How to fund new tractor purchase

irishguy19772

Farm is in fathers name and herd number also. I will be taking it over in a year or 2. We break even on the farm and I want to keep it on and am slowly improving things

Our parcels are spread out so buying a new tractor is a priority for me. The old one is very rusted up and be fine as the tractor for the yard.

I was looking at a 2000 to 2005 new Holland ts100. They seem reliable and I was recommended this make. I make around 55,000 in my own job

What is best way to purchase it? Would I need much of a deposit or could I finance it, even if farm not in my name. TIA

Aravo

There have been a few threads and some relate to joint herd number and the split between farmer and their son/daughter and associated tax split. Search for.

Joint Herd Number and the Tax Man!

joint herd number.....tax !!!

I would suggest discussing same with accountant.

893bet

It’s not a joint herd number.
You cant capitalise it against anything if you buy it.
If your current tractor is starting and going ok then the best you can do is keep it going as long as possible.
I hope by breaking even you mean that the payments are all profit but the beef/sheep or whatever side of things is just washing it’s face so to speak

mr.stonewall

For op, I would ask the question do you plan on using money, from the day job to fund a deposit or repayments. If you are, you are bloody mad, the farm should be able to stand in its own feet and fund this purchase. If not and the business needs it, the business must make plans on how to achieve it. End of discussion on that one

If your are planning on taking over the farm in the next year or so, options for extra monies may come with the young farmers payment. Also you will still have an income at the higher tax rate, which means that farm profit will be tax higher rate, meaning that the tractor will efficiently cost half over 7 years.

Getting finance, will be interesting here, I think it will be next to near impossible to get Hire purchase on a 25yr old machine. So it will probably leave you with a bank loan. Spread the payments a bit to the 3-5 yr bracket depending on farm size with out pinching cashflow

Sit down and start to plan carefully what is needed for your business. What are the goals, how are you for slurry storage. ( I have a feeling we are all going to be be pushed to have more)

Also explore the option of partnership as there is favourable tax treatment for farm partnerships.

Thread carefully and don't rush the plan

whelan2

Do you want a new tractor or do you need a new tractor. There's a big difference

cuculainn

Quote

"Also you will still have an income at the higher tax rate, which means that farm profit will be tax higher rate, meaning that the tractor will efficiently cost half over 7 years."

Could you expand on this a bit? I am in a similar situation with tax at higher rate, are you better off getting a loan for the tractor rather than paying for it straight from the business (farm) funds

FintanMcluskey

Buy the tractor, it's only the price of a middling car.

Regarding finance I would suggest getting financial advice from an accountant

queueeye

https://www.boards.ie/discussion/comment/122801779#Comment_122801779

Correct.

Also it’s not a disposable item. You don’t just use it once then throw it away, it will have a resale value. If you’ve got spread out parcels and it’ll make your operation more efficient and your life easier then it’s a total no brainer.

Novfith

https://www.boards.ie/discussion/comment/122801298#Comment_122801298

Interesting comment.

How would you feel about this perspective on it?

I buy tractor/shed/whatever using my day job funds but knowing over the long term I will make it back…eventually.

i.e the repayments on a loan wouldn't be covered by farm income but in 10/15 years when you're making 2 or 3k profit and putting it into your pocket, it'll stack up to break even?

kk.man

https://www.boards.ie/discussion/comment/122801917#Comment_122801917

Not as easy as that. Revenue would be interested as to why the farm is being run at a loss over a period of time.

Novfith

https://www.boards.ie/discussion/comment/122803008#Comment_122803008

The tractor would be bought using personal funds.

kk.man

https://www.boards.ie/discussion/comment/122803024#Comment_122803024

You be grand then if you keep it personal and don't interchange with farm account/s.

Tonynewholland

https://www.boards.ie/discussion/comment/122803024#Comment_122803024

How will you write it off if everything is in your fathers name.

Novfith

https://www.boards.ie/discussion/comment/122803161#Comment_122803161

I am not OP, just thinking of my own situation.

I wouldn't be writing it off as the farm is loss making anyways currently.

mr.stonewall

https://www.boards.ie/discussion/comment/122801917#Comment_122801917

It goes simply to can the business afford it. If not and the business needs something you have to plan on how to make it work from the business. 3 means, contract the work out, make more profit or reduce the budget. Cap ex write down only works if you have profit. No profit, means no repayment capacity and no tax benefit

Bring own personal funds into a farming business only papers over the cracks of a non viable business. Business planning and tax planning are 2 areas that farmers have to work on to make farms viable.

Loaning you own money to a friend and expecting it back in 10-15 years on the promise of him being in the black then. Dream on, and start thinking of your farm as a business

maidhc

https://www.boards.ie/discussion/comment/122801779#Comment_122801779

I agree here. Plenty of ways to take advantage of the tax code, but professional advice will help.

A clean ts100 bought at the right price is not likely to lose much money ever and you will also get the use of it, so I don’t see a huge issue.

mr.stonewall

https://www.boards.ie/discussion/comment/122801573#Comment_122801573

Yes if the farm is profitable and only if the farm is profitable

FintanMcluskey

https://www.boards.ie/discussion/comment/122803796#Comment_122803796

It's not like the tractor will be worthless in another few years in the way a car is.

It seems British built tractors in particular seem to be a solid enough investment if maintained correctly

Who2

there’s a lot of comfort in having a decent tractor on the farm, while profit is important I often see people (myself included) wasting time and money on a sh1tbox wondering whether it’ll do what’s needed and getting off with a sore left leg from clutching constantly.

Nearly all decent brand tractors will hold their value if minded. The last tractor I had actually sold for 3k more than I bought it for. I’d get more for the current one than I paid for it.
A normal farmers tractor is usually a fairly safe investment and it’s hard to put in the time into something unprofitable ; to help turn it profitable if everything is a struggle.

Id two different contractors in with me today and both were going more specialised in what they do as the profit margin wasn’t in some areas of contracting and between labour and timing I’d say most people will need to have some form of reasonable ability to carry out tasks .

maidhc

There was a TS115 bought here new 25 years ago for the equivalent of €50k. It has cost nothing in repairs in quarter of a century, done 25 years of work in comfort (still only 6500 hours), is still spotless, will do another 25+ years work, and is worth about €40k.

The economics stack strongly in favour of having good machines, provided you mind them.

visatorro

Plenty of people have expensive hobbies. If someone wants to buy a tractor with there own money to make life a little handier what about it. Can sell it anytime and recoup money. It's also no harm to have a loan repayed when applying for a mortgage. Shows good credit history. I put my own money into a project here on time to get it over the line. It made my life alot handier, I don't regret it.

Cavanjack

https://www.boards.ie/discussion/comment/122805033#Comment_122805033

I wonder is that still true if buying new now at over 100k.

maidhc

https://www.boards.ie/discussion/comment/122806673#Comment_122806673

probably. I bought a loadall new for that sort of money 3 years ago. I don’t think it has lost a whole pile of value.

eire23

https://www.boards.ie/discussion/comment/122806673#Comment_122806673

Definitely. Anyone that bought machinery within the last few years will have lost little to nothing on it. Provided it's looked after.

Dunedin

https://www.boards.ie/discussion/comment/122805243#Comment_122805243

fully agree. Jayus you’d be afraid to say you bought a shovel on here sometimes……..

DBK1

https://www.boards.ie/discussion/comment/122805243#Comment_122805243

Fully agree with all of that.

There’s lads blowing more up their noses at the weekends than the repayments on a tractor and think nothing of it.

Even leaving out any illegal activities look at anyone following English soccer and travelling to games, playing golf, any form of motor sports, they all cost a fortune as hobbies and no-one bats an eyelid at people doing them. If the farm is your hobby as well what harm in putting money earned from outside the farm into it to make your hobby safer and more enjoyable.

_Brian

Looking after the investment is key and you won’t loose your shirt.

I’ve a friend that gives out about all machinery he buys but he dogs the shiit out of everything, he’d break a spoon in a yoghurt sort of lad.