When looking to make a new purchase of equipment for an operation, sometimes the upfront costs can seem overwhelming. Leasing is a sound alternative option that can free up cash while taking advantage of potential tax deductions.
John Witt, National Leasing Manager with AgriFinancial, says, “A lease can be a great way to obtain farm equipment for use right away while taking advantage of a good, consistent tax deduction of the lease payment itself.” While quick to point out that he is not a tax professional or adviser, he mentions, “Typically, the leases we originate are true leases where you would deduct your lease payment on taxes and not take advantage of accelerated depreciation. However, we can structure our financing as an operating lease or a capital lease to give our customers flexibility for tax purposes.”
Producers often weigh their options when faced with purchasing new or used equipment. Witt offers, “Our program is particularly designed to offer financing for used equipment versus new, and we do that by structuring the payment terms and the residual purchase option price in a way that makes more sense for used equipment.”
Part of this specific structuring Witt is referencing comes at the end of the repayment term. A lease can provide flexibility through options. Producers can choose to trade in the equipment and get another piece, turn the equipment back in, or purchase the equipment for the pre-set residual value. Witt says, “In most cases, our customers want to own their used equipment after the lease repayment term, due to the residual purchase option being designed to make that easier.”
For many farmers and ranchers, finding the perfect piece or the best deal happens at a moment’s notice. Getting quick access to funds can be tricky, but John says, “If you find a good deal and want to move quickly, we can have a pretty fast approval process. Typically, we can get your application processed and approved within one business day.”
He also notes that there are several items farmers need to pay attention to when looking at a lease agreement. These include any usage limitations, or limitations on paying a lease off early. Working with a financial partner that you trust will walk through the agreement details with you is key.
Find your local AgFi representative at www.cgb-agfi.com.
Breaking Down the Benefits:
- Succession Planning – If you are planning retirement, an equipment lease can be used to reduce your income tax liability, and then the residual (buyout) of the leased asset can be assigned to the next generation operator.
- Quick Approval – Whether you have already found the equipment you want to purchase, or are ready to start looking, there is a streamlined application process.
*For new and used equipment up to $1,000,000. Max terms up to 7 years.
- Maximize or Accelerate Tax Deductions – Possible depreciation and other deductions on the leased assets.
*Always consult a CPA or tax specialist regarding tax deductions.
- Minimize Capital Outlay - A lease can help preserve working capital by structuring a program to meet the demands of the operator’s cash flow needs. A producer can choose monthly, quarterly, semi-annual, or harvest plan payments.
*100% Lease Financing Available.
Examples:
Image Courtesy www.fastline.com.
Price $739,900.00
Option 1
- 3 year term, 30% residual
- Annual Payments of $101,206
- Purchase option price of $106,500 in 2025
Option 2
- 5 year term, 20% residual
- Annual Payments of $73,229
- Purchase option price of $71,000 in 2027
Option 3
- 7 year term, 25% residual
- Annual Payments of $115,595
- Purchase option price of $184,975 in 2032
Image Courtesy www.fastline.com.
2023 CASE IH STEIGER 620 AFS QUAD
Price $528,580.00
Option 1
- 3 year term, 55% residual
- Annual Payments of $105,598
- Purchase option price of $274,450 in 2025
Option 2
- 7 year term, 35% residual
- Annual Payments of $72,060
- Purchase option price of $174,650 in 2029
Estimated payments calculated using August 2025 lease factors. Lease factors are subject to change monthly. CGB Agri Financial Services, Inc. All offers to lend are subject to approval NMLS #1472 . Examples are for informational purposes only. AgriFinancial makes no warranty, express or implied, of the availability, cost, or value of equipment shown.
