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Leasing Trend Continues in 2016

Leases offer equipment buyers a lot of flexibility

Published on 9/2/2016

"In the past, generally 10 percent of our business has come from leases," said Chad Goldsmith, an AgDirect territory manager. "In 2015 it accounted for 15 percent. Midway through 2016, 19 percent of our business is attributed to leasing. That’s significant."

"Leases offer equipment buyers a lot of flexibility, likely tax benefits and help them hang on to working capital," Goldsmith said. "Anyone deciding whether to lease and what type of lease to use should check with their tax advisor," he noted.

"One other plus is the current interest rate environment," Goldsmith added. "Interest rates continue to be very attractive right now."

Consider a Purchase Leaseback

Goldsmith says one tool available to reduce farmers’ or ranchers’ tax bill is a “purchase leaseback.”

"A purchase leaseback (PLB) is an option for a buyer to do a lease on new or used equipment they acquired with cash or a loan during the current calendar year," Goldsmith explained. "AgDirect will write a lease on the asset for the full equipment value and will reimburse the cash to the customer or pay off the customer’s loan and apply the ‘equity’ as the first lease payment."

For the farmer, using a PLB will help maximize write-offs for tax purposes and replenish working capital levels, Goldsmith said. It also sets a consistent annual write-off over the term of the lease, and can help increase cash reserves and preserve available Section 179 deductions.

“PLBs are only for assets acquired during the current calendar year, require original invoices and proof of payment, and they aren’t available in South Dakota or Washington because of those states’ sales tax rules. Other states also have different regulations, so check with the AgDirect territory manager for your state for details,” Goldsmith added. “But as true tax leases, PLBs are a great option for equipment buyers looking to reduce their taxable income and build up their cash reserves.”

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Agriculture is constantly evolving, which is why AgDirect® works to help you make the right decision for your operation when it comes to financing ag equipment.

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