As manufacturers struggle to return to operating at full capacity because of a shortage of parts and components, the availability of machinery — especially computer-chip-hungry full-size tractors — will be limited.
“The impact of this supply chain crunch is only worsened by nationwide workforce shortages seen across the country, which is particularly noticeable on our shop floors,” says Kip Eideberg of the Association of Equipment Manufacturers. However, compared to two years ago at this time, the supply of 1- to 3-year-old planter tractors has improved as more new tractors hit the market. At press time, we analyzed the supply of John Deere’s 8R Series of tractors to track availability, price ranges, and hours by model.
A detailed look at the lowest-hour 2022 and 2021 model 8R 370s (Deere’s most popular tractor) sitting on dealer lots can be found in the Pocket Guide.
8R 310
2022 (6 available)
$279,900 to $374,004
400 to 700 hours
2021 (28 available)
$231,000 to $370,656
200 to 2,490 hours
2020 (8 available)
$236,500 to $273,520
466 to 1,833 hours
8R 250
2022 (28 available)
$295,300 to $394,089
300 to 600 hours
2021 (28 available)
$361,915 to $334,900
550 to 2,490 hours
2020 (18 available)
$198,300 to $354,709
315 to 3,090 hours
8R 280
2022 (15 available)
$316,900 to $385,425
65 to 554 hours
2021 (71 available)
$319,500 to $407,713
65 to 2,872 hours
2020 (16 available)
$285,000 to $395,900
250 to 2,511 hours
8R 310
2022 (40 available)
$359,900 to $433,330
30 to 800 hours
2021 (61 available)
$309,500 to $453,580
144 to 2,780 hours
2020 (13 available)
$315,000 to $422,900
290 to 2,262 hours
8R 340
2022 (52 available)
$381,999 to $469,500
57 to 1,456 hours
2021 (86 available)
$328,400 to $484,500
144 to 2,780 hours
2020 (8 available)
$369,500 to $403,900
480 to 1,730 hours
8R 370
2022 (78 available)
$429,900 to $508,407
125 to 1,150 hours
2021 (107 available)
$355,000 to $512,500
160 to 2,000 hours
2020 (18 available)
$342,500 to $464,995
545 to 1,812 hours
8R 410
2022 (32 available)
$439,555 to $517,000
67 to 1,356 hours
2021 (59 available)
$407,500 to $528,485
71 to 1,442 hours
2020 (9 available)
$399,900 to $498,623
507 to 1,800 hours
Study the Pros and Cons Before Leasing Like-New Iron
The opportunity to lease late-model, large machinery puts a spin on the debate whether to finance or lease machinery.
Maybe it is stating the obvious, but consider the financial windfall leasing like-new equipment offers compared to leasing new. Based on the sale prices listed in “Planter Tractor Supplies,” you can lease a low-hour machine at one-quarter to one-third the cost of a new one.
Beyond that price point difference, the rules of leasing machinery holds true whether the iron is new or used, says Tina Barrett, the University of Nebraska economist and executive director of Nebraska Farm Business Inc.
“It’s important you consider the pros and cons of this decision and that you consider what effect lease vs. purchase decisions have on the tax return,” says Barrett. Reducing debt (by leasing machinery) will improve the debt-to-asset ratio for a farm that has equity in assets. “We also see improvement in the current ratio and working capital of the operation by removing that current debt from the balance sheet,” says Barrett. “Some lending institutions will include the upcoming lease payment as a current debt, so this pro may depend on the individual.”
Leasing will also keep you from having an asset that depreciates. “Most equipment depreciates rapidly,” says Barrett. “The last few years have certainly been an exception to that generalization, but we are seeing the trend of prices for used equipment dropping again. One argument that is often made in the case for a lease is that you don’t see that depreciation because you don’t own the asset. On the other hand, by not owning, you will never build equity in the asset.”
Most institutions that furnish equipment leases put taxes as a top reason you should lease. However, “as a tax preparer, I list taxes as the top con,” Barrett says.
Tax law allows that rental or leasing of farm assets is an “ordinary and necessary business expense,” she explains. Tax law also clearly defines what is not considered a lease but rather a conditional sales contract as defined in IRS Publication 535.
“In the leases I see, there are many factors that trip the IRS rules, but the most common is a lease that has a stated or imputed interest value or does not have a true fair-market value buyout schedule in the end,” she says.
“In simpler terms, a true lease will not have an equal payment as the buyout, there won’t be a stated interest rate, and you won’t gain any equity in the asset,” Barrett adds.
Go to Ag Lease 101 for extensive information about leasing agricultural equipment.
