We’ve been hearing for some time that in lieu of buying new big ag equipment, many farmers have turned to leasing equipment. But if leasing has become a trend, it’s been difficult to verify, but there seems to be plenty of anecdotal information floating around out there.

For example, one shortline manufacturer told us that one of the major equipment manufacturers currently has 1,500 high horsepower tractors coming off lease this fall. He says that dealers he’s spoken with recently are very concerned that many of these leases will expire over the next 12 months and will add to the already bloated backlog of used big ag equipment.

I spoke to a few dealers about whether or not they’ve increased the number of leases they’ve written or have noticed if neighboring dealers have done such. They’ve said that some dealers appear to be trading equipment rolls for leases, but none seemed too concerned about any significant increase in the volume of leased equipment in the market.

I’ve noticed only one comment in our monthly Dealer Sentiments report over the past 4 months. That dealer’s comment was, “The only thing that sells product is a low or zero interest lease or 0% financing.”

Each of the machinery analysts we work with questioned the major equipment manufacturers at the Farm Progress Show in early September about increased levels of leasing. They couldn’t seem to document a significant trend developing. In his report to investors after the show, Mig Dobre, analyst from RW Baird said, “Leasing is becoming more popular, but still a relatively small percentage of total. In fiscal 2014, less than 15% of Deere purchases were leased while 20% of CNH’s North American row-crop tractors are leased. Management teams all expressed confidence that leasing residual values would hold up and not become outsized liabilities down the road.”

On Oct. 19, Greg Peterson, a.k.a. Machinery Pete, who has been tracking used equipment values and auction data since 1989, noted a significant uptick in leasing volumes. “One thing that I’ve seen is a huge jump in dealer leasing programs. This is proving increasingly popular with farmers who want the warranty coverage they are used to. But is the market just kicking the can down the road? I’ll watch to see what all these off-lease tractors will be worth in a couple years and who will buy them,” says Peterson.

(To see his interview with Casey Seymour, Remarketing Manager with Prairieland Partners, a John Deere dealer in Kansas, on the topic of increased leasing activity of farm machinery in 2015 click here.)

Offering a wider view of farm equipment leasing levels, the Equipment Leasing & Finance Foundation reports that in 2014, “Agricultural equipment represented 11.3% of equipment financing new business volume reported by ELFA member companies, down slightly from 11.9% in 2013. As an end-user of equipment finance, the agriculture industry represented 12.9% of new business volume reported by ELFA member companies, down from 13.7% in 2013. Investment in agriculture machinery decreased in the first quarter of 2015 at an annual rate of 2.8%. In July 2015, agriculture machinery investment was down 35.4% year over year.”

So is farm equipment leasing activity trending upward? For answers to questions like this, it’s always best to go to the source. So, dealers give us a hand here by taking a quick, 2-minute survey. All responses will be aggregated and participants will remain anonymous. We’ll report on the responses we get in the next couple of weeks.

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