Reviewed August 2026 against USDA Farm Service Agency lending rates, USDA Economic Research Service farm income forecasts, and the Association of Equipment Manufacturers monthly tractor and combine reports.

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Ag Equipment Financing: Lease vs. Buy, With the Numbers Behind the Decision

By Farmonaut Research & Content Team · Published 9 October 2024 · Updated 27 September 2026

Leasing wins when you will replace the machine before it is worn out, when you cannot afford the capital outlay, or when the annual lease payment is below the break-even figure you can calculate from the purchase price, your loan rate and the expected trade value. Buying wins when the machine will stay past the point where lease payments would keep accruing, and when you can use the equipment write-offs. Everything below is the arithmetic and the current rate evidence you need to decide which of those two describes your operation.

The one number that decides it is the break-even annual lease payment: the net cost of owning over the same term, divided by the years. Below that, lease. Above it, buy. The calculator further down computes it from your own figures.

What’s on this page

• What ag equipment financing costs: verified USDA FSA rates effective August 1, 2026
• Lease vs. buy compared line by line, including one claim the old guides get wrong
• A break-even lease payment calculator using your own numbers
• Where the new and used markets sit, from AEM and University of Illinois data
• Section 179 and bonus depreciation limits for tax years beginning in 2026
• How to find the lender chartered for your county, whether that’s Topsham, Maine or Champaign, Illinois
• Why leaf de-greening on a satellite map changes your capacity maths
• An eight-point checklist that stays valid after every figure here expires

Machinery Demand Is in a Multi-Year Contraction — That Is Your Negotiating Position

US farm tractor unit sales fell from 317,944 in 2021 to 195,857 in 2025, a decline of 38.4% across four years. Self-propelled combine sales fell from a 2023 peak of 7,349 units to 3,579 in 2025, a 51.3% drop in two years. Both series are compiled by Gerald Mashange for farmdoc daily (16):33, University of Illinois, February 27, 2026.

Deere & Company’s own fiscal 2026 guidance, issued with its second-quarter results on May 21, 2026, forecasts large agriculture industry demand in the US and Canada down 15% to 20% for the full fiscal year, with Production and Precision Agriculture net sales of $4.503 billion in the quarter, down 14% year over year, and full-year net income guided to $4.5–$5.0 billion (Deere & Company news release, 21 May 2026). A buyer walks into that market with leverage. A lessee walks in with less, because lease residuals are set against falling used values.

What Ag Equipment Financing Actually Costs Right Now

Start with the floor. USDA’s Farm Service Agency publishes its direct lending rates monthly. Effective August 1, 2026, the rates were: Farm Operating (Direct) 5.250%, Farm Ownership (Direct) 6.000%, Farm Ownership joint financing 4.000%, Farm Ownership down payment 2.000%, Emergency loan (amount of actual loss) 3.750%, and Farm Storage Facility loans from 4.125% at three years to 4.625% at twelve (USDA FSA, August 2026 lending rates). FSA reissues these on the first business day of each month, so treat the chart below as the August 2026 snapshot and pull the current month before you sign anything.

Three practical points follow. First, the 5.250% direct operating rate is a national figure — it is identical in Maine and Illinois, so a search for a local rate is really a search for a local office. Second, FSA guaranteed loans carry rates set by the commercial lender, not by USDA. Third, dealer and captive-finance offers are frequently quoted as a payment rather than a rate; convert every offer to an annual percentage rate before comparing, or you cannot compare at all. Our own roundup of farm equipment financing options walks through the lender categories in more detail.

Leasing vs. Buying Farm Equipment, Line by Line

The table below is the comparison that matters, including one point most lease-vs-buy guides still get wrong.

The off-balance-sheet line is worth dwelling on, because it appears in guides written before ASC 842 took effect for private companies. If your lender covenants are written on total liabilities or a debt-to-asset ratio, a multi-year equipment lease now shows up. Ask your accountant what a five-year lease does to your ratios before you assume leasing protects your borrowing base.

The method for settling this properly has not changed since Kansas State published Leasing vs. Buying Farm Machinery (MF-2953) by Dhuyvetter, Williams and Dumler in October 2010: put both options on a common cash-flow footing over the same period and compare present values. That publication still stands as the reference framework, which is why the checklist at the end of this article follows it.

Break-even lease payment calculator

Enter your own purchase price, term and trade expectation; the tool returns the annual lease payment at which owning and leasing cost the same.

Assumptions and exclusions: annual payments in arrears, nominal dollars with no separate discounting beyond the loan rate, and no tax effects. It excludes Section 179 and bonus depreciation, sales and property tax, insurance, maintenance differences between the two options, lease-end buyout prices, hour or acre overage charges, and any custom-work income from owned machinery. Defaults are illustrative placeholders, not a quote — replace every one with your own figures.

Reading the Market Before You Sign

Monthly unit data tells you which categories dealers are struggling to move. In June 2026, US total farm tractor sales were 18,186 units against 22,287 a year earlier, down 18.4%; four-wheel-drive tractors fell 30.3% to 124 units; and self-propelled combines rose 3.9% to 269 units. Year to date through June 2026, tractors stood at 89,063 against 103,123, down 13.6% (AEM United States Ag Tractor and Combine Report, June 2026, released 10 July 2026). AEM publishes this every month.

Two contradictions in that picture are useful. Combines were the only growing category in June 2026 even though annual combine sales collapsed 51.3% from 2023 to 2025 — a small base makes monthly swings loud, so do not read one month as a trend. And 100+ HP tractors, the row-crop segment, are down 16.8% year to date through June 2026, which is where dealer discounting concentrates.

Used Equipment, Dealer Inventory and Why Both Matter to a Lease Quote

Dealer farm machinery and equipment inventories fell from a peak near $7.23 billion in October 2022 to $5.72 billion in December 2025, a 20.84% reduction of $1.51 billion. Used tractor inventories fell for an eighth consecutive month to December 2025, down 1.9% month over month and 15.5% year over year, with asking prices down 5.85% and auction values down 2.54% year over year. Used combine inventory fell 9.5% year over year while combine auction values rose 7.47% — the divergence between falling tractor values and firming combine values is the single most decision-relevant number in that report, and both come from farmdoc daily, 27 February 2026.

Dealer sentiment in the same report frames how hard you can push on price.

Fewer dealers expect declines in 2026 than experienced them in 2025 — 44.3% forecasting a drop in new sales against 67.5% who reported one — which suggests the discounting window narrows rather than widens from here. Tariffs push the other way on list prices: Deere carried approximately $600 million in tariff costs in fiscal 2025 and projected roughly $1.2 billion for fiscal 2026, and AGCO's expected burden rose from $40 million in 2025 to as much as $110 million in 2026, per the same farmdoc analysis. If used values are soft and new list prices are absorbing tariff cost, buying used is arithmetically stronger than it was in 2022. Our note on used tillage equipment trends covers what to inspect, and for readers outside North America the guide to farming equipment in South Africa covers a different dealer landscape.

The Tax Line That Often Decides It

For tax years beginning in 2026, the maximum cost a taxpayer may elect to expense under Internal Revenue Code section 179 is $2,560,000, with the dollar-for-dollar phase-down beginning once section 179 property placed in service exceeds $4,090,000. Those inflation-adjusted amounts are set in IRS Revenue Procedure 2025-32; the IRS reissues these figures annually, so confirm the amounts for the tax year you are actually filing.

The mechanical consequence for the lease-vs-buy decision: a section 179 election and bonus depreciation apply to property you own. An operating lease gives you a deduction spread across the payments instead. Whether that changes the answer depends entirely on your taxable income in the year of acquisition — which is why USDA ERS's sector forecast matters. ERS forecast 2026 net farm income at $153.4 billion, down 0.7% in nominal terms from 2025, and net cash farm income at $158.5 billion, up 3.0%, in the forecast updated 7 May 2026 (USDA ERS, Highlights from the Farm Income Forecast). A large deduction is worth less in a thin-income year. ERS revises this forecast several times annually; check the page before you time a purchase around it.

Finding a Lender in Your County: Topsham, Maine and Champaign, Illinois

Searches for equipment financing in a specific town are really searches for two things: which FSA service center covers you, and which Farm Credit association is chartered for your county. Both are answerable in under five minutes, and the method does not expire.

The two-lookup method

1. FSA service center. Use the USDA farmers.gov service center locator, which searches by state and county and returns Farm Service Agency, Natural Resources Conservation Service and Rural Development offices with addresses and phone numbers. For Topsham, select Maine and Sagadahoc County; for Champaign, select Illinois and Champaign County.
2. Farm Credit association. The Farm Credit System contained 59 banks and associations as of 1 March 2026, each with a chartered territory, across the CoBank, AgriBank, Farm Credit Bank of Texas and AgFirst districts. The Farm Credit Administration FCS directory and map, page updated 13 March 2026, lists institutions by district with county-level territory descriptions.

What Maine readers should know: the FSA direct operating rate of 5.250% effective 1 August 2026 is national, so a Topsham quote and a Kansas quote from FSA are identical. What differs is the commercial and Farm Credit pricing layered on top, and diversified New England operations frequently finance smaller machines — the under-40 HP segment that fell 22.0% in June 2026 and 15.7% year to date, which is precisely where dealer inventory pressure sits.

What central Illinois readers should know: you have a benchmark most states do not. The University of Illinois publishes Illinois crop budgets by region, including separate Central Illinois high- and low-productivity farmland budgets with per-acre lines for machinery repairs, machinery depreciation and machinery hire or lease. The 2026 budgets, published 19 August 2025 by Paulson, Schnitkey, Zwilling and Zulauf as farmdoc daily, 2026 Illinois Crop Budgets, project power costs relatively stable, with small increases in machinery repairs and hire or lease offsetting lower economic depreciation per acre. Test any proposed payment against the machinery lines in the budget for your productivity class and acreage: if a lease payment divided by your acres exceeds the budget's combined machinery depreciation and hire figure, you are buying capacity the regional benchmark says does not pay for itself. That is a Champaign-specific check no national calculator gives you.

Leaf De-Greening: What It Is Caused By, and Why It Changes Your Capacity Maths

Leaf de-greening — canopy yellowing — is caused by enzymatic chlorophyll breakdown. Under nitrogen starvation, plants degrade chloroplast proteins and chlorophyll pigments and remobilise the nitrogen to young leaves and other sink organs, so older leaves yellow first. Rubisco and photosystem proteins account for approximately 80% of chloroplast nitrogen, and the pigment loss runs through a chain of chlorophyll catabolic enzymes including NYC1, HCAR, NYE1/SGR1, PPH and PAO (Sakuraba, Molecular basis of nitrogen starvation-induced leaf senescence, Frontiers in Plant Science, volume 13, 2022).

Water stress, disease and normal end-of-season senescence produce de-greening too, which is why the pattern matters more than the fact. Nitrogen-driven de-greening appears in older, lower leaves and often follows soil variability across a field. Drought-driven de-greening tracks topography and soil texture. Disease-driven de-greening appears in patches that expand. Satellite vegetation indices detect the reflectance change, but they do not tell you which cause you are looking at — the spatial pattern and the leaf age gradient do.

The equipment link is direct and unsentimental. If a satellite time series shows 30% of a field de-greening three weeks before physiological maturity, that acreage will not deliver the tonnage your harvest-capacity assumptions were built on. Sizing a combine lease to nameplate acres rather than realised yield is how operations end up paying overage charges on a machine that was idle. Farmonaut's satellite monitoring exists to give you the realised-yield side of that calculation before you commit to a payment schedule.

Put field data into the decision:

If you model machinery decisions in a spreadsheet or farm management system, our satellite and weather API feeds field-level indices straight in; the API developer docs cover endpoints and authentication.

The Eight-Point Check That Outlives Every Figure Above

Every rate and unit count on this page will be stale within a year. This sequence will not.

1. Convert every offer to an APR. Lease rate factors and monthly payments are not comparable. Demand the implicit rate in writing.
2. Pull the current FSA rate first. It is your published floor, reissued on the first business day of each month at fsa.usda.gov. Anything materially above it needs justification.
3. Compute the break-even annual lease payment. Net cost of owning over the term, divided by years. The calculator above does it; a spreadsheet does it too.
4. Check the current residual trend for that machine class. Tractor and combine values moved in opposite directions to December 2025. Check auction data for your class, not the category average.
5. Read the usage schedule. Annual hour or acre caps and return-condition standards are where lease economics actually break.
6. Ask what it does to your covenants. Under ASC 842, leases over 12 months land on the balance sheet. Confirm the ratio impact before signing.
7. Confirm the current section 179 and bonus depreciation position with your tax preparer for the tax year in which the machine is placed in service, not the year you order it.
8. Size capacity to realised yield. Use field-level data on stress and de-greening from the previous two or three seasons, not planted acres.

Frequently Asked Questions

Is farm equipment leasing cheaper than buying?
Only when the quoted annual lease payment is below the break-even figure — net cost of owning over the same term divided by the years. That threshold depends on the purchase price, your loan rate and the expected trade value, so it is specific to the machine and to you, not to leasing as a category.

What interest rate should I expect on ag equipment financing?
USDA FSA direct rates effective 1 August 2026 ran 5.250% for Farm Operating and 6.000% for Farm Ownership. FSA guaranteed loans and commercial or dealer financing are priced by the lender. Pull the current month's FSA announcement as your reference point.

Does leasing keep equipment off my balance sheet?
No, not for leases longer than 12 months. FASB ASC 842 requires lessees to recognise a right-of-use asset and a lease liability, and it applies to private companies. Guides that still claim off-balance-sheet treatment predate that change.

Can I claim Section 179 on leased farm equipment?
Not on an operating lease, because you do not own the property. Lease payments are deducted as made. For tax years beginning in 2026 the section 179 ceiling on owned property is $2,560,000, with phase-down starting above $4,090,000. Some capital or $1-buyout lease structures are treated as purchases for tax purposes — ask your preparer which structure you are actually signing.

How do I find farm equipment financing near me?
Two lookups: the farmers.gov service center locator for your FSA office by state and county, and the Farm Credit Administration FCS directory for the association chartered for your county. Federal FSA rates are national; the local layer is the commercial and Farm Credit pricing on top.

What causes leaf de-greening?
Chlorophyll and chloroplast-protein degradation. Under nitrogen starvation the plant remobilises nitrogen out of older leaves first, so lower leaves yellow before upper ones. Water stress, disease and normal senescence also produce de-greening; the spatial pattern and which leaves are affected distinguish the causes.

Where to Go From Here

The decision reduces to one comparison and one honest capacity estimate. Compute the break-even lease payment from your own purchase price, term and trade expectation; pull the current FSA rate and the current month's AEM report so you know whether you are negotiating into a soft market or a firming one; then size the machine to the yield your fields actually deliver rather than the acres you plant.