Demand for agricultural equipment leases could increase if manufacturers have trouble moving new machinery.
Amid an industry downturn in lease activity, agricultural equipment dealer H&R Agri-Power President Steve Hunt stressed the value of lease-to-own arrangements in offering a long-term deal, during the Equipment Finance Connect event earlier this month.
“Four or five years ago, leasing on the ag side was opening up. It’s what the market demanded and everybody did it,” Hunt said. “Then everybody stopped.”
He is now seeing “everybody getting back in” to leasing, though it cannot be relied heavily on as a consistent source of income for Kentucky-based H&R Agri-Power.
Leasing a piece of equipment is the first step to building a relationship with a customer who H&R Agri-Power can then potentially sell to later, when the lease is up, Hunt said.
“It just depends on each customer’s individual financial situation,” he said of how his business decides whether to lease or finance equipment.
Some customers prefer to lease-to-own, while others just want to “lease it for three years and have nothing to do with it” after the terms expire, Hunt said. His business offers both options.
Hunt said a small percentage of H&R’s business is leasing. With an uptick in manufacturing output, “you’ll probably see some leases come out” he said, if OEMs find it difficult to move equipment.
Agricultural equipment financing, including leases, accounted for 14.8% of all equipment financing new business volume in the U.S. last year, a November 2023 study from the Equipment Leasing and Finance Association found.
Agricultural equipment was the second-most financed equipment category after transportation, ELFA found. In October 2023, agricultural machinery investment was down 25% year over year, according to the report.
