Does dropping $200,000 on a new piece of machinery send a chill up your spine? If so, there are other options.

When you're trying to decide how you're going to go about acquiring farm machinery, it's important to answer a few key questions, according to Iowa State University Extension economist William Edwards. Those are:

• How much will it cost to own and operate an item of machinery?
• What other ways are available for you to acquire the machine's services? What are their expected costs?
• How much capital will you need if you purchase the machine? Can you afford that much investment? Can capital be used more profitably in other areas of your farm business?
• What are the income tax advantages of each method? What is your own tax situation?
• Do you have the ability, tools, and labor to operate the machine and maintain it?
• Are current technological developments likely to make the machine obsolete in the near future?
• Are you likely to change production practices or farm size in the near future and no longer need this type or size of machine?

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Ownership is the most popular way to keep hold of machinery, Edwards says. But, it's important to identify where you are in the lifespan of your farm business, as that's typically key to whether you can afford to buy or not. Regardless of where you are on that scale, there are pros and cons.

"Machinery ownership may be the least expensive choice in the long run, especially for high-use equipment. However, if you purchase machinery on a dealer finance plan or with credit from some other lender, you may have to pay for it over a short period of time, creating a cash flow problem," Edwards says. "Investment capital is tied up for a long period of time when machinery is owned. If your farm business is expanding and there are high-return alternative uses for the available capital, other methods of acquiring machinery may be preferred."

Joint ownership is one way to avoid the periodic large expenditures that ownership requires, but still retain many of the benefits. But, this won't work without a good relationship between the farmers sharing the iron.

"Joint ownership allows you to share the responsibility for investment, repairs, and labor with someone else, and reduce ownership costs per acre," Edwards says. "Cooperation is absolutely essential. The parties must approve of each other's work habits and care of the machine, develop a system for scheduling use of the machine, and agree on responsibility for labor and repairs."

And, get it all in writing if you're going to share machinery ownership. "Most important, a written agreement should be developed with details of how the co-ownership will be dissolved in case of disagreement, termination of farming by one party, or death of one party, and with a method for determining the machine's value at the time of dissolution," Edwards adds.

Don't want to fool around with owning the iron? Custom-hire the work done. The obvious drawback is the loss of the equipment in general. But, it also frees the farmer from the responsibilities of ownership.

"You get a machine and an operator. That means you don't have to assume the responsibility for operating the machine or its daily care. You can perform some other task such as hauling or drying grain while the machine is operating, reducing the need to hire extra help. You have no long-term capital commitment in the machine," Edwards says. "But, you will not be operating the machine, so you will not have complete control over the quality of the job performed. The custom operator may not get to your farm exactly when you want or during the optimum time for your crop because of scheduling problems. Also some custom operators charge different rates for services, depending on the date they are completed."

Renting and leasing are also options, Edwards says. Whether either of these options works for your farm depends a lot on the type of equipment you need and how long you'll need it. That's especially true with renting iron.

"Short-term rental of farm machinery should be considered if you need an expensive machine such as a grain drill for only a short period of time each year, or if you want to supplement your present machinery system temporarily, during a late season or emergency, for example," he says.

Leasing, on the other hand, has different financial implications to consider. "Leasing is a hedge against inflation. Leasing payments are determined at the time the lease is signed, so future payments are locked in regardless of any inflation or variations in interest rates," Edwards says. "Leasing transfers some of the risk of obsolescence and liquidation to the lessor, who owns the used machine at the end of the lease."