Theoretically, leasing and debt are thought to be substitutes. This assumes that a lease payment, which is a fixed obligation like a loan, displaces debt and reduces debt capacity, i.e., if firms have optimal debt to equity ratios, then, to the extent that it represents "off-balance-sheet" financing, leasing reduces debt capacity. Ang and Peterson-the seminal work in the literature-fit Tobit models with 1976 to 1981 data from 600 firms in which a leasing to book value of equity ratio is the dependent variable and a debt to book value of equity ratio and other variables are the explanatory variables. Contrary to expectations, their model results indicate that leasing and debt are complementary activities. This study follows the Ang and Peterson methodology, but utilizes a set of firms which are distinct from those of earlier studies-non-corporate U.S. commercial farms-to test a land leasing-debt substitution hypothesis. An advantage of the land lease example is that by focusing on a single industry -production agriculture- the problem of potential industry affects is substantially reduced. In a departure from earlier studies, the issue of whether the leasing-debt relation is sensitive to heterogenous firm characteristics and shifting business conditions is examined. OLS leasing models corrected for heteroskedasticity are fit with 1977 through 1992 Kansas farm-level data in which a leasing ratio is the dependent variable and a debt ratio and other explanatory variables serve as independent variables. The models account for fixed time and farm type effects. Results strongly indicate that land leasing and debt are substitutes, albeit not dollar for dollar. A coefficient estimate of about -0.43 on the total asset full sample model indicates that on average, leasing decreases by $0.43 for each dollar of debt incurred. The rate at which farms substitute leasing for debt is sensitive to heterogenous farm characteristics and shifting farm business conditions. The cross-section sample split results offer some evidence that farms which are thought to be a priori more credit constrained substitute debt for leasing at a higher rate than farms which are thought to be a priori less credit constrained. All of the sample split results however, are consistent, with the notion that in order to push the leasing ratio to higher levels, leasing must substitute for debt at increasingly higher levels.