Lease vs. Purchase of Machinery

Leasing or purchasing of machinery and equipment represent alternative ways for farm operators to acquire assets for agricultural production. Leasing has increased in popularity with agricultural producers. Manufacturers and financial institutions view leasing and selling equipment as alternative means to generate business. By comparing the net present value of the after-tax costs, farmers can determine the least expensive way to acquire machinery or other assets in the farmer’s specific situation. Key factors in the lease vs. purchase decision are the interest rate on loans, lease payments, the taxpayer’s marginal tax rate, and the taxpayer’s after-tax discount rate that reflects the time value of money. An important factor in this decision process is the acquisition of new technology and how rapidly that technology may become obsolete or of it is needed for a specific length of time.https://digitalcommons.usu.edu/rural_tax/1018/thumbnail.jp