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Saronville NE | I know you hate leasing, but there are times when leasing is a good option, not always, just have to look at the numbers. I dont know on buildings but my example will be this on a tractor for me. I used to lease tractors for just 1 season, ( shortterm lease or longterm rent whatever you want to call it) At the time, we expanded our planting business and went to a 16r mounted planter, didnt have a tractor that would handle it and didnt have the resources to buy one, with taking the chances of payments and repairs, so leased a 8130 for 500 hours, it cost me $15k to lease that tractor, I had no repairs to pay and had no debt to take on, that woulda messed with a balance sheet, Ok so I in your eyes basically I threw away $15k, BUT if I wouldnt of leased a tractor I couldnt expanded my business. If wouda bought a tractor like that the payments woulda been $25k a year, plus, the dealer ended up having $9k in repairs that year on that tractor, 9 service calls in 500 hours, and it wasnt a new tractor. The leases have since gone up and was cheaper to buy a used tractor on my own and so far have lucked out with repairs, but you cant always overlook the option of a lease, just cause you think its a waste of money, sometimes, its the cheapest and smartest thing you can do for your operation.
To me if the payment, plus the repairs, plus being able to write off 100% of the lease payment on taxs instead of just depreciation and intrest, is quite a ways ahead of owning it with total out of pocket expanse, why not consider it. Most of the time you DO have equity at a end of a lease, not as much as if you owned it but you still have equity, and most of the time the payments are cheaper also, so you have to keep that in consideration in your cashflow and fincial sheet. I think another thing is leasing works better if you put higher hours, miles etc on something then if you are a low usage operator. Personally back when I was more highly leveraged starting out, I couldnt afford to buy a good tractor, woulda been just a high houred old thing that needed repairs, which you couldnt afford to fix, leasing worked great then, cause you didnt have the debt to take on, but you could cashflow the payment (custom work), so it was very benficial to me in starting and expanding with very low capitol outlay.
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Leasing question
