Investment capital is tied up for a long period of time when machinery is owned. However, if you purchase machinery on a dealer finance plan or with credit from some other lender, you may have to pay for it over a short period of time, creating a cash flow problem. Machinery ownership may be the least expensive choice in the long run, especially for high-use equipment. You provide the labor to operate it, and you assume responsibility for repairs and maintenance, liquidation, and obsolescence. By owning a machine, you control its use and the quality of its performance. Ownership is by far the most popular method of acquiring long-term control of farm machinery services. Are you likely to change production practices or farm size in the near future and no longer need this type or size of machine?.Are current technological developments likely to make the machine obsolete in the near future?.Do you have the ability, tools, and labor to operate the machine and maintain it?.What are the income tax advantages of each method? What is your own tax situation?.How much capital will you need if you purchase the machine? Can you afford that much investment? Can capital be used more profitably in other areas of your farm business?.What other ways are available for you to acquire the machine's services? What are their expected costs?.How much will it cost to own and operate an item of machinery?.Your choice for acquiring farm machinery will depend on your answers to the following questions: Are there any alternatives? Although most farmers own their own machinery, options such as custom hiring, renting and leasing are also popular. ![]() Today farmers can easily invest over $200,000 in a single tractor or combine. ![]() Article reprinted with permission from Ag Decision Maker.
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