Choosing between a purchase or a lease can be a big decision, and which way’s better will come down to you.
Farming’s a lot about choices. Inevitably there’ll come a day that you’ll need to decide whether to upgrade or expand your operations with new equipment. The question is – how to finance it? With buying and leasing options available, it can be hard to land on the one that’s right for you.
Here’s a quick overview to help you decide:
Leasing
- Finance as much as 100% of the purchase price.
- Reduced payments.
- Spread GST and PST over the term of the lease.
- Potential tax advantages in expensing the entire rental.
- Interest rates are usually fixed over the term of contract.
- Typically, no additional collateral’s required.
Buying
- There’s no residual value taken into account, so your payments may be higher.
- Taxes are paid and financed up front.
- You can expense depreciation and interest.
- If you borrow, your interest rate can be fixed or floating and you may need collateral to secure the loan.
Another option you may be considering is hiring a custom operator to complete your work. To make a fair comparison between sourcing outside help, purchasing and leasing, you’ll need to determine the cost per acre for all three options.
Each producer and farm is different and that’s why there’s no right or wrong choice when it comes to buying and leasing. An accountant can help analyze your situation and give you more details on the tax implications for each option so you can choose the best one for your business.
If you have questions about borrowing for your farm, call our Contact Centre at 1.866.863.6237 and we’ll connect you with an advisor who can help make sense of it all.