Why tractor hire rather than purchase looks attractive for our business

I’ve just arrived back late from the field after having spent the day digging carrots prior to more rain. It was one of those days that could only be politely described as a bad day at the office. We hit our target for loads dug, but it nearly killed us to achieve that goal. As a result, machinery and how it could improve our output - as well as preserve my sanity - is foremost on my mind.

We don’t run the flashest fleet of gear around, as we’ve always preferred the idea of spending that money in other areas of the business that offer higher returns without a whopping depreciation write down on asset value. When looking at machinery on a return basis, it’s often difficult to see the benefit of spending big on a shiny new fleet of tractors with a supporting cast of new machines to boot.

I’ve always liked the idea of using as much contracted machines as possible as it allows flexibility and allows me to use five tractors for one day’s work rather than one of my own tractors for five days work, risking the timeliness of the operation. Owning lots of kit only forces us to make that kit fit to all situations and try to keep it working for as long as possible regardless of the best approach.

We have spent a lot of time recently looking at 12 month tractor hire instead of ownership. We put 1,000hrs per year on our main tractor. At this level of output, hiring becomes very attractive as the total cost is diluted to its maximum (most contracts are up to 1,000hrs). One of the most attractive aspects of hiring would be the safety of knowing if the machine gave any trouble, a new one would be landed in our yard within 24hrs without a nasty bill arriving for repair. We budget a strong €3.20/hr for tyres and repairs on our tractors as we do a lot of heavy work but the cost isn’t the biggest issue, its losing machines at a key periods that is the problem.

Long term leasing would also benefit us in terms of our tax position as unlike finance agreements, machinery hire can be put against taxable income.

I think as a policy, we will continue to contract in machines that are only needed for 400hrs or less, own the machines on the 400-700hr bracket and long term lease the 700-1,000hr tractors. With two of the tractors coming up to the 5,500hr mark, it’s coming high time to move them on. Up to now we have been Deutz fans but I’m not convinced we will stay in that stable. Service, warranty, price and fuel economy will decide without us ever having to look at the livery on the bonnet.