Frequently Asked Questions: tractor financing and leasing
Equity, leasing, loan, or grant? We have gathered the most frequently asked questions about agricultural machinery financing.
What are the main financing options?
Basically, four main options are available to farmers in Hungary: cash purchase, financial leasing, operational leasing, and bank loans. Each has its advantages and disadvantages.
What is the difference between financial and operational leasing?
Financial leasing: you acquire ownership of the machine at the end of the term. From a tax perspective, it is listed among tangible assets.
Operational leasing: you return the machine at the end of the term (or purchase it at residual value). The full leasing fee can be accounted as an expense, favorable for tax purposes.
How much down payment is required?
Generally 10-30% of the purchase price. In some promotional schemes, it is available with a 0% down payment, but in such cases, the interest rate is usually higher.
How long can the term be?
Typically 36-84 months for new machines and 24-60 months for used machines. By the end of the term, the machine's age cannot exceed the maximum allowed by the financier.
What grant opportunities are available?
- RDP (Rural Development Program) machine procurement grants
- Young farmer start-up support
- Agricultural Széchenyi Investment Loan
- MFB loans
These can provide a support intensity of up to 40-60%.
What do financiers ask for?
- Business with a tax number or primary producer certificate
- Balance sheets or tax returns for the last 1-2 years
- Proof of land use title
- Business plan (for larger amounts)
What insurance is required?
Casco insurance is mandatory throughout the entire term. It is also worth taking out Gap insurance, which covers the difference between the machine's residual value and the loan balance in the event of a total loss.
Is it worth financing a used machine?
Yes, but the term may be shorter and the interest rate may be higher. Financing used machines less than 5 years old is the most favorable.
What should I do if the application is rejected?
Try with a guarantor, a higher down payment, or another financier. Agrider has partnerships with several leasing companies, let us know, and we will help you!
Summary
The appropriate form of financing depends on the size of the business, its tax situation, and your plans. Consult with an accountant before making a decision, the right choice can save you millions over the years.
