The Rural Voice, 1979-11, Page 10Leasing Equipment
— an alternative
Farmers are starting to look at "leasing"
as an alternative to ownership, according
to a local machinery dealer who has been
leasing farm equipment for the last four
years. "Pride of ownership is a myth," he
says,' "The larger farmer is operating a
business and the question of "ownership of
equipment" no longer applies."
The machinery dealer also said leasing is
a "planned replacement cycle." It allows
the farmer to have modern machinery at
minimum capital cost, saving working
capital for other areas. It also helps a
farmer that has no capital base.
He said most farmers don't ever acquire
the machines they lease but take out a new
lease on another machine. This way he
won't have high priced used equipment on
his hands, which he would have, if he had
bought equipment.
The only disadvantage to leasing that he
could think of, which would also apply to
buying equipment, was, if the farmer did
not utilize the machine fully and couldn't
justify it.
"Leasing started in the auto industry,"
he said, "They'll be an increase in leasing
farm equipment in the next few years".
There was only one dissenting opinion
on leasing - one assistant bank manager in
North Huron said that "farmers are a
different breed -- they would rather own
equipment than lease it."
DIFFERENT KINDS OF LEASES
Ther are as many different types of
leases as there is equipment.
Bruce Shillinglaw, near Seaforth, has a
six months "lease" on a tractor that he
obtained in the spring. "A sales tool." he
says, "It was done on a trail basis in two
states and it went over so well, that it was
introduced into this country."
His lease is based on 1/4 of the purchase
price, leased (or rented) for six months,
but paid over the first four months. Then,
he has the option of purchasing the
machine, in this case, a tractor - - with full
rental or lease money applied.
Bruce had two reasons for using this
method - - he needed a tractor for that
immediate period and he had a price locked
in. The rent is totally tax deductible. He is
fully responsible for repairs and such
things as oil filters, broken lights etc.
"It wouldn't be good if you were only in
it for a short period," he says, "I want to
keep my equity in it. It's the only
BY SHEILA GUNBY
alternative."
LARGE EQUIPMENT MINIMUM
SECURITY
Zurich area farmer, Glenn Miller said
leasing gave him "large equipment with a
. minimum of security." Glenn said he had a
machine he leased once that was "less
than good - - the lemon kind."
"If we owned it," he said, "we'd still
have it."
This way, the machine went back.
Glenn took a whole line up of equipment
on lease, including a planter and a tractor.
"When your looking at 60,000 or more
for a tractor -- who wants to be tied to that
liability." Leasing was the answer for
Glenn.
Leasing doesn't stop at machinery - it is
now into other "equipment." Ever hear of
leasing a silo?
One silo company is introducing a
program where you can lease a silo with a
guaranteed buy back price.
So, where do you go from here? Already,
in the states, they're leasing farm land -
cows - and pigs.
So leasing is another alternative a farmer
can look at in his farming operaton.
Now, if you could only get a new lease on
life.
Leasing popular,
Bruce dealers say
BY GISELE IRELAND
The trend in machinery buying definitely
leans to more new equipment than used
and bigger than farmers often need. This
trend was confirmed by both Huron Tractor
Sales in Walkerton which sells John Deere
and Teeswater Farm Equipment which
sells White.
The reasons for this are twofold: The
lack of help in peak seasons where it is
important to cover a lot of ground in a short
time,and the reluctance of farmers to buy
someone else's problem and wrestle with it
when he is trying to get ground covered.
Huron Tractor feeis that there will be an
upswing in the rental trade. Why buy a big
tractor when you only need it for two to
three weeks when you can rent one? Case
is doing a Drisk rental 'trade in Bruce and
Grey. Many feel that this trend will catch
on with rising interest and machinery
costs. White had such a program a few
years ago but scotched it for reasons
unknown. Both dealers feel that, with
machinery taking 10-15 per cent price hike
in the coming year, rental would be a
feasible alternative to buying.
Most companies have good warranty
programs. Some dealers feel that warran-
ties set by contract by companies are
sometimes not realistic and this leaves the
PG. 8 THE RURAL VOICE/NOVEMBER 1979
dealer with the excess cost of warranty
covered and the actual cost in fixing or
replacing the part to absorb. Generally
warranty seems to be abused little but
there are exceptions where carelessness
and mishandling of a machine results in
farmers applying for warranties where
there is real doubt that the equipment was
at fault.
Dealers see a future for farmers pooling
equipment with each farmer buying a
certain machine and doing as much with it
as possible. It is getting to the point where
it is not economical to own a whole line for
all operations if each piece is only used for
a few short weeks. Custom operations will
be more prevalent in the next few years
when it becomes cheaper to hire someone
to do the job than to buy the machine to do
it. The only problem there is you have to
wait until the operation gets there which is
not necessarily the peak of the crop's
perfection or the most favourable con-
ditions for a farmer to pull his own machine
into the field.
Farmers are going to have to have a hard
look at their operation and decide which
avenues will be best for their farm. Dealers
are willing to sell all of the big beautiful
machines they can but for how long will the
average farmer be able to afford them?