The Cost of Owning Your Own Ag. Equipment

Agricultural equipment is a huge part of having a successful operation. Modern technologies have made farming more efficient, but without the right tools, it can be difficult to get everything done. For many business owners, there is a decision that has to be made regarding renting, leasing, or owning equipment. In this article, we will discuss some of the costs associated with owning your machinery.

Your Operation Type

The type of farm you have can directly affect your costs of equipment ownership. For example, specialty crops or organic operations often require specific or additional equipment to complete all necessary tasks. This means your total cost increases because you need more machinery or specialized equipment.

Livestock operations encounter similar situations, though they may not have as many total pieces of equipment. Instead, producers and ranchers may need to have multiple attachments for a single machine. 

Whether you’re a first-generation farmer or the operation has been in your family for decades, it’s important to understand operating differences for different end products. 

Initial Purchase and Fixed Costs

The biggest cost will be the upfront investment in the equipment. Typically a loan will be required in order to finance the purchase and monthly payments will be made. This also includes the loan interest. 

It’s also important to note that taxes will have to be paid toward the equipment as well. It can play into your business costs, but you’ll need to work with your accountant to make sure all requirements are met. 

Other fixed costs include maintenance and fuel, which are required to keep your equipment running. Although these are fixed input costs, they will fluctuate with the market. Fuel prices, for example, can change seasonally and with the global economy. 

Before you purchase any agricultural equipment, you should understand the associated operating costs and variable factors that could come into play. 

Depreciation

You may not immediately think of depreciation as a cost, but it is! When you purchase equipment, its value will depreciate over time. This can result in a cost for you if your loan amount were ever to become more than the value of the equipment. Depreciation reduces the total resale value, but it’s also important to understand how the equipment adds value to your operation. From a numbers standpoint, depreciation may cost you, but if your ag equipment continues to be useful for your operation, there is still value involved. 

Technology 

Another cost you’ll need to consider is the technology in your equipment. Because the industry is evolving so much and so quickly, keeping up with changes in technology might be a cost factor for your equipment. 

Owning your own equipment can be beneficial for many operations, but it’s important to weigh all of your options before committing to a purchase. Our team at A&H Sales & Service is here to help you find the best option. Visit us at our location here in Athens, Georgia—especially if you’re located nearby in the Atlanta, Georgia area.