cost of tractors vs cost of autos, etc

[wrooster]

the used tractor values go up an down according to economy an tractor brands.take the last 3yrs most tractor sales have prolly been used tractors insted of new unless people have the cash for the new 1.

I tend not to agree with this. The 0% financing incentives that many tractor companies have been offering for the past few years has driven down the prices of used tractors somewhat, and conversely made possible many sales on brand new tractors.

Why would I pay, for example, a private seller US$14,000 out of my pocket on a used and possibly abused compact tractor w/ FEL when most any of the "tier 1" tractor companies (e.g. K, JD, etc) are offering no-cost financing on a new model with warranty? In this instance I would have 5 years to pay off US$15,000, at no financing cost to me. Contrast the cash-flow and risk difference -- it's not even a contest. Plus you can roll any needed implements into the no-cost financing...

Wrooster

 

[D7E]

I tend not to agree with this. The 0% financing incentives that many tractor companies have been offering for the past few years has driven down the prices of used tractors somewhat, and conversely made possible many sales on brand new tractors.

Why would I pay, for example, a private seller US$14,000 out of my pocket on a used and possibly abused compact tractor w/ FEL when most any of the "tier 1" tractor companies (e.g. K, JD, etc) are offering no-cost financing on a new model with warranty? In this instance I would have 5 years to pay off US$15,000, at no financing cost to me. Contrast the cash-flow and risk difference -- it's not even a contest. Plus you can roll any needed implements into the no-cost financing...

Wrooster

Absoluteley ...on hard times the trend to finance new is even greater than on good times . When land /crop prices are good and farmers are optimistic is when used prices go up ..like right now !

 

[bigbull338]

well yall are right about 1 thing.the economy controls the tractor sales.have yall wondered why kubota keeps running those good rates.its because they use them to get people to buy new tractors.

 

[wrooster]

well yall are right about 1 thing.the economy controls the tractor sales.have yall wondered why kubota keeps running those good rates.its because they use them to get people to buy new tractors.

From an economic perspective, ROI and medium term confidence drives tractor sales. If the return on investment is attractive (i.e., spending $X on a tool will net you $Y profit, and $Y is greater than $X) and you are confident that ROI will continue for a modest period of time, then folks will buy. They may buy new or used, that is a cash-flow tradeoff only. If financing can be arranged such that there is little marginal added cost, that will be an attractive option.

As for Kubota offering good rates -- this is a function of the fact that they can borrow money nearly for free from their creditors, so therefore they can loan it to you (vis-a-vis the purchase price of Kubota products) for free. The fact that Kubota may take a 25bp (25 basis points = 0.25%) haircut on the "loan" is inconsequential compared to keeping the factory unit volume throughput high and the dealers in business.

The reason that Kubota (and other companies) can borrow money for free is because (a) their current balance sheet demonstrates a reduced default risk profile, and (b) the source of their funding is somewhere in the "encouraging investment" portion of the economic cycle. To this end both the Japanese and US governments are attempting to stimulate growth with historically low interest rates (the technical term is QE: Quantitative Easing). The result of this is not felt only in the tractor market, of course. Home mortgages, auto loans, and even consumer loans are historically cheap. Interest rates are down across the board, which makes it a good time folks to buy assets which will hold their value (or increase in value). It is *not* a good time for folks who are retired and/or on a fixed income from CD, bonds, or other financial instruments which are yielding paltry returns. How much are you making in your money market account these days?

Wrooster