Which is the Better Option - Leasing with a Dealer or Bank?
Forecasts for 2019 show that the ag equipment leasing trend from the past few years will not only continue, but more producers are expected to lease new equipment this year than in 2018. But who provides the better lease option - a dealer or bank?
On the surface, you may think that a dealer lease is the way to go. But many borrowers will not qualify for lower interest rates and those who do may find that leasing through a bank offers greater financial benefits.
What are some similarities between a dealer and a bank? Both can offer;
- Up to 100 percent financing
- Zero down payment
Here is where the differences emerge.
A dealer’s leasing program generally has early payoff penalties and a balloon payment at the end of the lease; while a Lincoln Savings Bank (LSB) lease can be structured to meet your financial objectives with no prepayment penalties, early termination fees or end of lease balloon payments.
“Lincoln Savings Bank has lease options similar to an installment loan,” explains Sara Forrester, Ag Lender at LSB’s Lincoln, Garwin and Tama branches. “We can term your lease to have payments that will pay your lease in full without the need for a balloon payment.”
Bill Dolan, First VP Ag Lender at Lincoln Saving Bank, concludes that “Larger residual means smaller payments and better cash flow.”
Although dealers can often offer lower interest rates, many farmers would rather pay a little more to know they are working with a community banker that understands the local economy.
The Community Bank advantage.
When Forrester and Dolan were asked why their customers chose them, they all chorused the same answer: a community bank provides the customer with the ability to do business locally and with people who truly care about the well-being and success of their farms and their families.
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