The financing game - what's the real deal?

   / The financing game - what's the real deal? #1  

ameador1

Member
Joined
Apr 21, 2014
Messages
38
Location
Parsons, WV
Tractor
Mahindra 3535
Hello all! I am new to this board and appreciate all the information I have been able to find so far. It has been very useful!

First off, I have no tractor and never have - but find myself in need of one now. Or, throw thousands out of the window on equipment rental and delivery fees.

I have the need for a tractor with a FEL and backhoe - but need to keep payments in the $300-$350 range. After looking around a fair bit at outside financing and tractor company financing - I thought I found this great Mahindra deal where they are offering 0% for 84 months. But now that I'm starting to get down to price shopping, I am finding that the dealers are giving a cash price and then a substantially higher - financed price! This hardly seems like 0% financing - it's simply financing the interest right into the loan - so not even an option to pay off early and save some money. Is this right? Or am I running into some unethical dealers?

We're talking about a difference in price of around 10% to 15% or so... if financed. Granted, in the end I may be able to get my payment in the right ball park due to the 84 months, but I can't afford the other companies as they are only financing for 60 months. The 2 years shorter payment schedule makes the payments move into the $400-$600 range based on equipment I'm looking at.

Should I shop more dealers - or is this just a Mahindra enforced plot that I will not be able to avoid? Is there another company/finance option any of you know of that will potentially work for me?

Right now, based on current quotes, I'm probably looking at Max28XL or 3016 - in HST with FEL and backhoe. I would like a few other lower cost implements as well, but I need to keep my payment in the $300-$350 range as stated.

Another question relating to the total cost is sales tax. I am trying to run a small/mini farm with this (as well as other uses on the property) in WV. Does anyone know if with the proper business license, 1.5Ac of land, Ag income of nearly $2000 per year - would this allow for any exemption from WV sales tax in buying a tractor? I know it would be exempt from WV Personal Property tax as it is agricultural equipment, just can't get a strait answer from the dealers on the sales tax. Seems like they are not sure. They are willing to say "We won't charge you sales tax, but if you do owe it - it's your problem". I'm not trying to scam - but if I can legitimately keep from financing nearly $2000 in sales tax, I would prefer not to.

I have a lot of dirt to move from one portion on my property to another (about a 300' trek). I need to re-cut and lower a 300' road about 2 to3 feet lower, dig two building footers, move 100+ tons of dirt to the other end of the property, will dig a partial half basement, re-work the driveway a couple of feet lower (1600 sqft area), move around 40 or 50 tons of gravel, plow garden, move snow, etc... I would love to go with the 3016 or 3616, but prices may force me to go with Max28XL or 3016 with limited or no implements. The projects do not need to be done fast - I can work on them over the next summer or two - so big and fast isn't needed - just capable and best bang for the buck while keeping in my payment range.

I know this is a mouthful - but I need to get some of these projects started soon and need to get moving on something.

Thanks in advance!
 
   / The financing game - what's the real deal? #2  
What you found is normal business practice. If you look at auto dealer ads you may see fine print"includes dealer participation". That means the dealer pays for part of the financing so he can give you a better deal if you pay cash. When I bought my JD they advertised 5 years no interest but JD only provided the first three years. After that the dealer had to pay the interest. So I financed for three years no interest with the same price as cash.
 
   / The financing game - what's the real deal? #3  
0% financing is a scam as is invoice pricing.
 
   / The financing game - what's the real deal?
  • Thread Starter
#4  
How did you find this out and know how to approach this deal? Will they volunteer this kind of information if you ask them outright? In your case it wouldn't seem to have effected their bottom line, so it would seem like they would be upfront about it. Do you know if Mahindra does something similar?
 
   / The financing game - what's the real deal?
  • Thread Starter
#5  
0% financing is a scam as is invoice pricing.

That's kind of what I first noticed about this deal - selling at MSRP! Who sales at MSRP! That the number they've always used to tell you how much savings you are getting when they sell it at a lower price than MSRP. But, I must say, that this is the first time I have run into two different purchasing prices - depending on how you pay.
 
   / The financing game - what's the real deal? #6  
At least Mahindra is right up front about their pricing / financing options. When I was ready to talk price, my dealer presented me with three options - the lowest price was a cash price. Then there was a slightly higher price with 5 years of interest. Then a slightly higher price with 0% for 84 months. Since for me - like you - cash flow was a major issue, I went with the 84 months at 0%. Unless you have the cash sitting in the bank to make a 100% cash purchase OR if your plan is to finance for 5 years but pay it off in 2 or 3, it is very likely that your total payments on a five year loan with interest will equal the total payments of your 84 months no interest.

Financing aside, have you considered getting a larger tractor and foregoing the backhoe for the time being? While I can see some backhoe work in your list, the majority of it sounds like FEL work. Have you considered something like the 4010? More capacity (HP, lifting, FEL volume, etc.). You can always add the backhoe later (like I did to my 4035 after owning it for a year.) The way I see it, it will be REALLY hard to justify the hit you will take financially if 12-18 months from now you come to the conclusion that you really should have bought a larger tractor initially.

As for your tax question, I would suggest calling the WV tax authorities. Ultimately they will be the ones who are going to decide IF you are following THEIR rules. I can certainly understand your dealers 'non answer'.
 
   / The financing game - what's the real deal? #7  
I've only bought Deere and Case new, but both were the same. I just bought my Farmall 55a in March. When negotiating price, using CASE-IH financing at 0% added $1500 to the price, no negotiating. I decided to take the $1,500 and then finance with AgDirect at 3.9%. Total cost on my loan (principal + interest) was much less than going the Case financing way for me after pocketing the $1500 up front. The only "disadvantage" was that I only got a 3 year note, where Case would push it to 5 years. Since I only financed 10k (minimum you could finance), 3 years was ok with me.

You have to decide which approach works best for you.
 
   / The financing game - what's the real deal?
  • Thread Starter
#8  
At least Mahindra is right up front about their pricing / financing options. When I was ready to talk price, my dealer presented me with three options - the lowest price was a cash price. Then there was a slightly higher price with 5 years of interest. Then a slightly higher price with 0% for 84 months. Since for me - like you - cash flow was a major issue, I went with the 84 months at 0%. Unless you have the cash sitting in the bank to make a 100% cash purchase OR if your plan is to finance for 5 years but pay it off in 2 or 3, it is very likely that your total payments on a five year loan with interest will equal the total payments of your 84 months no interest.

Financing aside, have you considered getting a larger tractor and foregoing the backhoe for the time being? While I can see some backhoe work in your list, the majority of it sounds like FEL work. Have you considered something like the 4010? More capacity (HP, lifting, FEL volume, etc.). You can always add the backhoe later (like I did to my 4035 after owning it for a year.) The way I see it, it will be REALLY hard to justify the hit you will take financially if 12-18 months from now you come to the conclusion that you really should have bought a larger tractor initially.

As for your tax question, I would suggest calling the WV tax authorities. Ultimately they will be the ones who are going to decide IF you are following THEIR rules. I can certainly understand your dealers 'non answer'.

I'll have to ask about the 5 year option - if it drops the price and the interest isn't too bad, maybe near same payment with 2 less years loan time. Works for me.

The backhoe is probably what I'm after the most right now. Our soil is fairly hard packed (loam, clay, shale, limestone rocks, etc...) and full of fist size (and some bigger) rocks - and occasional - big rocks (dynamite? ;) ). I don't think the FEL will get into it good enough by itself - even with a somewhat bigger unit. I had rented an excavator last year and the blade on the front had a hard time breaking the surface - but the hoe did pretty well. The most pressing issue is the footers for one of the buildings (which is my house). I need to go under the house and dig out new foots and re-build the foundation. Hard to explain, but I don't really have much option other than a smaller (sub-compact or compact) size machine than can dig the footers and then be able to scoop out and move the loosened dirt a distance away. I have another building (to be) that I need to dig footers for. I need to setup a water spring which is going to require digging out the area and building it up and then trenching water and power lines to it - probably 500' or so through the woods. I have to dig and burry water storage tanks (2 or 3, 500 to 1000 gal tanks). I also have a bunch of tree stumps to remove and I'm sure I can come up with more. BUT, I am still new to the world of tractors and digging machines - does this extra info make the backhoe more relevant or is a FEL alone still a possibility? I've never used one before - only the excavator so far - good at getting the dirt loose, but not so good at putting it somewhere else. Larger capacity/power would be nice - I'm sure I could use it in either case - but budget is the limiting factor. I think I would probably cap out with something like the 4035 with just a FEL - and granted that is more than the 3016 - but enough to give up the backhoe?

I'll check further with WV State Tax Dept on the Sales Tax Issue. I think they are behind on Income Tax returns. I did try calling them today and only got "We're REALLY busy!" messages with long hold times and never ended up getting anyone. Will try more tomorrow.

Thanks!
 
   / The financing game - what's the real deal?
  • Thread Starter
#9  
I've only bought Deere and Case new, but both were the same. I just bought my Farmall 55a in March. When negotiating price, using CASE-IH financing at 0% added $1500 to the price, no negotiating. I decided to take the $1,500 and then finance with AgDirect at 3.9%. Total cost on my loan (principal + interest) was much less than going the Case financing way for me after pocketing the $1500 up front. The only "disadvantage" was that I only got a 3 year note, where Case would push it to 5 years. Since I only financed 10k (minimum you could finance), 3 years was ok with me.

You have to decide which approach works best for you.

I'll look into that company - so far, most of what I found was in the 5 to 6% range which was bringing the payments higher. Maybe this company can go to 5 years with 3.9 - and if I can get the cost down a few thousand that puts me back in my target range.

Thanks!
 
   / The financing game - what's the real deal? #10  
With my dealer it was no mystery. I negotiated the price first and then asked about financing. He told me that three years at 0% was no difference because JD paid for that but anything higher he had to pay for so he would charge me. The manufacturer part of a 0% deal is no scam. You can't get it cheaper by paying cash.
 
 
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