Buying vs Renting Equipment: Which is Best for California Farmers?
12/19/2024
Buying your farm equipment vs. renting it: Which is better for you? Many customers ask this question when they begin to research and explore what they can afford, and what makes the most sense for their needs. Both options have clear advantages and disadvantages.
Neither option is the final, correct answer for everyone. So, to help demystify farm equipment options, let’s examine the pros and cons of buying versus renting.
First, let’s explore the advantages of buying your farm equipment in California.
The most apparent difference between buying and renting your farm equipment is that you have complete control and ownership when you purchase equipment. You can use the equipment as you see fit without any restrictions that would come from renting instead. If you need your equipment, and not just seasonally, owning your equipment is the best option. In contrast, if you don’t need your equipment year-round, you can rent your equipment to someone else and make a little extra money during your off-season.
Another advantage of buying is building equity in your investment. Just like owning a home builds equity, so does owning equipment. That equity will let you upgrade to newer equipment when it’s time to finally sell or trade-in your used tractor, sprayer, attachments and implements, or other farm equipment.
Buying can be a significant upfront investment, but it can be much more cost-efficient than renting down the road. Think of it like renting an apartment vs buying a home. Yes, renting an apartment is more accessible to start, but the money you put toward an apartment is continuous for the duration of your lease. However, if you buy a home, you may be paying for many years, but it’s a finite payment that ends once you’ve paid off the loan amount. The same applies to equipment; you own it once it’s paid off.
Now let’s go over some disadvantages of buying your farm equipment.
The biggest hurdle to buying farm equipment for most is the high initial cost. There’s no sugarcoating it: farm equipment is expensive. Purchasing a tractor or a combine is tens, sometimes hundreds of thousands of dollars. This high initial cost is sometimes not feasible for farmers, especially those with a small farm or just starting out. This is where renting is a better option.
Another disadvantage of buying that many people don’t think about is the cost of maintaining and repairing your farm equipment. Unlike rented equipment, owners are responsible for all maintenance and repair costs. These costs can quickly add up over time, especially if you buy equipment from brands with a bad reputation. That’s why we only sell the most reliable, high-quality John Deere equipment at Belkorp Ag.
Now that we know the pros and cons of buying, let’s explore how renting can save you money initially.
Renting allows farmers who are just starting out to avoid the high upfront costs of purchasing expensive equipment. Rather than making a large down payment to buy a tractor, you can make more reasonable, less expensive monthly payments that work within your budget. The money saved from renting can also go toward other operating expenses or emergency purchases.
Renting is also a great way to get your hands on the latest and most advanced technology. New models are released yearly, typically including the latest advancements in precision agriculture technology. Rather than waiting years to try the latest model, renting allows you to trade up and try something new annually.
Rental agreements on farm equipment typically include maintenance and repairs, removing the burden of forking up the cash for costly repairs when something inevitably breaks down. However, this isn’t always the case, and it’s always best practice to check with the dealership to see what’s included in their rental agreements.
While renting farm equipment has strong advantages over buying, it also has some disadvantages that every farmer should know.
Renting your equipment means you don’t own it, which is fine for many but limits the equity you can build. You also can’t make upgrades or customize your equipment if you rent it because it belongs to the dealership rather than the individual. Some farmers are okay not owning their equipment, but for others who want to have full control over their operations, renting doesn’t sound as appealing.
Renting also comes with potentially higher long-term costs. As we mentioned before, renting has no set end date; you are paying for the equipment for as long as you have it. Whereas payment on owned equipment ends once the loan is paid in full.
Whether you’re looking to rent or buy your farm equipment, Belkorp Ag in the California Bay Area can help you out. We even have a selection of returned rental equipment that you can buy for a reduced price.
We would love to help you find the equipment you need for your California farm. Visit one of our many locations in the Bay Area and find out whether renting or buying is best for you.
