Trying to figure out whether to finance your next combine or pay cash upfront?
You are not alone. This is one of the most important decisions every farm operator must make, and if done incorrectly can seriously damage your working capital for many years to come. The good news is there is a simple framework that will remove the guesswork from the process.
Let’s jump in…
What you’ll discover:
- Why The Buy vs. Finance Decision Matters Right Now
- The Real Cost Of Paying Cash
- When Financing Makes More Sense
- When Outright Purchase Wins
- The Decision Framework To Use
Why The Buy vs. Finance Decision Matters Right Now
The farm equipment market is in a weird spot.
Prices are up on equipment. Margins are tighter. And interest rates aren’t what they used to be. In fact, new data show the average cost of farm machinery increased more than 21% from 2020 to 2023.
That’s a massive jump.
Now when you’re looking at a six-figure combine and you’re deciding if you want to write a check or sign a loan, it is more important than ever to make the right choice. Do it correctly and your operation is safer. Do it wrong and you’ll either be bleeding your budget dry or you won’t have any money to plant next year.
Here’s the thing most farm operators forget…
The choice is not just about interest rates. It’s about protecting working capital, mitigating risk and aligning your equipment with your farm’s actual revenue production. A reputable used farming equipment dealer and trusted company for used combines can provide both choices – so the real question is which one is right for your operation.
That’s what this framework will help you figure out.
The Real Cost Of Paying Cash
Most farmers think paying cash is the “smart” move.
Free of Interest. No payments. No bank on your back. Sounds too good to be true? Well…it is!
Cash has an opportunity cost.
When you drop $200,000 on a used combine, that’s money you don’t have for:
- Seed and inputs for the upcoming season
- Repairs on existing machinery
- Land lease payments
- Other equipment upgrades
If your operation has a cash flow squeeze, that cash is tied up in iron in your shed.
Cash isn’t free just because you don’t pay interest on it.
It’s why so many previously cash-paying farmers are transitioning to financing. As cash is getting tighter across the board in the industry, many traditionally cash-paying buyers are opting for financing – to conserve working capital while still being able to upgrade the equipment they need.
That doesn’t mean taking on cash is always wrong. It just means the choice is not as black-and-white as “no debt = good.”
When Financing Makes More Sense
Financing isn’t only for the farmer who can’t pay cash. In fact financing can be a strategic decision for many operations. Here’s when it usually comes out on top.
You Want To Preserve Working Capital
This is the big one.
If paying cash for a large equipment purchase will leave you short of operating capital during planting or harvest time, debt financing is usually the better option. Operating capital is the bloodline of a farm business. Depleting it in the middle of the season can create many more headaches than a monthly equipment payment.
Interest Rates Are Reasonable
Rates have been trending in flux. The Federal Reserve lowered the federal funds rate three times in 2025, with guarded optimism for additional easing in 2026. This translates to equipment financing more attractive than it was a few years back.
If the rate works against the expected return on the equipment – finance it.
You Want Tax Benefits
Section 179 and bonus depreciation can greatly reduce your tax bill in the year you finance equipment. Consult with your CPA before you sign – financing usually provides these benefits while keeping your cash.
Your Cash Flow Is Seasonal
Most farms have uneven cash flow. You earn income at harvest time. The rest of the year, you are spending money. Financing allows you to pay for large equipment over time. It can also be timed to your real cash flow cycles.
That alone can be worth a few extra percent in interest.
When Outright Purchase Wins
Cash still has its place. Here’s when it makes the most sense.
You Have More Cash Than You Need
If you have lots of working capital, no impending big ticket expenses, and the equipment purchase isn’t going to hurt your operation – paying cash is OK. You avoid interest. You avoid paperwork. You own the machine outright on day one.
The Deal Is Too Good To Pass Up
Occasionally you’ll snag a bargain at auction or from a private party. The price is so good that financing terms aren’t available, or the discount more than offsets the interest you’d save.
In those cases, just pay cash and move on.
You’re Buying An Older Workhorse
Terms on older equipment can be tough. A lot of people don’t finance old machines at all after a certain age, and those who do charge an arm and a leg. When buying an older combine that has been well cared for – cash is almost always the way to go.
The Decision Framework To Use
Here’s the simple framework every farm operator should use.
Walk through these 4 questions before any major equipment buy:
- Would I go broke if I lost this cash for 12+ months? If yes, finance it.
- What’s the expected return on this equipment? If it’s higher than the financing rate, finance it.
- Is the cash flow seasonal or unpredictable? If yes, finance it.
- Is the deal one that won’t qualify for financing? If yes, pay cash.
That’s it. Four questions. No spreadsheet gymnastics.
Now… There is one more thing to consider before making any decision.
The market matters. Sales dropped 35% YoY in 2025, which has translated to changes in pricing and inventory levels industry-wide. The good news for buyers is that this translates to more inventory and softer pricing – a buyer’s market for used equipment.
Take advantage of it.
Final Takeaways
Financing vs. paying cash is not about being against debt. It’s about making the best move for your operation today.
To recap:
- Pay cash if you have lots of working capital and the transaction requires it
- Finance when you need to preserve cash, require tax benefits or have seasonal income
- Use the 4-question framework to decide quickly
- Pay attention to market conditions – right now favours buyers
The farms that make it through tight margin years are the ones that preserve working capital. The ones that don’t are the ones that empty their bank account on one big purchase and can’t come back.
Pick a template, fill in the blanks for your situation, and get back to farming.
