Leasing, or Buying?

[dk2566]

My dad and I run a 250 cow dairy farm in Wisconsin.  With used equipment being so high priced right now somebody told us to look into leasing a tractor instead of buying? 

We are looking at a Case IH magnum?  Who is a good company to lease with? 

[illiceman11]

Alot of banks do leasing.Make sure you get their interest rate.Keep in mind in lot of cases leasing means you credit has to be very good.

[Pupdaddy]

...With the liberal depreciation deductions we've been gifted with lately...I'm thinking you probably ought to run some numbers by an accountant first. Leasing has a lot of advantages...and a lot of limitations. Sometimes you'll run out of hours on a lease before you run out of work to do. Especially if you're running a tractor every day in a dairy operation. Take your last year's tax records back to your accountant...and just ask him how much money you would have saved if you had spent the money (Borrowed or not) on a good used tractor...and depreciated it off at the accelerated rate. It may add up to the cost of the tractor in the same amount of time that a lease would run....and you would still own the tractor when you're done.

[Nebrfarmr]

Just my opinion, but I'd rather buy than lease.   Yes, you can deduct 100% of your lease, but they extended the quick depreciation for another year, so you can deduct 100% of the purchase price, as well, and actually pick the amount of your deduction for this year (within limits).

I do not know what you are going to be using the tractor for, will it be a 'field' tractor, or a 'chore' tractor?
The reason I ask, is that if you are going to fire it up 2X a day, for an hour or two at a time in cold weather, be sure to get one with a tranny heater, it will greatly reduce the warm up time before the tranny warms up, if it is exposed to the elements.

[illiceman11]

Some good points here.What I like about leases is that you can deduct the cost each year.When you write off 100% the first year it looks good on your taxes that year but only that year.If you have it finaced for say 5 years you loose  a write off to help off set your taxes for the balance of the loan.

[Nebrfarmr]

Talk to your accountant.

I belive, you can take 'any' amount of the purchase price as a deduction, on the first year, and then amortize the balance over the next 4, if there is one.

So, say you spend 50K on a tractor, you could deduct 50K the first year, and zero the next four,

or take 10K a year, for 5 years,

or take 30K the first year, and 5K for each of the next 4  (in round numbers, I belive there is usually a declining balance rule, that will make that vary a bit)

This may be the last year, you would be able to do this, as the talk is making depriciation a fixed % each year, over time.