Eight Reasons You Should Lease and Not Take the Low Rate, or Tractor Leasing 101
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- เผยแพร่เมื่อ 24 ส.ค. 2024
- If you're buying a tractor, you might want to consider leasing it. Today we look at eight advantages of doing a tractor lease versus financing or paying cash.
First, let's discuss how leases work. With a finance contract, you have a down payment at the beginning, then equal payments until the end of the terms and then you own the tractor. A lease starts with 1-3 payments in advance, followed by equal payments until the end of the terms, and then, if you want to keep the tractor, there's a residual you must pay off. So, a lease works opposite of a standard loan. A lot of customers, at the end of the lease, just trade the tractor back in and roll any equity they've built up in it to a lease on a new tractor.
So what are the advantages of leasing? The first one is not for the customer, but for the industry in general. Leasing tends to build up the supply of late model used inventory. A lot of people who lease will get a new tractor at the end of each lease period, and the tractor they turn in is attractive for a dealer to offer to customers who can't afford new tractors. In my opinion, this is why car dealers push leasing. If more dealers did leasing there'd be a greater selection of used tractors for those of us who don't want to pay for new.
Secondly, obviously, with leasing, you can get a new tractor every few years. If you're the type of customer who likes the latest and greatest technology, and new shiny paint, then leasing my be the way to go. You can turn the old tractor in at the end of the lease program and get a new one, many times keeping your payments the same.
Third, with a lease, you can tailor your warranty to match the lease program so every tractor you have is going to be covered for as long as you own it. If the standard manufacturer's warranty doesn't cover the lease term, have your dealer get a price on an extended warranty and roll that price into the lease payments and you'll always be covered. Peace of mind has value.
Fourth, there may be tax advantages to leasing a tractor. You can generally expense lease payments, if you're buying it outright, you'll depreciate the value. If you have all the allowable depreciation and still need some tax help, look at a lease to minimize your tax exposure
Next, leases generally don't require a big down payment. Let's say you need to keep all of your available funds to run a business, if buying, you could have to come up with 20-30% down payment. With a monthly payment lease, you generally have to have three payments in advance, quarterly, semi-annual and annual leases usually require one payment in advance. If you're trying to minimize the amount of cash you spend, consider leasing the tractor with quarterly payments.
The sixth advantage of leasing is the residual might be negotiable. If you leased now, when inventory is tight, then, when you're ready to turn the tractor back in, inventory is excessive, the lender might not want that tractor back. So, they might be willing to cut the residual to entice you to keep the tractor. There are no guarantees this will happen, but it's not out of the realm of possibilities.
The seventh advantage of leasing is that it lets you budgets for mistakes. Let's say you leased a non-cab tractor and realized later on you should have gotten a cab. At the end of the lease you can turn the non-cab tractor back in and have the dealer lease you one with a cab, with no hassle.
Finally, a lease allows you to walk away from the tractor at the end. I don't recommend this because you'll lose money, but if you don't want the stress of trying to get rid of a tractor when you no longer need it, lease it and then give it back at the end. If you go for this option, get the highest residual amount you can so you don't lose as much in equity when you return it.
It may sound like I would lease my next tractor if I were buying now, the truth is, I wouldn't. In my next video I'll give you eight reasons NOT to lease and talk about why, for me, it's not the best way toward tractor ownership.
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Thanks for all the information Mike. I'm 53 years old and I've never heard someone describe the lease process so well. I look forward to your next video on the pitfalls of leasing!!
I sold cars for 35 years. The only one that makes out on a lease is the salesman. Wait until you bring that tractor back with damage from using it. Bend over.
We had the same question when we bought a home with 4.5 acres, we wanted to widen the driveway, dig up a few stumps, take down a few trees. We figured it out and was going to take about a month and renting cost 6-7k, and will need it throughout the years. The best for us was to buy, we bought a new JD 2305 with a backhoe, front loader, belly deck, and weight box that was a waste. lol. It was the best for us and our property. This was 2006 and we use it year-round and 3-5 days a week. It was the best thing we did. We bought it in 2006, ran trouble-free until 2020 due to water in the fuel station's tanks it cost us $4500 to fix, but not bad over 14 years of use.
Never comment on these but have to share this. My tractor lease in 2014 was the best decision my farm ever made. I needed a 100 hp machine for a growing part time farm, but the hay biz has uncertain cash flows so i wanted to be able to cash flow pmts from off farm income. Mine was a low hour 5 year lease with residual about 50% of new. Payments were affordable and when the lease was done i was able to pay it out without financing. In that time new tractors that size had increased in price by about 50% and my 5 year old tractor was worth almost what i had paid for it.
Greetings Mike. I just very recently learned of your channel. I viewed the post that Hamiltonville farm put up where a number of tractor experienced lads expressed there opinions on the subject of buying a compact tractor. That was an insightful video. I've started viewing posts from all who participated in that post. Prior to viewing that episode, I wasn't familiar with you. I've watched a number of your posts and I say with complete honesty, that you've become my #1 channel for tractor related information. Thank you for putting in the time to produce and post your videos. Even though I live in Ontario Canada, most of what you share still applies to my circumstances. Again, thank you for sharing your knowledge and experience.👍👍👍
Thanks for the nice comments, you made my day!
-Mike
Thanks Mike, I never could understand leasing anything but you put into perspective, would not consider for me, I like building equity and tractors seem to hold their value very well.
A lot of great info in this video. Glad you didn’t miss the option of leasing because not sure of what you really need.
Very good points Mike.
When Mike speaks we listen.
I was never able to justify leasing. You bring up things I did not know about.
Great video, and thank you for sharing the story. Not enough people talk about "failure", I put failure in quotes because it seems rather short sighted on corporate part.
"Pretty soon you've got a 90 horse tractor with a 15 foot batwing you probably still want a bigger one" LOL!
Something that was Not mentioned was allowable low hours of use and how to file Taxes and benefits of ownership vs leasing. I almost leased a Bobcat Compact Tractor recently because, we too, were concerned about tractor size and "buyers remorse"....but after doing the math&tax considerations...for us, owning is going to be better.
Great tips for leasing Mike. I am looking forward to the opposing video. Thanks
I can't agree with renting unless it's very short term.
And leasing is generally a bad deal.... Cat, tractor or house.
Great story! Thanks for sharing with us.
Great info Mike. Thanks. Great personal story too.
Great story. Thanks, Mike!
Love that story Mike! I guess the big guys at the top weren't all that sharp.
Good advice and great story! Best wishes.
Great explanation Mike.
Great video. Love your attitude.
Great information and story
The only thing I've ever leased was an apartment (years ago). I do know many people that have leased vehicles and equipment and some of them still do. However, I've never heard of anyone building equity in them. I could lease vehicles for my business but I won't do it because all of them are spec'd the way I want them and don't get traded off that often.
Leasing would be good for many people that don't put a lot of hours on the units....
Great info Mike...Thanks!
Kubota has 60 months same as cash. Back in 14 I bought a L3901. Loader and brushes.
0 down and $425 a month for 48 months. As far as I was concerned it was a good deal
Actually 60 months
Really enjoy your videos!
Good points. I'm a buy-and-hold kind of guy, but interesting none the less. Beautiful property behind you, by the way.
It's my neighbor's place down the road and it is gorgeous. He lets me film there once in a while when I need a change of scenery. He's retired and keeps everything he owns immaculate. Makes me look bad :).
@@TractorMike Don't you hate those guys.... probably buys his wife diamonds on their anniversary, too.
Nice to know that one time in history the consumer put it to the corporate stiffs😂
Great information 👍
Thanks for the info
Section 179 allows for BOTH expensing in full up front AND depreciating the large business capital item. Tractors, trucks, and other large capital. Read and study it for more information.
Leasing only works for those that can write it off for business. Ford made the same mistake at bloated residual when they leased the Explorer in the late 90's.
Good for yoo Mike. I hope some of those suits took it in the chin for the residual losses at the end. It was their genious that caused the problem to start with. You did what you were hired to do.
same thing in the car industry Mike. I had some good years with different programs, but than the company GM or the dealership would end the deals and the salesman was always at fault somehow. The more you sold the worse you looked at the end. Both to the company or if a bit of a shady finance deal to the customer. Like the 0% interest for 5 yrs. But if they took it for 6yrs the customer got like 25% for the last year, not my fault but got the blame.
Very timely, I’m thinking about selling my new-ish L3301 w/ backhoe and moving to a mini excavator. My needs have changed and I think I may only need the mini for a couple of years. Leasing may be the way to go.
Buy a good used mini, use it , treat it right, then sell it !
Very nice
Tractor selling machine!
You didn’t invent the game, you just played it.
Sounds like leasing is good to find out what you want, then buy.
Never lease unless you plan to buy a new one every three years. Tractors hold thier value pretty well. You didn't say what you needed it for. Could you buy a $2500 to 5000 tractor?
Now a problem, I buy 55 gals at a time, this time due to a water problem I decided to clean out the drum. In doing so I noticed a dark brown sticky, pasty crap on the bottom and even with the powerwasher it will not clean out, it just moves around, and sticks to the bottom again. What is this crap?
Would never lease anything. My Kubota with 0% financing will be worth more than I paid for it 10 years from now.
Kubotas tractors are junk and are not worth anything. None of the big farmers like myself run kubotas cause their cheap and are way to light in the rear. John deere and old Ford New Holland’s are the way to go
If your tractor is worth more in 10 years you obviously arent running a pot of hours on it. Issue is that when you have profits purchased equipment is a great write off. Farms cannot write off nearly as much money when they profit less and modern farms well they profit less. And equipment costs more. So if you are buying a toy sure 0 finance looks great but if you are buying equipment for your business sometimes it is attractive to turn it onto a fixed monthly cost then replace it.
How so? They keep their value for sure, but appreciation is not common.
It’s a “tool” for me - I’m not about brand and I don’t need it to make a living. It’s a very expensive, but very useful, wrench that I need. I’m not a big farmer like @sunny - I’m talking about economics, inflation and the value of a dollar. The tractor I bought for x dollars today doesn’t cost me x dollars. The most I will ever pay for it is less than what I paid for it today. I can’t buy the “same” tractor I bought in December of last year for what I paid for it. It’s almost $1,200 more expensive and months before I can ever take delivery of it. If I paid $20k for it today, it would cost me $20k of actual “today” dollar value. $20k today will be worth $19 k a few months from now... It will eventually cost me much less because I financed it at $20K at 0%. I will pay a ~ $200 per month for 100 months. Each month, the value of the dollar goes down. You do the math.
If I financed 100 gallons of gas last year at a price of 1.89 and 0% interest. What am I paying to use it today? What are you paying “to buy it” today? You guys need to contemplate things that are much bigger than your tractor or acreage sooner rather than later. I’m not trying to be adversarial about it... I’m just saying you might want to reevaluate things.
Great information with a nice story at c rnd. Perfect!
Never thought of that before, the retired life on the farm would make that appealing too. Kids don't want to farm....wife will be confused with what to do with all the tractors and hay making equipment.
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like your video
Leases are not for average folks ,, you also forgot to mention anything damaged or if you go over allotted hours they going stick it to you
Yep....it better be returned 'Spotless' and with Low hours.
It's like leasing a car you are throwing money away and are just paying the depression and you don't own it in the end just look at what Dave Ramsey says about what he calls fleshing instead of leasing the dealers and lease company are the winners and the person that leases stays in debt for life so no thank you I would rather own and you can still take a business expense if you own
a business.
The one exception Dave would make is if your net worth was over a million.
Unfortunately, thats the direction of the entire economic world....you will be leasing your phone, car, dish washer, etc.....2030
Mike, I’m looking for a tractor, preferably with FWA, that can safely pull a 6 ton fertilizer buggy up and down some steep (30%) trails to get to various fields. What size, weight and horsepower range should I be looking at? I’ve done this with my 3/4 ton 4WD truck in low range, but it’s at best a white knuckle experience, and when it’s wet it’s a no go.
Mike, I have no idea. Too many variables here to predict. Type of soil, dew/moisture conditions, tire tread, wind conditions, and other factors I haven't thought of, can all come into play. I've never tried to pull anything that heavy in the field, I can see it being really dangerous without an adequate tractor in front. The place where you purchase the fertilizer should be able to tell you better than I could. Good luck and stay safe!
manufactures that offer a lease have a product that is over priced from the factory. i would rather own than rent (lease) a tractor.
Hi Mike I am a noob and bought a tractor from a private owner.. So simple question do tractors have a title?
No. If you want to check to make sure it's not been stolen at some point, give the serial number to your local sheriff and they can check it.
@@TractorMike Perhaps a good idea for a upcoming video would be how to secure your tractor and perhaps touch on how hard it would be to hot wire one??
So in today's economic climate its probably not a good time to invest in a tractor?
Leasing....ALWAYS the most expensive way to buy ANYTHING..
I hate throwing up in my mouth..
If it flys, floats or screws....rent it !!!
That’s their fault for not seeing down the road 2, 3 or 4 years down the road .. their program, email and so on so forth..
Hey Mike they made the rules that’s there fault everyone brought them back. Haha Good story!
However, we will probably have to rethink this in a hyperinflation scenario. The owned asset will be worth more in the long run IF maintained well.
Why would we consider such an unrealistic scenario?
Nothing worse than being the "stinky" guy at the conference.