Economic incentives for agricultural cooperatives to lease capital assets such as structures, machinery, equipment, and other depreciable items are explored and illustrated. Selected aspects of lease contracts are reviewed. The lease or purchase problem is analyzed using capital budgeting (discounted cash flow) and wholefirm financial simulation methods. Results for a case farmer cooperative situation are compared under pre- and post-1986 Tax Reform Act rules and various interest rate and lease rate conditions. The analyses suggest that the attractiveness of facility leasing for cooperatives has declined in the post-1986 period. However, leasing will likely continue to be used selectively by farmer cooperatives.