I am curious to know how it was "worth it". I'm not trying to be difficult here but if I'm missing something, I'd like to know. The mere offering can lead people to buying the wrong product whether it's the Mahindra or the Kubota if they are looking at this financing ruse first.
You still have a monthly payment and you're paying a finance charge anyway. It simply doesn't look that way as they plopped the financing onto the purchase price.. To me, any financing allows one to "keep their money". If indeed you are considering that as an advantage, I would rather have the option of paying a reduced amount for the product and getting my own financing (or even use theirs if competitive) at a reduced rate and not be involved with this kind of sneakiness in the least.
With "0"%, manufacturers can tack on any amount they want to their msrp if they want a 6,7or 8% return on their financing investment when the buyer could have gotten 3,4 or 5% on a real loan.. They can get so tricky with numbers as to actually make it look like 0% is an advantage. The kicker is one will never know exactly what percentage they are paying on with 0%. In no way is it "0" in any fashion and many times, the buyer is paying more in the long run with 0% than with a reduced real percentage.
For me right now, when I see or hear "and we are now offering 0"% on your purchase", it's the same as someone offering me a lick of their lollypop and they have ebola.
OK. And thank you for asking. The thing about interest is that it is a two way street.
I admit that I was more than surprised - kinda floored - when the dealer and I had agreed on a tractor and a price but then when I offered to pay cash he wouldn't give me a discount.
In fact, the dealer not wanting to deal with us put me off so much that I took another few weeks before closing the deal just to see if he would budge. But he wouldn't. Then I got stubborn myself because buying a new tractor was a huge big deal in our lives....my wife had been trying to get me to get a nice new tractor for years... and here that dealer had gone and taken all the fun out of the bargaining that I had been looking forward to doing.
One day common sense took over & I began to get worried that someone else would buy "our tractor", so I went down and closed the deal.
I told the dealer why I had been stubborn and he said that cash or 0% was all the same to him since if I financed all he had to do was fax the paperwork to Kubota and he would get a check back from them in 24 hours. So why should he discount?
OK, that made sense to me. So what I did was first make sure that the price was complete.
It was; he showed me that we simply divide by 60 to come up with the monthly payment for a 5 year 0% note. I signed the loan and he delivered our new tractor a day later.
The next week I went over to the downtown outlet for a well known on-line broker and with the cash I had offered the dealer I opened up an account for the price of the tractor. That acccount came with a free checking account and checks. I kept back 20% of the cash, and invested the rest on the spot into buying stock shares in four very conservative mutual funds that were expected to grow in value while paying dividends: One financial, one manufacturing, one hi-tech, and one bonds. The rest of the cash I held back to make the first year payments.
My plan was that once a year - usually in December - I would sell just enough stocks back to the broker to make the next years payments. I was pretty nervous about all this, but hey ... at this point I have a tractor and still have control of my original money.
All the dealer has to show for his once new tractor is a piece of paper with a promise to pay if I can. The only collateral he really has is a tractor which lives on my land which I get to use every day. The dealer is left with a piece of paper plus watching the collateral for his loan get older and weatherbeaten as I use it. So it looks to me like I'm doing OK.
Then it all screwed up. All this happened in 2007 .....just a couple of months BEFORE the stock market dropped in that huge 2007/2008 dip. My cleverly thought out tractor account suddenly lost 30% of it's value overnight. I thought I had made a big mistake and was going to end up paying 30% more for the tractor than if I had paid cash..., but decided to say with the plan....mostly because I was so shocked that I didn't know what else to do.
Well, you know the rest. All my life when I do these kind of things it ends up costing me money. But that time the market came roaring back like it never had before. The cash I first held back made the payments the first year when the stock was worthless... so nothing got sold at a loss. Then when it came time to sell for the next year the price was already looking good.
In the end, the account ended up paying for the tractor plus a little. I kept the account. After 8 years it had grown to be worth almost as much as the tractor cost.
The funny thing is that I don't do that kind of investing thing before. And I never would have done it if I hadn't been so disappointed that the dealer wouldn't give me a discount for cash. What I really wanted was a few thousand off the purchase price, or for him to throw in some "goodies". But he wouldn't.
rScotty
