Compact Tractor Financing Comparison - Hopefully this helps someone

[Silverado21]

Trying to make sense of it all and wanted to share. Doesn't include tax, insurance or implements. All machines are HST with a FEL. Yellow cells mean the rate wasnt listed but was inferred off rates used for lower months. Prices are based on manufacturer website and may not be entirely accurate due to dealer incentives.

Also - Did all of this, still dont have a **** clue what the best choice is. Excel screen shot attached.

 

[RSR]

My interpretation of that spreadsheet is that it is a clear justification for why you should pay cash for a tractor. Up to a 25% increase in the sticker price due to interest charges, depending on the length of the loan. Ouch!

And, those that have "0% interest" just mean you should be able to get a better cash price, as the financing charge is factored in (there's no such thing as a free lunch).

 

[KennyG]

My interpretation of that spreadsheet is that it is a clear justification for why you should pay cash for a tractor. Up to a 25% increase in the sticker price due to interest charges, depending on the length of the loan. Ouch!

And, those that have "0% interest" just mean you should be able to get a better cash price, as the financing charge is factored in (there's no such thing as a free lunch).

I probably should let this go, but when there is a 0% (or any low interest rate) promotion, you have to ask "Is there dealer participation?" If there is not, the factory does the financing and the cash and financed price is the same. If the dealer has to "participate" he can discount for cash. Some states require this to be disclosed in the fine print. Just ask and the dealer will tell you. I got 3 year 0% on my John Deere, same price as cash. 4 or 5 year 0% was available, but the dealer said he had to increase the price for those deals because it cost him.

 

[RSR]

I probably should let this go, but when there is a 0% (or any low interest rate) promotion, you have to ask "Is there dealer participation?" If there is not, the factory does the financing and the cash and financed price is the same. If the dealer has to "participate" he can discount for cash. Some states require this to be disclosed in the fine print. Just ask and the dealer will tell you. I got 3 year 0% on my John Deere, same price as cash. 4 or 5 year 0% was available, but the dealer said he had to increase the price for those deals because it cost him.

I didn't realize there was variation on whether financing was provided by either the dealer, or the manufacturer. Maybe this explains why Kubota used to not offer cash rebates at all, until recently? When I was shopping they were willing to offer rebates in the neighborhood of $750-$1,000, but I believe that was a relatively recent development.

Regardless, as you say, the financing is either carried by the dealer or the manufacturer. That is, at 0% someone is paying finance charges, which means if you buy a 0% financed tractor that cost is being passed on to you through increased sticker price.

When I was shopping for tractors, any company that wouldn't give a cash discount left a bad taste in my mouth, as that basically told me they were overcharging for their tractor at the cash price.

 

[edgarrian]

84 months seems like a person cant afford one. I paid cash for mine. In 10 years we will see longer term loans. Its a guarantee. I don't like that personally as i believe 84 is far to long. Its gonna make big trouble.

 

[cjoffutt]

84 months seems like a person cant afford one. I paid cash for mine. In 10 years we will see longer term loans. Its a guarantee. I don't like that personally as i believe 84 is far to long. Its gonna make big trouble.

Completely agree with your 84 months seems like someone cannot/shouldn't buy statement. I've also never understood why anyone simply makes the monthly minimums.

Take the Kioti I purchased in August, I put the most I could down on it (60%), financed the rest due to some other projects going on at the time. But Christmas work bonus was thrown right onto Decembers payment to knock down a good chunk instead of spending it on other nonsense. I've also doubled the minimum every other month along the way. I'm already planning on dumping the bulk of my tax return onto it as well. Just seems silly to me to not pay off one's debts asap so my money can start earning money for myself again and not someone else.

While I understand that not everyone in the world can pay ABC instead of XYZ, 95% of people can look at their monthly expenses and see where there is a LOT to save/stop spending to pay off something else.

 

[KennyG]

Regardless, as you say, the financing is either carried by the dealer or the manufacturer. That is, at 0% someone is paying finance charges, which means if you buy a 0% financed tractor that cost is being passed on to you through increased sticker price.

Logically, that makes sense but there is a lot more that goes into equipment pricing than cost of production and a set profit. I think we all know that if you buy a new 2020 car in December 2019 it will probably cost a lot more than it will in September 2020 when the manufacturer wants to clear out inventory. The way I look at it, if I definitely want to buy Brand X, Model Y and the dealer has no incentive to take cash over 0% financing, I will always finance it.

 

[RSR]

Logically, that makes sense but there is a lot more that goes into equipment pricing than cost of production and a set profit. I think we all know that if you buy a new 2020 car in December 2019 it will probably cost a lot more than it will in September 2020 when the manufacturer wants to clear out inventory. The way I look at it, if I definitely want to buy Brand X, Model Y and the dealer has no incentive to take cash over 0% financing, I will always finance it.

Sure. The decision is ultimately going to come down to what you want/value, and how much you are willing to pay.

What bothers me, however, is when people think that 0% finance means they are getting a better deal. You aren't. Somebody is paying that finance charge. And, to paraphrase an old poker saying, "if you don't know who exactly is paying the finance charge, it's you."

If that doesn't matter to you, or you deem the extra expense is worth it to get what you want, then great.

 

[kenmac]

Believe it ,or not. Last time I was considering buying a new car. The car salesman told me he would sell me the car at a lower price if I financed over paying cash !.
Said he didn't care If I made one payment, then paid it off

Must be getting some sort of kick back from the finance company

 

[KennyG]

Believe it ,or not. Last time I was considering buying a new car. The car salesman told me he would sell me the car at a lower price if I financed over paying cash !.
Said he didn't care If I made one payment, then paid it off

Must be getting some sort of kick back from the finance company

That's just like a mortgage broker. The real estate company doesn't care if you pay cash or finance. The mortgage broker wants you to finance, even if you pay it all off next month. The actual mortgage company wants you to pay it off over the full 30 years (unless mortgage rates go way up).

 

[Maineuropa]

That's just like a mortgage broker. The real estate company doesn't care if you pay cash or finance. The mortgage broker wants you to finance, even if you pay it all off next month. The actual mortgage company wants you to pay it off over the full 30 years (unless mortgage rates go way up).

YES! When I bought the farm I needed a 30 day bridging loan. I made the mistake of letting the mortgage company know this. They suddenly got real slow on arranging the deal, then told me I had to pony up up an additional $2000 or it wasn't worth their time. This was 15 days prior to the closing.

 

[polarred21]

Pretty good comparsion, I have attached a sheet I saved from an internet sales ad that sums it up for Massey with Agco financing, It's all a game isn't it? About 3 ways to buy a tractor looks like. DON'T be sold on the 0%, it's a gimmick and always will be.

Obviously paying cash and finding the best price AND best dealer is the key. Saving a dollar from an undesirable dealer is not good.

IF you plan to finance and maybe payoff early, here is rule of thumb I have found in dealing with my local dealers:

1. Cash price discount? Maybe, Kubota Yes. Massey No.
2. Financing low rate or 0%: Interest is added to the sales price up front and will make the payment lower. You will not save any money paying off early, this is the price, and these are the payments.
3. Financing at 4% to 5%: Sales price is lower. Normal simple interest loan, pay finance charges as you go. IF you plan to pay off early, this would be my choice.

 

[polarred21]

There's even a YT video for it! Some dated relative info and matches my experiences. Just decide a head of time what your cash/finance desires are and know your limits before you sit down on the back side of that computer screen!

AGCO Finance: Financing Tips for Purchasing a Tractor - YouTube

 

[Kubota2501]

Sure. The decision is ultimately going to come down to what you want/value, and how much you are willing to pay.

What bothers me, however, is when people think that 0% finance means they are getting a better deal. You aren't. Somebody is paying that finance charge. And, to paraphrase an old poker saying, "if you don't know who exactly is paying the finance charge, it's you."

If that doesn't matter to you, or you deem the extra expense is worth it to get what you want, then great.

I dont know where you guys are getting your information from about someone having to foot the bill when there is a 0% finance offer. The way the company makes it money from a 0% offer is by selling more tractors, cars, tvs, etc. The offer normally does not increase the price of the item being sold with cars. Kubota normally raises its price $500 if you accept the 0% offer, Mahindra and other companies may raise the price up to $2500 if you accept the low finance offer. There is not back room deal with the dealer and the finance company when a low or no interest loan is involved. Stop with the conspiracy theories.

 

[RSR]

I dont know where you guys are getting your information from about someone having to foot the bill when there is a 0% finance offer. The way the company makes it money from a 0% offer is by selling more tractors, cars, tvs, etc. The offer normally does not increase the price of the item being sold with cars. Kubota normally raises its price $500 if you accept the 0% offer, Mahindra and other companies may raise the price up to $2500 if you accept the low finance offer. There is not back room deal with the dealer and the finance company when a low or no interest loan is involved. Stop with the conspiracy theories.

I think you are taking a simplistic view of finance. From the standpoint of a company issuing the loan, there are (at least) two "costs" associated with loaning money. (1) The risk of someone defaulting, and (2) the opportunity cost. That is, how much you could earn with your money if you invested/used it in a different manner.

Neither of those costs scale with volume. The same percentage of people will default, regardless of the number of loans, and the percent return on your money if invested elsewhere will largely be the same regardless of the amount you decide to invest.

Therefore, the "cost" the company has to absorb to finance your tractor has almost nothing to do with the number of units they sell. It doesn't get cheaper for them if they sell more units.

Any company that offers financing has to recoup those costs, or they are literally losing money on the transaction, and they won't be in business long. If they just break even, it still isn't a good investment, so you can be sure they are going to charge a little extra. So, yes, there is no such thing as a free lunch (0% interest). Someone has to pay for those costs, and it's most certainly the buyer.

If you don't believe me, go into your bank tomorrow and ask what the interest would be if you want to take out a 30 year, $200k mortage loan. Then ask if you can get a 0% loan for the same amount over 60 years instead, or if you can get a lower interest rate if you borrow $400k instead. Be prepared to be laughed at.

 

[KennyG]

I won't ever argue that some of the "financing" deals are paired with less price discount than cash, but there is a lot more to pricing than people seem to realize. Factories are set up to produce a certain volume of product at a competitive price. If you can't move that volume of product, you take a big profit hit because the infrastructure is already in place and a fixed cost. Things are more flexible now, but it used to be that an auto assembly line was optimized for 60,000 cars per year and the line cost was fixed regardless of how many cars were built. Part way through the year, if the sales were heading for only 40,000, the factory has to come up with a way to move as many of those additional 20,000 cars as possible and they can take what would seem like a "loss" on some of those cars to support the fixed cost of the factory. They may offer 0% financing, cash back, push fleet sales, or some combination. But unless they strong arm the dealer and make him chip in on the financing or cash back, those incentives are non-negotiable. You can't try to make a deal with the factory and the dealer has no part in the incentives.

As an extreme example, some years ago, a copy of Microsoft Windows cost $100 in the US. It cost about $10 to $20 in China. Why? Because each additional copy of Windows cost less than $1 to produce and, at $100 the China market probably was only a few hundred copies. You couldn't negotiate with a retailer and get the China price because his cost was set by Microsoft and you can't negotiate with Microsoft.

 

[Takman]

I sell tractors and zero turns. I can give a person 4.5% a tractor for paying cash/check. When we finance 4.5% gets taken out of our profits. Every month I have to check what the new "dealer buy down" is. So you do pay more for 0%. I have found everywhere else that offers 0% (non tractor stuff) I always ask for 4-5% off for cash, haven't been turned down yet.

 

[nards444]

I think you are taking a simplistic view of finance. From the standpoint of a company issuing the loan, there are (at least) two "costs" associated with loaning money. (1) The risk of someone defaulting, and (2) the opportunity cost. That is, how much you could earn with your money if you invested/used it in a different manner.

Neither of those costs scale with volume. The same percentage of people will default, regardless of the number of loans, and the percent return on your money if invested elsewhere will largely be the same regardless of the amount you decide to invest.

Therefore, the "cost" the company has to absorb to finance your tractor has almost nothing to do with the number of units they sell. It doesn't get cheaper for them if they sell more units.

Any company that offers financing has to recoup those costs, or they are literally losing money on the transaction, and they won't be in business long. If they just break even, it still isn't a good investment, so you can be sure they are going to charge a little extra. So, yes, there is no such thing as a free lunch (0% interest). Someone has to pay for those costs, and it's most certainly the buyer.

If you don't believe me, go into your bank tomorrow and ask what the interest would be if you want to take out a 30 year, $200k mortage loan. Then ask if you can get a 0% loan for the same amount over 60 years instead, or if you can get a lower interest rate if you borrow $400k instead. Be prepared to be laughed at.

Think you are both right. Some companies like Kioti offered a pretty big different in finance, vs cash, vs low rate. LIke you said 0% is never free, somebody has to pay the bank, even with cars they often times dont let you take incentives if you take 0%.

But with that said I think some people get things twisted with cash as well. Bigger companies like Kubota I think the difference between cash and low rate was a few bucks. really equated to pretty cheap money, obviously with the units kubota sells and their purchasing power they are spreading that bank cost out, or simply are doing themselves. Think when I bought this spring dealer said cash would have saved me $500 or I could save my money and pay on it. TBH my 401k is rocking at 15% right now, my money is better spent not spending it. People always say well what if you lose your job and your lunch money, well to be honest at that point a tractor is the least of my worries as I dont use it to make money, so come get it.

Financing is healthy when done right and done smartly.

 

[Industrial Toys]

Personally I believe that the CASH payers have been thrown under the bus. Since most sales are financed, they (The Financers) would hurt the 0% illusion if they gave a realistic discount for CASH, so they decided to forgo that. I think they may still play some games though, like having a rebate, but you only get that if paying CASH.

 

[nards444]

Personally I believe that the CASH payers have been thrown under the bus. Since most sales are financed, they (The Financers) would hurt the 0% illusion if they gave a realistic discount for CASH, so they decided to forgo that. I think they may still play some games though, like having a rebate, but you only get that if paying CASH.

Think you are right to an extent. We have turned everything into a finance layaway situation, not always good. But to an extent nobody would buy anything if the option wasn't there. I think financing its self has drawn up prices though. Quickest way to lower the price of college would be to drop federal loans, watch the schools scramble and cut pricing. I have a good job and so do many others but buying a 60k truck cash really isnt in the cards for most I know

With that said I think times have changed, and Cash people over value what cash is. Cash was king in the day people used cash or check to pay, short of a threat of counterfeit notes, cash was real, meant something and could instantly be put into a bank or used to buy something. Was an easier way but same concept as carrying gold. Vs a check, you had to wait a week for funds, was it real, did it bounce etc. So I can see for people where cash had the allure. Today plastic is used could be credit or debit(same as cash). I can keep small card in my wallet and swipe and be on my way, I dont have to worry about carrying around bills to be lost or stolen and if my card is stolen, so what its protected. My pay check is digits as well, its fully guaranteed to hit my account on the same days each month, I dont have to wait for my employer to cut a check, make sure it doesnt get lost and wait for the bank to open then wait a week to get my money. Money is simply turning digital thats really all there is to it. I have worked for a few business' and when buying from them, they could care less about cash. plastic is easy they dont have to store cash or go to the bank, monthly the credit card companies send them a check, the cost is built in. In todays world bringing a brown bag of cash has no advantages, and I really see why it should from a business stand point or even individual.