financing

[barberjim]

Thanks everyone for your input. I am reluctant to attach a "toy" loan to my house just for a tax purposes. I wouldn't qualify for any of the "big three" programs as my pick for best value is not one of theirs. My dealer called me today
and informed me that one of their lenders has an RV plan that would cover a tractor for 10% down a lower monthly and a ballon at the end of 60 mos. I don't know the int % etc yet though.
Jim

 

[Worksmart]

Just another thought....How 'bout a loan from a life insurance policy. This can also be cheap money if you have this type of policy. You don't even have to pay it back if you don't need/want to.

Disclaimer......CAREFUL evaluation of your situation and UNDERSTANDING of any ramifications can make this a good source of "found" money. C

 

[PaulT]

Be cautious with home equity loans. There are two types, tax deductible and non-tax deductible. In order to qualify for a tax deductible loan, you must pay up front closing costs to the bank/lawyers, just like buying a house. One of the fees is to register the second mortgage with you local government agency that has authority over mortgages. Only if these fees are less than the tax savings is this a good deal. The savings you have to compare to the closing costs to determine break-even is equal to interest paid times your tax bracket, NOT your entire interest expense. Occasionaly banks will waive their closing costs as they promote home equity loans, but they cannot waive the government filing/registration fee. That still must be paid.

The non-tax deductible type is nothing more than a loan with a favorable (non-tax-deductible) rate because it is collateralized with your existing home equity. This places your equity at risk if you default on the loan. Since most CUTs have a pretty good resale value, this risk is pretty low, so I would worry more about the cost of the loan than the risk of default.

One other thing to watch for with a tax-deductible loan - when it is registered as a mortgage, your primary mortgage holder is notified, and you may now be required to escrow taxes and pay PMI, since your ownership position may now be less than the magical 80% (or whatever your bank required to waive PMI). Careful...

 

[PaulT]

If you have Whole life, this will work. I don't believe in Whole ife insureance, because it is not (life insurance, that is). It is a savings account that pays a shamefully low interest rate, combined with a term life insurance policy. I recommend Term life if you wnat life insurance, and savings accounts or money market accounts if you want interest on your cash balances.

That being said, if you DO have a whole life policy, you can borrow against it, and as you repay it, the interest is actually going to you (eventually, after they have the use of it in MUCH higher yielding investment strategies than they are paying you/w3tcompact/icons/blush.gif).

Another similar source of money (and a much better investment to make) is your company 401(k) plan. You can borrow against your balance, typically up to half, and typically for no more than 5 years, and pay yourself back at a predetermined interest rate. The interest is just going into your retirement account. There are some complications with this when you reture, but you get to keep all of the money. You also get to decide how you will invest it (within the choices provided to you by your 401(k)). That may be a good route to go if you want to buy used or an "off brand" of tractor. Before you are certain that you can't afford a green/orange/blue tractor, make sure you calculate the exact payments for each tractor against the (probably) higher rates you will have to pay for a less expensive or used model. You may actually be better off with a leading brand, considering resale and favorable factory financing options.

 

[barberjim]

Hi,
Yes I had considered big 3 for financing program advantages. But I could not find anything even close to
this deal:40 horse kubota diesel, 4wd, hydro steer,1800# fel,2sp independent pto,12/12 syncro w/shuttle, 2600# 3pt lift, flat deck etc,etc. $17,500. If you know of something I'll be glad to listen. BTW, its at a well
respected, long time, and family owned/operated dealer.
Jim

 

[Worksmart]

PaulT - I agree with your reply. I would never go out and buy a whole life policy. I wouldn't recommend it to anyone either. I believe at one time it was the "insurance du jour." Probably back in the 60's or 70's. Just like many other financial products they come and go based on the current tax, financial etc environments.
My thoughts were some people might have a policy of this type in place and it could maybe be put to better use/w3tcompact/icons/smile.gif with a tool(toy?). C

 

[PaulT]

Sounds like you found a bargain. Also a bit bigger than I have or need. I tend to think of the 35hp and under category when I think about these things. For that size, I don't think you could touch that price, even with factory incentives.

 

[PaulT]

Good point. I know a lot of people who bought these policies when they were the rage. Many people may not know they can borrow against it, and pay themselves back with interest. My wife had one that her father bought when she was just a littel girl. I had her cash it in right after we got married so she could increase the return.

 

[barberjim]

Pau,
Same company has a 30hp for about 2g less. Same 1800# fel.
barberjim