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National & World Ag News Headlines |
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John Deere Tightens Leasing Terms
USAgNet - 05/24/2016
Deere & Co. said it has tightened conditions for equipment leases as a slump in farming incomes has led customers to prefer leasing machinery over purchasing it. The slide in global commodity prices has already eaten into Deere's sales and profits for nine
straight quarters.
Dow Jones reports that the farm and construction machinery market slump has bled into Deere's customer-finance arm, where leases now account for a growing volume, forcing the company to tighten the terms for renting equipment that has rapidly depreciated
in value.
Leases have accounted for about a quarter of the company's customer financing deals lately, compared with about 15% in the past, according to estimates by industry analysts.
Farmers in the U.S., South America and elsewhere have cut back sharply on equipment spending over the past two years, despite planting big crops, as lower commodity prices reduced farm income.
Deere has stepped up its leasing activity in recent quarters, but its finance unit and dealers have been left with even more used equipment as customers walk away when leases expire. The company took a write-down on the residual value of used equipment in
the latest quarter. Deere said it is restructuring leases to share more of the risk of further declines with dealers.
New leases will likely cost farmers more, as the company lowers residual equipment values at the end of the leases to reflect the depressed prices for used equipment.
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