Record interest rates are changing the way farmers are buying tractors and combines. Many now prefer to lease or pay straight cash rather than pay 14 percent to 17 percent interest or higher.
As a result, farm machinery manufacturers are seeing an upswing in their leasing business. "Our leasing volume has almost tripled over this time last year," says E. W. Muehlhausen, vice-president, marketing, Steiger Tractor Inc., a manufacturer of high- horsepower four-wheel-drive tractors in Fargo, N.D.
Even though the annual payment for the lease might be greater than an annual loan payment for the same equipment, a lease makes good business sense for farmers. This is because the entire lease payment can be deducted from taxable income, while only the interest expense can be deducted for a loan.