Yes New Farm Equpment needs a Restart button

[Grahamp]

We were looking at a new tractor this year and there is no way a red green or blue one would work. We were going to go used but ended up with a new versatile. The price difference was staggering.

[hobbyfrmr]

Wiseguy, there may be some truth to that. I own some 4800 series 4WD tractors. We put in air ride seats, autosteer and new radios. So far no catastrophic failures. One was pulling a 65 foot seed hawk with 2 fans before I bought it.
These tractors are nowhere near as efficient as new one, but they all sit in a shed for 9 months a year.

[furrowtickler]

Those new Versy's were definitely a very good buy compared to the big three.

[Richard5]

Jwab, your comments make zero sense

You say those farmers need to the write off. That could be but then those farmers are not very smart

$500,000 combine, 13% tax when fully written off - $65000 tax savings when fully depreciated - almost 8 to 1 ratio

Seems like a hell of a deal to me

[greybeard]

Appears to me to be simple supply and demand.
Dealers lots got 5x bigger in last 10 years. Row upon row of new sprayers, drills, combines.
All going out the door to farm the same land. As they say, they ain't make any more of it.
Only as many farmers.
Kind of like a Ponzi. Everybody was in.
Now everybody's out.

[greybeard]

S/B only 1/2 as many farmers.

[farmaholic]

I too doubt some corporate BTOs flip iron frequently for just the right off. Spend a buck to save 13 cents? Hardly makes sense, unless their net income is higher than the 500k small business lowest tax bracket. There are usually enough fingers in the pie or other options to "manage" excess income than waste it buying new iron for tax purposes only.

Maybe they want to always be under warranty (escpecially combines). Maybe they "think" they need to flip because it only costs "X" dollars per acre but in the meantime aren't gaining any equity or losing equity in the iron. Leasing is next, pay to use it then after a couple years send it back and start the process over again. Vicious circle.
Good for those who can "afford" it.

Then there is the MUD color swaps. I will never get there, some are too blindly brand dedicated to even consider it and some have no loyalty at all.

Takes all kinds...

[agchat]

When I read posts like this I just sit and smile, for two reasons. One, I am on the way out, and nearly finished of all this ****ing bullshit. Two, guys like me have been saying this for years, farmers have created this mess themselves, but **** what does a small farmer like me know anyway. Remember when they stopped making pull type combines(which i never did like anyway) in the eighties. Asked the salesman why they stopped and he showed me his dealership records for the past four years and they had only sold one. His answer "the farmer made them stop they were not buying them." And so the snowball keeps rolling and getting bigger. Progress is good, but sometimes there may be a limit. Good luck to those you who continue or must continue this way of living.

[Richard5]

Jwab, you're still not getting basic tax

Whatver the deduction, the lease pmt, the additional expense, you only get your tax rate.

Using your example a 10,000 acre farm, if he finds additional "deductions" of $100,000 it only reduces tax by $13,000. That means you spent $100,000 to save $13,000

Not good financial planning at all especially if trading off something that would more than do the job (example 3-7 year old tractor)

For leasing, almost always you will get a higher expense rate in depreciation by buying instead of leasing unless the lease is drawn up with larger pmts. This strategy is then really hard on cash flow if the farm is struggling already.

Leasing has become very popular because is a 1 stop done deal. No trip to the bank, lawyer etc. And also, imo, some of these leasing companies never turn you down for the deal

[Richard5]

Once over 1/2 million I think the tax increases to 27%.

If you are a very large farm with lots of earnings and debt you don't have luxury of the first 500,000 at 13%, it might all be at 27%.

Even then, its almost a 4 to 1 ratio on the investment verses tax savings.

No doubt some may be dead against paying tax at those rates but its a slow bleeding wound that will never ever heal then