Compact Tractor Financing Comparison - Hopefully this helps someone

[Takman]

Cash/check/card is all the same to my business and gets a discount over financing.

 

[NEEDLES617]

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. View attachment 635092

Wow..the Branson was that much? TYM looks like a deal on paper there. Idk what financing youre using, but from the TYM dealer the financing is 5.49% right now.

 

[chim]

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................................................

Unless the tractor is 100% profit, you sure are getting great treatment by the manufacturer.

Example - Tractor is $10,000 and assuming your margin is 15%, or $1,500.

Customer gets 4.5% of the tractor which is $450 discount and the manufacturer takes 4.5% of your $1,500 profit which is $67.50

 

[tduby]

Thing to remember with Kubota is Japan’s interest rate is usually negative so Kubota can borrow money build a tractor with a 0% interest loan and still come out ahead.

 

[desertdog71]

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.

Depends on the interest rate. If it's less than 3% I'll take terms all day, every day. Assuming the price is equal. You have to account for opportunity cost of having your cash tied up in a piece of equipment. You can also get a greater rate of return on your money than 3% and have a net gain over time instead of cash tied up in a depreciating asset.

 

[RSR]

Depends on the interest rate. If it's less than 3% I'll take terms all day, every day. Assuming the price is equal. You have to account for opportunity cost of having your cash tied up in a piece of equipment. You can also get a greater rate of return on your money than 3% and have a net gain over time instead of cash tied up in a depreciating asset.

That's true, but that makes a VERY big assumption that someone will have the discipline to finance the tractor, and then wisely invest their money, instead of spending it on something else.

It's possible, and a very few number of people do that successfully, but I think to most individuals it is simply a justification for financing something that they can then spend their hard earned money on something else.

I think that's why 60% of Americans can't afford an unexpected $1,000 expense. Because they are wisely financing their purchases so they have more money to invest...

 

[desertdog71]

That's true, but that makes a VERY big assumption that someone will have the discipline to finance the tractor, and then wisely invest their money, instead of spending it on something else.

It's possible, and a very few number of people do that successfully, but I think to most individuals it is simply a justification for financing something that they can then spend their hard earned money on something else.

I think that's why 60% of Americans can't afford an unexpected $1,000 expense. Because they are wisely financing their purchases so they have more money to invest...

I agree with you 100% most folks are not disciplined. I only borrow if the rate is stupid low, otherwise I pay cash. I wouldn't borrow a dime if it's going to stress you out and you're worried about paying the bill. That doesn't stop people though, I see plenty of folks in my area driving way more expensive vehicles than me and I $200K a year. I bought a base model pickup with rubber floors and cloth seats:laughing:

 

[finn1]

If you don’t have the discipline to have an investment plan, maybe wou shouldn’t borrow foe a tractor if the tractor is a toy. If it is a tool that helps earn a living, nothing wrong with financing at a low interest rate.

If you do have a strong financial plan and investment strategy, you would bee foolish to ignore leveraging through borrowing at a low rate. Some people will never understand, though. My mother, who was born on November 28, 1929, never understood.

In my case , had I liquidated investments two and a half years ago instead of taking a small loan at my credit union to finance my tractor at 2.48%, I would have missed out on a 30% return on that investment.

Also, look at the details on that clickbait claim that 60% of Americans are without access to $1000 in cash. Clickbate stories are there to grab headlines and rarely stand up when you drill into the details.

 

[nards444]

If you don’t have the discipline to have an investment plan, maybe wou shouldn’t borrow foe a tractor if the tractor is a toy. If it is a tool that helps earn a living, nothing wrong with financing at a low interest rate.

If you do have a strong financial plan and investment strategy, you would bee foolish to ignore leveraging through borrowing at a low rate. Some people will never understand, though. My mother, who was born on November 28, 1929, never understood.

In my case , had I liquidated investments two and a half years ago instead of taking a small loan at my credit union to finance my tractor at 2.48%, I would have missed out on a 30% return on that investment.

Also, look at the details on that clickbait claim that 60% of Americans are without access to $1000 in cash. Clickbate stories are there to grab headlines and rarely stand up when you drill into the details.

Yes it kills me. I have friends in 2020 and still dont understand leveraging borrowing and have this cash is king mentality. Anything under 2-3% interest is a no brainer to finance, when you figure ROI on investments, keeping your cash for other things etc.

What kills people is the payment mentality. The idea of another 200 a month wont hurt, then another 150 a month. That is where people ultimately get off the rails. Follow the golden rules of pay the bills, invest 10% into retirement, have another 6-12 months of cash on hand at minimum for emergencies and youll be fine.

 

[polarred21]

Follow the golden rules of pay the bills, invest 10% into retirement, have another 6-12 months of cash on hand at minimum for emergencies and youll be fine.

Good advice. OR keep 6-12 months of cash invested in a ROTH IRA that carries no penalty for withdrawals.....

 

[nards444]

Good advice. OR keep 6-12 months of cash invested in a ROTH IRA that carries no penalty for withdrawals.....

usually a 10% hit if you arent 59.5. So I would suggest a money market or liquid able CD. End of the day this is money to gain access to now if you need it, chances are you wont gain much interest off of it, so really just keeping it in a bank is probably the best idea.

Really if you keep your bills to around 50% that includes house, food, cars, allocate 10% to retirement, probably 5-10% to savings/ emergency fund. should leave you around 30% of your paycheck to buy whatver you want.

 

[Handloader109]

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.

This is THE answer to you guys that think zero percent is cheaper or even equal. 4.5% on 15k tractor is $675. or the $700 kubota offered me as cash discount 3 yrs ago. pay cash guys.

 

[KennyG]

This is THE answer to you guys that think zero percent is cheaper or even equal. 4.5% on 15k tractor is $675. or the $700 kubota offered me as cash discount 3 yrs ago. pay cash guys.

It's the answer if the financing requires dealer participation. Sometimes it does and sometimes it doesn't. You have to ask. If the dealer won't give you a discount for paying cash, the financing comes from the manufacturer and you should take it.

 

[nards444]

It's the answer if the financing requires dealer participation. Sometimes it does and sometimes it doesn't. You have to ask. If the dealer won't give you a discount for paying cash, the financing comes from the manufacturer and you should take it.

yup and whats $700 anyways in comparison to keeping your money for other things. Again I have no issue with either method of buying. But buying with cash comes with very little benefits if any.

 

[RSR]

yup and whats $700 anyways in comparison to keeping your money for other things.

And that mentality is precisely why consumer debt continues to explode, and people can't afford simple unexpected expenses.

Few have the discipline to use any extra money judiciously. Most just go further into debt buying a new toy with the money they "saved."

 

[chas0218]

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.

Usually the manufacturer will build the cost of the financing to buy down from the bank into the price of the tractor. It's all "smoke and mirrors" as a lot of people would call it. You'll see tractor prices vary by $1000 or $2000 or see a "finance charge" that re-coops some of the cost of the manufacturer buying down interest rates.

We just financed our tractor with 3.99% and the difference between 60 and 84 months in interest was minimal with $3000 down. We financed for 60 months to get rid of the payment faster but 84 would have given us quite a bit smaller payment.

0% would have drove the tractor cost up 4% on top of the 3.99% so basically 8% added cost of the tractor over the TERM of the loan that would have accounted for the interest paid at the 3.99%.

Financing is a whole lot of trickery and you can get really screwed if you don't watch what you're signing.

 

[nards444]

And that mentality is precisely why consumer debt continues to explode, and people can't afford simple unexpected expenses.

Few have the discipline to use any extra money judiciously. Most just go further into debt buying a new toy with the money they "saved."

Thing is its just about as mindless to not understand how to work the system to your advantage and think cash is king. People are going to get the next toy regardless just the way it is. But if your looking at the this situation by its self only $700 is nothing in the big picture.

End of the day its usually simple math, if it works it works, doesn't always work but if you are smart and have other things figured out it can usually work. .

 

[KennyG]

Using financing is a matter of discipline. A lot of people would say I'm crazy to have a mortgage when I'm over 70 and have the money to pay it off. But my investments averaged over 20% this year compared to my 3% mortgage.

 

[finn1]

I’m with KennyG. Just bought a winter house in Tucson and took a 3% fifteen year mortgage, and I am well into retirement. Haven’t worked in 11 years. Same with my tractor a couple of years ago: 2.48% at the credit union, and leave the money in investments.

I could have paid cash for both, but why? As long as your cash flow is positive, it just doesn’t make sense to cash in your investment portfolio with interest rates as low as they have been for the past dozen years.

The strategy doesn’t work if interest rates on borrowed money increase dramatically, though.

 

[desertdog71]

If I get 3% or better on financing I always go that route. I go a little higher on investment properties but someone else is paying my bills for those. It's all math, and if the numbers work, they work. Cash is fine too and not all "investment" money is in 401K or IRA's sometimes a straight brokerage account is the way to go, not everything is tax advantaged once you reach a certain point. Make your cash work for you if you can. Inflation is about 3% so if you borrow at that rate or below you should break even or better. That frees up your cash to be used other places that may pay you a pretty good return. It's all a risk of course but such is life.