predictable monthly costs
• Tax benefits of expensing payments are valuable
• Credit lines are limited and you need equipment
• You're uncertain about long-term equipment needs

Purchasing may be better if:

• You plan to use equipment for many years
• Equipment holds value well
• Low-interest financing is available
• Section 179 depreciation benefits exceed lease benefits
• You want to build equity in owned assets

Evaluating Lease Offers

• Compare total cost of lease vs. purchase with financing
• Understand end-of-lease options and costs
• Check for mileage or hour limits and excess use charges
• Review maintenance and insurance requirements
• Confirm early termination penalties
• Discuss with your accountant about tax implications

Cost Considerations

Lease payments depend on equipment cost, lease term, residual value, and implicit interest rate. A $200,000 tractor on a 5-year FMV lease might cost $3,000-4,000 per month. Compare to loan payments plus depreciation tax benefits for the same equipment. Include insurance and maintenance costs in your comparison. Work with your accountant to model the true cost of each option for your tax situation.