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Save money by purchasing "Off Lease" Equipment

Neil from Messick's here to talk to you a little bit about off-lease tractors. We're going to discuss the leasing today a little bit, tell you about what people are doing when they lease machinery, but also discuss what happens to these machines when they come back from a lease. Off-lease machines can be a good opportunity to save a little bit of money on a new piece of equipment. Today, we're going to discuss leasing.
If you compare the different ways that you can buy a piece of equipment, be it paying cash for it, financing it, or leasing it, leasing is usually the most expensive way to own a piece of equipment because you don't, actually, own that machine. It's really owned by a bank and you're making temporary payments against it before it's returned. That doesn't mean though that there's not reasons to lease equipment.
If you're a company and you exceed your Section 179 deduction for the year, leasing a machine allows you to write off the complete cost of that unit right up front as opposed to having to depreciate it over many years. Oftentimes too, we're rolling the cost of extended warranty or sometimes service plans into the cost of a lease. If you're a customer who would like a really predictable payment, a predictable amount that that piece of equipment is going to cost you to run, all the ownership expenses of that piece of equipment can be rolled into that lease and you've got a number on a piece of paper that you know that machine is going to cost you every month.
That said, though, leasing is one of the more expensive ways to own that piece of equipment. Now, once a customer is done with that machine and it comes off lease, it comes back to the dealership, back to the leasing company, and then it is turned around and, usually, sold off to a dealership or sold off through an auction and returned to the secondary market just like a used piece of equipment does.
Now, with the current supply chain problems that are out there, we really struggle to get higher horsepower tractors in the Messick's here. We've, actually, bought a bunch of these lease return machines here recently and they're here to offer them to you. I'm going to tell you a little bit about these different machines, point out some things that you want to look for on a lease return, explain some of the caveats, the things that we dove into when we brought these things back here. Maybe we're going to sell you a tractor today, we'll see.
Behind me here, I think is one of the best deals out of this lot of tractors. This is a Kubota M7.131 Premium KVT. This is the most deluxe of the tractors out here. It's the most loaded of all the machines in Kubota's M7 family. This is a 131. The current model is an M7.132. The biggest difference being a little bit of difference in the gearing and the transmission.
If you were to go buy a machine like this brand new today, MSRP for this tractor would be over $180,000. This one here with 800 hours on it, we have priced at $94,850, nearly half-price of what the current model goes for brand new. It's a fantastic value for what it is to be able to find a big farm tractor out here with 12-inch displays, electronic remotes, closed-center hydraulics, all the stuff that's on this machine. It's an expensive unit.
Now, we had a bunch of work to do to this machine when it arrived, so we went and bought this tractor, brought it here into the dealership. By no means is it retail-ready when it comes in from the prior owner. As you may guess, sometimes when a machine is leased and the person running it doesn't own it, they don't necessarily always keep up with things as much as they should.
In the case of this unit, it wasn't kept up on its campaigns. It had a bunch of service work that needed to be done, a lot of updating that needed to be done to the machine. We brought that in and did all of that work here in the shop. There's also some cleaning and stuff had to be done to a cab. We bring in a detailing company to go through that tractor, wipe everything down, vacuum out the floor mats, wipe down all the surfaces, and make the thing look like a very presentable 800-hour tractor.
We then dive in through the engine, plug in the laptop into the tractor, and check out all the diagnostics. In the case of this machine, someone needed a DEF header upgrade done. That was a campaign, but it's something that needs to be done on, basically, every one of these machines to make sure that they don't have problems with their emission systems. A lot of mechanical updates that had been done over the years.
All told, you have a fantastic opportunity in a tractor like this. A machine that somebody else put those 800 hours on or so took a lot of that depreciation. The bank had that machine come back and here it sits now at Messick's at, basically, half the price of a new one. When you lease a machine, there's usually terms behind that lease that are going to dictate what your monthly payment is. Usually, that's in terms of a bucket of hours per year and usually in 300 hours increments, say 300, or 600, or 900 hours per year of utilization that you get on that machine, and then dictates your monthly payment. You're going to make that same monthly payment, regardless of how many hours you use out of that bucket.
Behind me is an M7.151 Premium. This is the next step up compared to the other tractor that we were just talking about. It doesn't have a loader on it, but because of that difference, it sells for approximately the same price. This one comes in right about $94,000. Now, we talked about those buckets of hours. That person is out there making those payments against that machine, and in the case of this one, they didn't utilize a lot of those hours in the bucket and it only has 175 hours on it. Again, a tractor that comes in at, basically, right about half price, that only 175 hours of usage.
Our next story tractor is an M7.151 standard with right about 2,000 hours on it. This one's priced at $79,650. A little bit less expensive because of the hours that are on it. This one represents another leasing scenario. This tractor looks to me like it was probably a highway mowing tractor. A little bit higher hours, you could see some of the usage patterns on this thing, some of the scraping up on the floor and stuff. Look like that was the usage that it was put into.
This is another application where leasing actually makes some sense. In the case of a highway mowing contractor, they're going to have a contract. They've got a job to go out and do and they may not want to own this tractor for eternity. If you got a two-year contract, you take a two-year lease on, you know what your costs are, and you can pencil that whole thing out to make sure that your job is going to be profitable. Leasing can make a lot of sense in those situations, and it gives us this 150-horsepower tractor with 20-horsepower up boost available at a really attractive price.
Behind me is our final tractor, another M7.151 Premium, this one with 880 hours on it, coming in at $87,650. Now, you see, this tractor has a full rack of front weights on it. I don't know the history quite as clearly on this machine, but it was mostly doing drawbar work from the look of the drawbar behind it. When we go through a tractor like this, we would have gone through, cleaned the machine out, detailed the cab, did all of the missing campaign work that needed to happen.
In the case of this one, also put some of the pieces back onto the tractor that were removed and not picked up by the trucking company that would have recovered it when it came back when it's dropped off at the dealership. Many, many times, when you see machines like this that come off of lease and are returned, little things are missed in that return process. Say a tractor like this is maybe coming through with, say, two PTO sheds or sometimes a special torque wrench to adjust the lug nuts.
Some of those little odds-and-ends things that usually come along in a cardboard box often are left sitting in somebody's shop and don't make it back with the unit and can be important when it comes to the ownership of a machine like this. Most of these tractors that we've talked to, we're spending somewhere in the neighborhood of about $3,000 in that receiving process, completing all the campaigns, updating things, replacing missing stuff, cleaning it, getting it ready for sale for you to make sure that when it goes to the field, it's going to perform the way that both you and us expect that it's going to.
If you're shopping for a piece of equipment like this and we can help, if you're struggling out there on the new market to find what you're looking for or find something at an acceptable price point, we're hoping that these machines might fill some of that gap, maybe help some of you out here when it gets to year-end tax time that we've got to get a purchase out there for tax purposes. We know there's always a pinch point here coming up and we're doing what we can to find as many options as we can in order to help serve customers.
If you're shopping for a piece of equipment that we can help or if you got parts of service needs for a machine you've already got, give us a call here at Messick's, available at 800-222-3373 or online at messick's.com.

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