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Every piece of farm equipment is an investment. Tractors, especially, are critical to the day-to-day work all year round. Not only do you need dependable equipment, but you also need to make sound financial decisions that provide both short-term and long-term benefits.
In today’s agriculture economy, leasing can be a good option for farmers who are balancing cash flow and equipment upgrade needs. TriGreen and John Deere financial provide flexible leasing and financing options that can be customized to your operation.
There are pros and cons for both tractor loans and leases, and understanding the key differences can help you decide which one is best suited to your financial situation. After reading this article, we recommend working with your local TriGreen Equipment and your tax advisor or accountant to decide what makes the most sense for your operation.
Tractor Loans vs. Tractor Leasing
The question to ask is: do I want to own the equipment, or operate it at the lowest cost per hour?
What You Need to Know About Tractor Leases
Leasing a tractor isn’t as complicated as it might seem at first. The primary advantage of a tractor lease are the generally lower payments compared to a purchase loan. Leases can be designed for annual or monthly payments. Leases generally require one upfront payment that’s usually equivalent to a periodic payment on the lease.
Many leases have the option to purchase the tractor at the end of the lease for a set value. Then, you can recuperate the dollars you’ve invested in the leased tractor. Or, you can return tractor at the end of the lease, and know that you were using equity elsewhere in your business rather than investing it in a tractor. You may also have the option to renew your lease and keep the same tractor working hard for your farm. If you decide to return your leased equipment, check out this guide to a hassle-free lease return.
While leases are often shorter terms than loans, they’re also subject to hour restrictions and are unconditional and non-cancellable.
When leasing a John Deere tractor, we recommend evaluating the manufacturer’s warranty timeline against the lease timeframe. If you plan to purchase the tractor at the end of the lease, or the lease timeframe goes beyond the warranty, we recommend purchasing PowerGard extended warranty as a way to keep machine costs constant and protect against unexpected repair bills. You can even finance in the PowerGard plan in the original deal so you will know the total cost of ownership for the whole lease period.
If you’re leasing a tractor in Alabama, both true leases and conditional leases are subject to the state’s leasing tax. If you are leasing in Tennessee, you may be subject to taxes unless you have an agricultural tax exemption registration from the state.
In short: leases help on the cash flow side by keeping payments and up front costs low. At the end of the lease, you decide if you want to trade in, keep the tractor, or renew the lease.
What You Need to Know about Tractor Loans
Tractor loan terms and payment schedules provide options to fit your farm operation and cash flow. If you purchase your tractor by financing through a loan, you start building equity immediately, which can positively impact the net worth of your operation. Your financed tractor will appear as an asset on your balance sheet. You can also depreciate your equipment, and operate it without limiting hours to stay within lease parameters.
Tractor loans may also give you more flexibility to upgrade sooner. The equity you’ve built up in your tractor can help you upgrade when you trade in for a new model on the time horizon that works best for you. Or if you don’t plan to upgrade in the near term, you don’t have to worry about any annual hour limits. If you plan to keep your tractor for the long term, though, it’s best to figure in long-term maintenance costs and potential repair costs as the equipment increases in age and hours.
Depending on your credit approval, a loan may require a bigger upfront investment with a down payment.
What You Can Count on With Leasing or Loans
While there are important differences to consider when you’re evaluating a lease versus a loan, some things stay the same. Whether you’re leasing or financing a tractor, you can:
- Include attachments like loaders in loan or lease deal
- Include extended warranty to manage repair costs over the equipment’s lifetime
- Work with your local TriGreen to understand rate or term options and find the payment option that works best for your operation
- If you have a Tennessee agricultural tax exemption registration on file at TriGreen at the time of your purchase, you won’t have to pay sales tax on qualifying farm equipment
Another important thing that stays the same whether you lease your tractor or finance it on a loan: the need for insurance. You’ll have to keep the tractor insured, and TriGreen offers affordable Sentry insurance which can be purchased at the time of your tractor transaction. Sentry Guard can be purchased and financed in with your deal.
Loans, Leasing, and Tax Implications
There are also tax implications of loaning and leasing to understand and consider before making a decision. Owning a piece of farm equipment allows you to take advantage of the Section 179 tax deduction provision for accelerated depreciation and the separate bonus depreciation option. Tax law allows for payments toward the rental or leasing of farm assets to be written off as business expenses. But the lease agreement has to meet the Internal Revenue Service’s guidelines, which distinguish between a true lease agreement and a conditional sales contract.
There are a variety of factors that can affect the IRS’s view of your lease agreement, including whether there is a stated or imputed interest value or a true fair-market value buyout schedule. You should consult with a tax advisor before using potential tax savings as a determining factor in their major equipment purchasing decisions.
At the end of the day, you have to choose what makes the most sense for managing your operation. Leasing can be an appealing option to the owner of a small farm who does not have the acres for a large outlay or a beginning farmer who is hoping to reduce their debt and free up equity to be used to purchase land in the foreseeable future.
Tractor Financing Through John Deere
Once you’ve decided on how you plan to finance your farm equipment, the next decision is finding a partner with whom you can get the financing you need. John Deere Financial is a unique option because of their deep understanding of the industry and unmatched equipment expertise, which enables them to develop and offer customized financing solutions. TriGreen is proud to offer financing and leasing through John Deere Financial, and we can offer competitive rates and flexible terms. You can view financing offers on applicable products on our website, or stop by one of our locations to review the options.
To get the financing you need to purchase new and used commercial, residential, and agricultural equipment, explore your options with TriGreen Equipment and John Deere Financial.
**48 month/300 annual hour walk away lease offer valid on qualifying purchases made through 30 June 2026. Taxes, freight, setup, delivery charges, and optional charges for other services may increase monthly payment. Subject to applicable state lease tax, including Alabama lease tax of .75%. Attachments, implements, and loader are not included. Down payment and financing subject to approved credit with John Deere Financial. Offer available on new in-stock equipment and in the U.S. only. Prices and savings in U.S. dollars. Some exclusions apply.
