Should You Buy It? Making Tough Equipment and Land Decisions on the Farm

A new piece of equipment would make harvest easier. A neighboring piece of ground comes up for sale. The opportunity is there...but does that mean it’s the right time to buy?

For farmers and ranchers, some of the biggest financial decisions don't come with simple yes-or-no answers.

Matt Raber and Adam Holtorf recently joined the Rural Radio Network’s Surviving the Family Farm podcast at Husker Harvest Days to talk about equipment purchases, buying land, financing and why knowing your numbers can help you make better decisions for your operation.

The big takeaway? Just because you can afford something doesn't always mean you should buy it.

Repair, Replace or Run It Another Year?

It’s a decision nearly every producer eventually faces.

When equipment starts requiring more repairs, downtime becomes more frequent or a newer machine could make the operation more efficient, replacing it can start to look pretty appealing.

But before heading to the dealership, take a closer look at the entire picture.

Consider the age and condition of your current equipment, expected repair costs, downtime, trade-in value, financing costs and how a replacement would affect cash flow.

And don't forget one important question: Is this something the operation needs—or something you really want?

There’s nothing wrong with wanting newer equipment. But separating a want from a true operational need can help you make a decision based on the financial health of the farm rather than the excitement of something shiny and new.

“Can I Afford It?” Isn't the Only Question

Financing may be available, but that doesn't automatically make a purchase the right move.

Instead, consider how the purchase fits into your overall operation.

What will the payment look like? What does your cash flow look like? Will the purchase generate additional income, reduce expenses or improve efficiency enough to justify the cost?

Most importantly, what happens if next year doesn't go according to plan?

Agriculture comes with plenty of variables outside a producer's control. Commodity prices change. Input costs move. Weather happens.

Building some breathing room into a decision can be just as important as determining whether you can make the payment today.

When Land Comes Up for Sale

Equipment can be replaced. The piece of ground next door might only come up for sale once.

That can make land purchases especially difficult to evaluate.

For young and beginning farmers in particular, buying land can be an important step toward building an operation—but high land prices can also create significant financial pressure.

Before making an offer, look beyond the purchase price.

Consider the productivity of the land, financing terms, taxes, current debt obligations, available working capital and how the purchase fits into your operation's long-term goals.

Sometimes stretching financially may make sense for the right opportunity.

Other times, the best business decision may be to walk away.

Know Your Numbers Before You Need Them

Good financial decisions start long before you're sitting across the desk from a lender.

Understanding your cost of production, cash flow, debt obligations, working capital and overall financial position gives you a much clearer picture when an opportunity comes along.

It also helps your banker understand your operation.

And that relationship shouldn't only happen when you need to borrow money.

Don't Wait Until You Need the Loan to Call Your Banker

One of the biggest advantages of working with a local agricultural banker is having someone who understands more than the numbers on a loan application.

They get to know your operation, your goals and where you're trying to go.

That's why we encourage producers to keep the conversation going during the good years and the difficult ones.

If you're considering a major equipment purchase, thinking about buying land or wondering how a decision could affect your cash flow, talk with your banker early.

You don't need to walk through the door with a final decision.

Sometimes the most valuable conversation starts with:

“Here's what I'm thinking. Does this make sense?”

Local Decisions for Local Agriculture

At Heartland Bank, agriculture isn't just another category of lending. It's part of the communities we serve.

Our agricultural lenders work directly with farmers and ranchers to understand their operations, evaluate opportunities and talk through the numbers behind major decisions.

Because whether you're deciding to repair, replace, buy or wait another year, the goal isn't simply to make the purchase work.

It's to make sure the decision works for your operation.

Want to talk through an upcoming equipment or land purchase? Contact your local Heartland Bank agricultural lender. We're here to help you look at the numbers, ask the right questions and make a decision with your operation's future in mind.

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