By:

Marc Taylor, Northern Plains Equipment Co., Inc.

Mandan, North Dakota.

Sometimes there is confusion of the terminology that Equipment Companies and Dealers use. And in today’s market place, there is not a "one plan fits all". At Northern Plains Equipment Co., Inc. we will compare as many as eight financing plans to try to find what will work best for the customer.

A purchase is still the most popular method of machine usage in our region. This is probably due to pride in ownership, what we are comfortable with and in many situations, the lowest cost of machine usage. Today there are many creative ways to finance equipment and help a customer gain ownership of the equipment they need.

Leasing has all of the obligations of a conditional sales contract, except the customer generally can elect not to purchase the equipment at the end. It is also a type of financing where a buyer needs to be alert. Truth in lending laws are not as clear in lease situations as they are in conditional contracts. In the past, some companies would advertise "stream rates" which are very different from what most of us consider interest rates and as a result, the customers would end up paying a much higher interest rate than what he expected. Most large equipment companies today can tell you what the lease rate is. The lease is a good financing tool when the objective is cash flow -not ownership.

In recent years, we have seen leases on late model used equipment become popular. These leases will typically have a 30 to 60 % residual (buyout) depending on the equipment and the lease company will often write a contract for the residual amount at the time of the buyout, using the equity the customer has in the equipment as the down payment. The advantage is the customer lowers his payments.

Typically, equipment rental is for part of or all of a season of use, but nearly always less than 12 months. Seeding equipment rentals give a customer the opportunity to try equipment under their own conditions before buying. In the early air seeder/no till drill era, many customers started out renting.

There has been an increase in custom seeding in recent years. It appears this has become very competitive. I’m not sure if the operators are charging enough to cover their long-term costs, but it is a way to help make payments on equipment. For a grower, it is also a way to get your seeding done with a minimal investment. The only disadvantage for a grower is timeliness-this was very apparent this spring.

Generally, modifications will not improve the resale of equipment. If the customer can modify a machine and is comfortable with the performance after the modification/modifications, it may be a low cost approach to seeding equipment ownership. However, almost always, modifications will decrease the trade value of a machine. (Attachments, such as rotary harrows, coulters, etc. are generally not considered modifications.)