Do farmers leasing a new combine have a lower Cost/Acre than Used Combine owners?

Question

Dad and I Found that John Deere has a ton (30+) combines listed at one dealer which all are 1-2yrs old with no more than 500 hrs on any of them. 
What we are discussing and I'd like to bring it to discussion on here is that were these combines being used at a lower cost per acre for the first user than the second or possible third? 
 I am sure this could reach responses from new and used owners/renters.

Answer

Leasing is great if you are going to wear it out completely because if you keep it and do a buyout you will get screwed when you trade it in
Been there done that

Answer

**’s “walk away leases” have come up short.  That is why the new dealer contract has specified for many, that if the value at the end of the lease does not equal the market value, the dealer must make up the difference...all while Deere sets the terms of the lease??  What hurts the most is the deals of 10 or more where they simply but the deal.  Just as in autos, you see more and more lease quotes, because stating the cost would shake people up...That being said, they all trying to get away from the large “mud” programs that they initiated.  It all comes down to cost / acre or bushel...as well as equity vs tax advantages.

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Use a net present value of cashflows calculator to determine lease vs buy.  It is just numbers.  After that it's a cashflow and investment decision. Where and how much of your cash do you want to use.

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Leasing Case 8250s for 58k a year for 400 sep hours full warranty the term of lease get new one every 3 years on our 2nd round.

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Where is this dealer that has 30+ combines with 500 hrs?

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Ultimately it comes down to 3 things.

1) Cash flow/equity. Can you make payments every year? Can you increase those costs 10% and still consider it a good deal if your lease increases? Do you want to deduct it off your taxes?

2) What is your philosophy on handling bad years? We could have leased machines at times and been cheaper with the tax implications and such but what if things go bad for a few years? Not only do you not own the machine that secures your income, but do you have the equity for the bank to stand with you? My philosophy is to own the equipment. If things get tough we can run machines a long time if we have to. It's like herbicide programs; I'm paying for flexibility.

3) Cost/SEPERATOR hour. I've seen leases based on engine hours and I could almost not care at all about the engine hours. I care about the hours it's working in the field with all the wear parts. Also, a "good looking" lease or trade based on engine hours is typically a third higher when you look at sep hours. Figure your cost/hour, per acre and per bushel and let that tell you what to do.

As for running cheaper first year vs following years, it depends on what the company is throwing at the deal to make it happen. MUD programs and such make it difficult to say on a generalized basis if they are cheaper first year or not.

Answer

Good question, I have always owned and always purchased newer used.  Just makes sense to me and the last two combines I checked out leasing and it just didnt make sense to me, but must for others?  The best deals I have ever made were purchasing on farm sales and I expect that to be really true in the near future.  You can afford repairs out of pocket when you save tons on purchase.

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I have two 20 year old Lexions each with over 4000 seperator hours.  been good machines but one of them has frame cracks and fatigue on the bottom.  A custom combiner with a 9770 dropped in last fall and was willing to work for $28 an acre if I provided the fuel for the machine and his two trucks. he brought a truck driver that was between oil field jobs and knocked out acres faster than I could. I put a field view puck and an iPad in his cab on his 2600.   Am I better off to go to one combine, hire about 1/2 of the farm harvested like this and skip one H2A worker next season?  I would save about $40,000 off the labor bill.

Answer

For the last few years, I've been trading my 2 yr old machine for a one yr old machine every year. It's been costing 58 to 62 K every year, depending on hours on each machine. Case has been offering 0 interest for 12 months, so I pay my yearly trade price, and let my borrowed balance hang out interest free. The downside of this strategy is I'm not building any equity in my machine. The upside is I've yet to have any repair bills. (Knock on wood). I agree that's its definitely cheaper to own a 10 or 15 yr old machine and keep it running well. If you can live with the risk of breakdowns, and the realative inefficiencies of a 15 yr old machine  compared to a newer one, it will save you some money. But, basically,  there's no cheap way to own a combine.

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My perspective is the same for farm equipment as it is a pickup truck, if it is mechanically sound and it does what you ask it to, what's the point of having new?  An older truck will get you from a to b just like an older combine will harvest just like a new one if it's maintained and kept up.

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It’s all relevant to your numbers. I mean if you’re leasing a 500 machine is there warranty still attached with parts and labor covered from the dealer? Or are you still out parts and labor if needed? If covered how long are they covered, 750hrs? 1000hrs?

On your owning numbers, do you count just the payment or payment plus down payment? What hours on on it? Again warranty left or not? Parts, labor (your cost or dealer), depreciation, etc.

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$40-50k a year for a combine? Just buy a 5-7 year old machine and use the money you saved for working capital and repairs.

Works for us, but we poor boy everything.

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I recommend never leasing a combine. Cashflow in farming is very up and down. Why put that extra stress on your wallet? I'd recommended buying somewhat modern equipment that you can purchase using cash. If you have to leverage a little no big deal, but don't get too crazy with it.

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I find if you're not buying new, you shouldn't buy a high priced 1 or 2 year old machine with 500 hours. In my opinion anyway.  The'free' hours are nearly done already. We bought at 5 years old with 700 sep hours and almost immediately had to start changing out wear parts. Buuuut we also paid about a third of what they wanted for 2 years old with 4 to 500 hours. Now the machine is 11 years old and not current, but it still does a fabulous job and we keep it up to date like new. We're very thorough with our combines and over the years have only had a couple set backs during harvest. 
I like to own what I can. If I had big cash flow I'd likely consider leasing new to get the tax break. Otherwise it's nice to own as much cost of production as possible.

Answer

You are talking lease with option to buy sort of deal?  Or more of a yearly lease and a different combine each year?

Each is available for different scenarios.  Each has pros and cons.

I had a lease deal with machinery link that was great for me.  They even paid all repairs.  Such a good deal they went bankrupt.  I owned the header.  Some deals might come with a header.

Good advise my dad gave me.  Most farmers don’t go broke because of a bad year.  They go broke because of the good year.  That being, they buy machinery with payments they can’t make when the bad years come.  I have watch that being a very good lesson around here in the past years.

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Do farmers leasing a new combine have a lower Cost/Acre than Used Combine owners?

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