According to an Oct. 14 report in the Wall Street Journal, it appears Deere & Co., as well as other major manufacturers of farm machinery are once again emphasizing equipment leasing to keep sales moving.
“The world’s largest manufacturer of farm equipment has leaned on its financing business in recent years to combat declining demand for new machinery at a time of unprecedented stress in the U.S. Farm Belt because of the trade war and bad weather,” says the report written by Bob Tita.
“Leases allow Deere to bump up sales by delivering machinery to customers who might not be willing to buy in a soft market. But the longer term risk to the company is that many customers will continue to prefer leasing when the farm economy rebounds, and leasing offers less reliable profit and more complexity than lending customers money with interest to pay for their equipment purchases.”
And as dealers know well, the report says leases also “weigh on the used equipment market.” More than a third of the financed purchases of Deere high-horsepower tractors and construction equipment is being leased to farmers and builders, and leasing levels are ~2x the rate in 2012, when the U.S. farm equipment market was booming because of high crop prices, according to the report.
According to the report CNH Industrial, maker of Case IH and New Holland farm equipment, also is relying more on leasing to support sales. “More than 40% of the high horsepower tractors CNH has sold annually in the U.S. since 2014 have been leased, up from 25% in 2012, according to the Uniform Commercial Code data on financed purchases, which cover most of the farm equipment sold in the U.S.”