costs & benefits of leasing
Lease vs Loan: What’s the Difference?
When it comes to financing cows, farmers have two main options — leasing or taking out a loan. At first glance, they might seem similar, but how they impact cash flow, tax, and flexibility makes the two options different.
How Leasing Works:
Spreading the Cost and maintainING strong Cash Flow
Leasing keeps your capital free. Instead of owning the cows upfront, and taking out a loan to buy cows, a farmer leases them for a fixed term (typically 2-5 years), making regular payments.
Here’s why leasing is different:
The entire lease payment is treated as a deductible operating expense.
There’s no large upfront cost, so cash flow is available for other farm expenses.
The cows are the security for the lease, meaning land and other assets remain unencumbered.
How a Loan Works:
Paying Off Ownership Over Time
A loan is a lump sum borrowed from a bank to buy cows outright. The farmer owns the cows immediately but must repay the loan in installments — these payments include two parts:
Principal – The original amount borrowed.
Interest – The cost of borrowing, charged by the bank.
The key thing to understand is that only the interest portion of a loan payment is tax-deductible. As the loan is gradually repaid, the interest charged by the bank decreases. This means the tax benefit from the loan is only ever a fraction of the total payment and it decreases over time as the loan balance is repaid.
Most banks require security (such as land or other farm assets) for a livestock loan, which can make it harder to access additional finance for things like infrastructure, feed, or farm improvements.
Funding Your Herd: Outright Purchase, CowBank Lease, or Bank Loan?
When dairy farmers consider expanding their herd, the biggest question often is: How do I finance the cows? Whether you’re buying outright, using CowBank’s lease option, or securing a bank loan, each choice impacts your cash flow, tax situation, and overall cost.
Scenario: Purchasing 100 Cows at $2,000 Each
Imagine you have the opportunity to buy 100 high-quality cows, priced at $2,000 each. That’s a total investment of $200,000.
You’re considering your options:
Buying outright
Leasing through CowBank
Taking out a bank loan
Let’s break down the numbers for each option.
Key Takeaway from the Comparison
The table clearly shows that purchasing cows outright is always the cheapest option when looking purely at the total cost, but when comparing financing net cost after tax at 25%, CowBank leasing emerges as the better financial option compared to a bank loan.
Despite slightly higher total payments before tax, CowBank's full tax deductibility of lease payments significantly lowers the final cost.
Looking Beyond the Numbers:
The Real Value of CowBank Leasing
Numbers tell part of the story—but don’t paint the whole picture. When farmers assess finance options, it’s easy to focus on total costs alone. But CowBank’s leasing model isn’t just about what you pay—it’s about what you gain.
Leasing cows through CowBank keeps capital free, allowing farmers to invest in infrastructure, feed, and land—critical factors that drive long-term success. More importantly, the cows are generating revenue from day one. The milk cheques start rolling in while the lease is still active, meaning the cost of leasing is relatively low compared to the profit made on-farm during this period.
For some farmers, this creates a strategic advantage — one that wouldn’t be possible with an outright purchase or a restrictive bank loan. It’s not just about spreading payments over five years; it’s about seizing an opportunity that aligns with the real economics of dairy farming—where cash flow, flexibility, and productivity matter just as much as bottom-line figures.
CowBank leasing is a tool for growth, allowing farmers to act when the time is right.
The real value? More milk, more options, and a business that keeps moving forward.
WHICH OPTION IS RIGHT FOR YOU?
If owning cows outright is the priority and you’re comfortable tying up capital, a loan may work. But if cash flow, tax benefits, and flexibility matter most, leasing makes more sense. It keeps your business moving forward without overextending financially—giving you cows in the paddock, money in the bank, and options for the future.
Thinking about herd finance?
Give CowBank a call — they’ll help you weigh up the options and find the best structure for your farm.
