Brockett’s Ag Advice
Hb By John E. Brockett
jH Farm Management Agent
Lewistown Extension Office
WHAT ABOUT LEASING
EQUIPMENT
Short term leasing quite often is
an excellent way to acquire the use
of equipment that you only need for
a limited period of time. The cost
per hour is quite high but the cost
per year may be well below the
WHITEWASHING
with
DAIRY WHITE
• DRIES WHITE
• DOES NOT RUB OFF EASILY
• NO WET FLOORS
• IS COMPATIBLE WITH
DISINFECTANT & FLY SPRAYS
• WASHES OFF WINDOWS &
PIPELINES EASILY
BARN CLEANING SERVICE
AVAILABLE WITH
COMPRESSED AIR
To have your barn cleaned with air it will
clean off dust, cob webs & lots of old lime.
This will keep your barn looking cleaner &
whiter longer.
W« will take work within
100 mile radius of Lancaster
MAYNARD L. BEITZEL
Wilmer, PA 17585 717-392-7227
Bern Spraying Our Businsss, net e sideline.
Spraying since 1961
High Pressure Washing & Disinfecting
Poultry Houses And Veal Pens
cost of owning the item. Example:
You need the use of a “Bob Cat".
You really only need it about 3
times per year for about 30 hours
each time. If you purchased one
new the cost would be $BOOO. An
nual costs would be $l6BO
i depreciation for 7 years, interest
\§l^ L * LANCASTER STOCKYARDS
THE ADVANTAGES OF SELLING YOUR HOGS AT
- Competitive Bidding
- Prompt Payment
- 4 Marketing Days A Week: Mon. 1 P.M., Tues. 10 A.M., Wed, & Sat. Sales Start at 8 a.m.
- Water & Feed Available For Hogs Brought In Other Than Market Days
- Water Available To Cool Hot Hogs In Warm Weather
- In Weights - Hogs Are Weighed Right Off Trucks. Hogs Can Easily Shrink 2-3 lbs. Per Hog
Waiting Several Hours To Be Sold (2 lb. x $.50/lb.= $l.OO loss per hog) We Weigh Hogs As
Soon As Possible Right Off The Truck!
WE CAN NET YOU MORE DOLLARS PER HOG
AND EVERY LITTLE BIT HELPS.
Hog Division
(Mon., Tues., Wed. & Sat. A.M.)
717-291-8912
Ed Prosser s Home 717-367-2368
at 12%, repairs and insurance i
Thus ihe ownership cost per hour
would be $lB if you used it for 90
hours per j ear. If you can rent or
lease one foi li i'l loan $lB, you
would probably be dollars ahead.
Most field machinery can be
leased for short periods of time at
rates that are better than your
ownership costs. Using the
example above you can figure the
annual cost of owning equipment
yourself. Then you can figure the
break amount of use to justify
owning over leasing. For fast
wear, high repair items such as
flail choppers use 20 to 22 percent
ot purchase price to figure the
annual ownership cost. For low
wear items such as tillage tools use
12 to 14 percent of purchase price
to figure the annual ownership
cost. Other items would be in
LANCASTER STOCKYARDS!
Main Office 717-397-1411
Lancaster Farming Saturday Decambar 15,1984-05
between. Example: If the annual
ownership cost of an item was
$l6BO and you could rent the item
for 20 dollars an hour, the
break*" en use would be 84 hours
per year.
Long Term Lease
- Purchase
Ixmg term equipment lease with
an option to purchase is for all
practical purposes a way to buy an
item. Is it worth it 9 Sometimes the
answer is yes but quite often it is
no. When is it justifiable?
1. You don’t need investment
credit and the company will give
you a lease rate well below the cost
of borrowing the money for it.
Don’t forget to include the amount
you will have to pay at the end of
the lease to purchase it.
Example: a $lO,OOO item with a
possible investment credit of $800;
you can lease purchase it for
$182.49 per month over 5 years plus
$lOOO which you will borrow at the
end of that time. Total cost of
11,949 plus interest on the 1000
(12.5% for one year) or $12,038.
Since you can not use the $BOO
investment credit anyway don’t
count it as a cost. If you borrowed
the $lO,OOO at 12.5% amortized over
6 years (same as lease + 1 year for
purchase after lease), the cost
would be $198.12 per month of
$14,265. Since you can not use the
$BOO investment credit, don’t count
it. In this case the lease would save
$2182 of dollar outlay so the lease
would be the less expensive.
Bill McCoy’s Home 717-569-5044
Pat McCoy’s Home 717-656-8076
2. The savings for leasing is
greater than the tax savings of
investment credit.
3. The cash outlay per month is
20 percent less than the cash outlay
per month for purchase.'
Remember you may have an extra
amount to pay at the end of the
lease period.
When is it probably not a wise
move?
1. You do need or will soon need
the investment credit yourself and
the savings of leasing over owning
is less than the value of the credit.
Example: a $lO,OOO item with a
possible investment credit of $800;
you can lease-purchase it for
$182.49 per month over 5 years plus
$lOOO at end of lease period. Total
cost of 11,949 plus interest loss on
the $lOOO plus loss of $BOO for a cost
of $12,794 or charges of $2794. The
net loss of interest if you used your
own money then paid it back into
the account over 5 years would be
$2700 (9% annualized rate) less the
investment credit you gained or
$l9OO. In this case the lease would
cost $894 so purchase would be less
expensive.
2. The cost of purchase at the end
of the lease is not stated (not
possible before 1981).
3. The monthly cash outlay for
leasing is equal to or greater than
the cash outlay for purchasing.
Remember that with a lease you
will have a purchase amount tied
to the end.
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