To finance or not to finance ...

[RSR]

SHOW ME those interest returns..my retirement has averaged 3% over the past decade...most banks are paying .3% - point 3..
Googling shows some CD at 2.2 to 2.7.

$2100 discount? that's huge. Wonder what the small print is...

Not sure about tractors, but on cars and motorcycles dealers make money on the financing, sometimes a little sometimes a lot. They don't want cash buyers.

Ask and ye shall receive (or you could just Google it yourself)

Tractor house listing of $2,100 rebate for cash price.
https://www.tractorhouse.com/listings/farm-equipment/for-sale/24568045/2018-kioti-ck3510hst



CD rates: (around 3'ish %)
Best CD Rates for October 218 | Bankrate.com



Investment returns for SP500 index fund. (10 yr average 11.83%)
VFINX Performance History | Vanguard Index Trust 5 Index - Yahoo Finance

 

[Diggin It]

SHOW ME those interest returns..my retirement has averaged 3% over the past decade...most banks are paying .3% - point 3..
Googling shows some CD at 2.2 to 2.7.

Ask and ye shall receive
Investment returns for SP500 index fund. (10 yr average 11.83%)
VFINX Performance History | Vanguard Index Trust 5 Index - Yahoo Finance

Which is similar to mine in the Federal Thrift Savings Plan: TSP: Annual Returns

Though mine has done somewhat better overall, running around 13% or so across the mixed funds. The way things have been the last couple of weeks though who knows if it will be up or down for the year. People have been talking about '08 again, which as you can see from that chart was .... unfortunate.

 

[kenmac]

SHOW ME those interest returns..my retirement has averaged 3% over the past decade...

WOW ! If you have a financial advisor managing your money, you better fire him /her. If you don't have one, you might consider finding one
I have been earning an average a little better than 12% returns on my investments

 

[Atchuuu]

Kenmac, you state that debt is never good and purchaser's rationalize financing a product. In the example below I show how someone financing a tractor and keeping their cash invested would actually make $1,761 on the deal. That is a return of 8.85% ($19,900 x 8.85% = $1,761). If you were to review these numbers and find them to be accurate would you still take the position that financing /debt is slavery? If you do not agree that my numbers are accurate please let me know what you disagree with.

Money is a very emotional subject for sure but there are times when financing or borrowing is smarter than paying cash. You can't tell which is which with emotion but you can with math.

I don't follow your example. If he is getting 0% interest on the tractor then the cost of the tractor is $22,000.

A cash purchase would reduce the price by $2,100 or 9.5% so you could argue that the cost of financing is 9.5% right off the bat.

If you pay cash the tractor is $19,900 (after rebate of $2,100)

If you put the $19,900 into a investment (instead of buying a tractor) earning 3% annually the value is $23,761 at the end of 6 years.

So financing the tractor at a cost of $22,000 with zero interest and leaving the $19,900 in the bank would actually earn the purchaser $1,761. This doesn't factor in the cost of any doc fees, insurance requirements, etc.

How do you come up with $6,369. difference between cash and financing? You can't add the cost of the rebate to the compounded interest on $22,000.

Did I misunderstand?

 

[Rock Crawler]

You folks are amazing. Who gives a crap, it's money... more pours in every day. Live life, make love, have fun and savor every moment. Money is fake, it comes and it goes.

If your hobby is saving money, great. My hobby is making money and spending it at the same time. I'm pretty good at it. I make a ton and I spend a ton. I really and honestly am not worried about a tomorrow that may never come, and I sure as heck am not hurting for a dang thing.

 

[Atchuuu]

You folks are amazing. Who gives a crap, it's money... more pours in every day. Live life, make love, have fun and savor every moment. Money is fake, it comes and it goes.

If your hobby is saving money, great. My hobby is making money and spending it at the same time. I'm pretty good at it. I make a ton and I spend a ton. I really and honestly am not worried about a tomorrow that may never come, and I sure as heck am not hurting for a dang thing.

Thank you. I'm sure you meant amazing in the best way.

Good for you but the post wasn't about you. Surely you realize that other people may not be in the same situation you are in.

The OP was worrying over paying cash or financing. Nothing wrong with being able to analyze a situation and finding the best deal. You can still live life, make love have fun and savor every moment without spending more than you have to.

 

[prof fate]

at this time the tractor is giving me more joy than my car (which i just paid off, so traded one payment for another)

Also, i'm getting older and 2 things occur as this happens - I'm not as physically able to do what I could 20 years ago, so the tractor makes doing this stuff easier.
And more importantly, I fully appreciate the time I have left and that it's ever decreasing - so one load in a bucket is like 2 wheel barrow loads filled with a shovel - but MUCH faster - so I have more 'life' leftover to do do things with.

Like my zero turn - I've saved 20 some hours this summer over the mowing time before i got a zero turn. So yes, maybe there is a 'cost' to pulling the money from savings (which i did for the ZT) or a loan (for the bigger tractor), but what are those 20 hours worth? If you make $30/hour at your job then your time is worth $30/hour so $600.

Or measure it - we spent $1500 a year on paying to have brush hogging done, $300 ish depending on the year for snow removal, misc amounts for loader work. We'd plant few posts (doing it manually), have to drag limbs to a fire pile manually, etc, etc.

We now pay only fuel for the work, and it's done on our time schedule. We clean up trees faster - and plan to plant a lot of fence posts, a job that would either never be done or be very exhausting or cost something to hire out.

So even if there is a cost to the interest to having it NOW, there are savings that are measureable, and some not so easy to figure, that having the tractor allows.

The real issue is i've spent a LOT mroe time on a tractor this year then ever before in my life - because I CAN do things that just never were doable before as too much work. So then, does a tractor save work or create work? LOL

Option 2: Save $305.55/mo and invest it at a conservative rate of 3%, compounded annually. At the end of 6 years, you will have a cash balance of $24,102.47. Now, buy the tractor at the reduced cash discount price of $22,000 - $2,100 = $19,900. You are left with a balance of $4,502.47. That is still a significant sum of money.

You have made the assumption that the tractor, 5 years from now, will be at the same price it is today. It will not. This exercise only shows that we can all rationalize our reasons for doing or not doing just about anything. I suggest that if you need a tractor get one. Even if you don't really have to have one you will have to decide if it gives you $305. a month worth of joy. For me the answer is yes. Not everything in life is an investment.

 

[rScotty]

For those of us who don't absolutely have to have to be using a tractor everyday to make a living, there is an alternative to going into debt to buy a tractor.

Simply buy a used one with whatever cash or promise you can scrape up. There's a ton of them out there. Old tractors are deliberately simple to work on.

You just have to look at the tractor fixing part as one piece of the whole enjoyable package of working on your own land.

The main decision that needs to be made has to do with how much cash to lay out versus how much fixing work is necessary. It might be very little of both. In fact, it often is...

I don't know what changed to make loans so much more common today.
But I do know that part of what used to take the place of unobtainable debt for the average guy was making do with used equipment - cars, machines of all kinds, and houses. It was called "sweat equity" and it bridged the gap between available cash and a new toy.

Look, I know that today it is popular to take a loan. All I'm saying is that there are other ways to do things. Nobody was born knowing how to build a barn or fix a tractor. Yes, the first time is pretty crude. But the basic philosophy of fixing used things is just as available to all of us as it ever was, and learning how to do so will eventually make you money instead of costing.

And as a bonus, you can have all the toys you want....
rScotty

 

[kenmac]

For those of us who don't absolutely have to have to be using a tractor everyday to make a living, there is an alternative to going into debt to buy a tractor.

Simply buy a used one with whatever cash or promise you can scrape up. There's a ton of them out there. Old tractors are deliberately simple to work on.

You just have to look at the tractor fixing part as one piece of the whole enjoyable package of working on your own land.

The main decision that needs to be made has to do with how much cash to lay out versus how much fixing work is necessary. It might be very little of both. In fact, it often is...

I don't know what changed to make loans so much more common today.
But I do know that part of what used to take the place of unobtainable debt for the average guy was making do with used equipment - cars, machines of all kinds, and houses. It was called "sweat equity" and it bridged the gap between available cash and a new toy.

Look, I know that today it is popular to take a loan. All I'm saying is that there are other ways to do things. Nobody was born knowing how to build a barn or fix a tractor. Yes, the first time is pretty crude. But the basic philosophy of fixing used things is just as available to all of us as it ever was, and learning how to do so will eventually make you money instead of costing.

And as a bonus, you can have all the toys you want....
rScotty

problem with most buying used is. Most of the time, they can get financed at the dealer and maybe not when buying used.

I could have easily bought a new and paid cash. I just didn't want an emissions tractor.
Plus, with only 380 hrs and at 23k. I probably save a great amount of money over new.

Here's what has changed to make loans popular ....

All the zero interest , 1.99% . Financing for 7-8 yrs ?,etc, most are offering these days to sell you something.
I sure don't remember any of these kind of rates /length of terms 20 yrs ago.

I can remember when all you could get a new car loan for was 3 yrs. If it was a used car 2 yrs. and interest wasn't cheap either !

The tractor / car dealer knows he/she can sell them more than they may really need because it only adds 25.00 more per mo. to the loan.

I wouldn't say getting a loan is popular these days, as much as it is accepted as the norm

 

[Diggin It]

We've been over this used vs. new stuff a few times. In my case, used was almost the same price as new, but used had less capabilities. And with hundreds of hours, I have no idea what the condition of internal parts might have been or what costs they might incur or when. I might have picked up a $15K machine that broke down a week later with no warranty or dealer support.

Also financing would have been much higher, somewhere around 10%, maybe more.