How to Choose Between Leasing and Financing Equipment in Agriculture

New equipment can help your farm work better. But how you pay for that equipment matters just as much as the machine itself. Leasing and financing both let you spread out costs over time. However, they affect your cash flow, taxes, and ability to get grants in different ways. Picking the right option can help you keep more working money or build up your farm’s value, depending on your needs.

In Canada, most farm equipment purchases are supported through repayable financing, not grants. Programs like Farm Credit Canada (FCC) financing are meant to fit into your bigger farm business plan.

Leasing vs Financing: What’s the Real Difference for Farms?

The main difference between leasing and financing is who owns the equipment and how much flexibility you have.

Leasing Farm Equipment

Leasing means you pay to use the equipment for a set period, usually 3 to 5 years. You do not own the equipment unless you buy it at the end of the lease.

Leasing might be a good choice if:

You often upgrade to the newest equipment
Your cash flow is tight during busy seasons
You want lower monthly payments
The equipment loses value quickly

Key points to remember:

Lease payments are usually counted as operating expenses
You may have limits on how much you use the equipment
You do not build equity unless you buy the equipment at the end

Leases are usually offered by dealers or private lenders, not by federal programs.

Financing Farm Equipment

Financing means you borrow money to buy equipment. Once you finish paying off the loan, you own the equipment.

A major option for Canadian farms is Farm Credit Canada – Farm Equipment Financing.

According to FCC:

0% down payment for loans under $100,000
10% down payment for loans under $500,000
Competitive down payments for loans over $500,000
Available at participating equipment dealerships
Subject to credit approval

Financing may be better if:

You want to keep the equipment for a long time
You want to build up your farm’s assets
You plan to apply for cost-share or capital programs later
You like knowing you will own the equipment

GrantHub offers tools to help you find financing-friendly programs by province and farm type.

How Grants and Repayable Programs Fit In

Most support for farm equipment in Canada comes as repayable financing, not grants you do not have to pay back. This is important when you are deciding between leasing and financing.

Example: FCC Financing Programs

Farm Equipment Financing (FCC)

Purpose: Buy new or used farm equipment
Funding type: Repayable loan
Who can apply: Farmers buying equipment through participating dealers
Jurisdiction: Federal

Livestock Financing (FCC)

Purpose: Finance feeder cattle or breeding livestock
Funding type: Repayable loan
Requires working with a participating livestock alliance partner
Modest down payment options available

The livestock program does not cover equipment, but it shows how FCC uses repayable support for different farm needs. In both cases, ownership is important. Leased equipment usually does not count for capital-based funding or for your balance sheet.

When Leasing Can Affect Grant or Program Eligibility

Leasing can limit your choices if:

A program later asks for proof that you own the equipment
You need the equipment listed as an asset for your farm
You want to use the equipment as security for other loans

Many provincial cost-share programs only pay for owned equipment, not leased items. This is especially true for environmental upgrades or projects that require you to own the asset.

For more details on how funding types work together, see How Government Grants Interact with Loans and Equity Financing in Canada.

Common Mistakes to Avoid

Looking only at monthly payments
Low payments can hide higher overall costs or lost value.
Leasing equipment you will use for many years
Long-term use is usually cheaper if you finance instead of lease.
Forgetting about future program eligibility
Leased equipment may stop you from qualifying for some cost-share or capital programs later.
Not checking if your dealer is approved
FCC equipment financing needs you to buy from a participating dealer.

Frequently Asked Questions

Q: Is leasing farm equipment cheaper than financing?
Leasing can have lower monthly payments for a while. But financing is usually less expensive if you keep the equipment for many years.

Q: Can I use FCC financing for used equipment?
Yes. FCC farm equipment financing works for both new and used equipment from approved dealers.

Q: Are FCC programs grants or loans?
They are loans you must pay back, not grants.

Q: Does leasing affect my taxes?
Lease payments are usually operating expenses. Financed equipment can be depreciated. Ask your accountant for details.

Q: Can I switch from leasing to financing later?
Only if your lease lets you buy the equipment at the end. If not, you may need a new loan to buy different equipment.

Next Steps

Choosing between leasing and financing farm equipment can affect your cash flow, taxes, and future funding options. Take time to look at your farm’s goals and what programs you might want to use later. GrantHub tracks hundreds of agriculture grants and financing programs across Canada and can help you see which options fit your farm’s needs now and in the future.

How to Choose Between Leasing and Financing Equipment in Agriculture