0% loans on new tractors

[Cougsfan]

A couple of the quotes I got on new tractors offered a cash price a $xx,xxx or the option of a 0% loan at a higher sales price. Of course you could still buy it at the cash price if you wanted a 4.99% loan. Going through the math, the total cost to the user is exactly the same, within $50, with the 4.99% loan as it is with the 0% loan. Are we as dumb as we look?

 

[Wagtail]

Yes.

It's an old sales gimmick... just like petrol prices with the *.99 after, or anything else for that matter. The most common being advertised vehicle prices $XX,990. As if $10 is going to make a difference.

But WAIT, THERE'S MORE! :laughing:

 

[jeff9366]

Ferguson, not Furgeson.

 

[chim]

..................Are we as dumb as we look?

Apparently there are a sufficient number of people who do see this as appealing or they wouldn't continue to use the tactic. At an interest rate of 4.99% you'll pay $9,000 for each $8,000 borrowed on a 60 month loan (if my math is right).

 

[jeff9366]

Bear in mind "core" inflation is 1.7%, and creeping up. If your pay keeps up with inflation you will be paying off the tractor with cheaper dollars over term of the loan.

You might figure that 0% is actually -1.7% in inflation adjusted dollars.

 

[Fiziksgeek]

I think most people finance because they either don't have enough cash on hand to make the purchase, or at least don't want to drain their cash savings by that amount. Financing always cost money, its the price to play for many.

 

[coobie]

Ferguson, not Furgeson.

Hey look mommie a english major..LOL........

 

[LD1]

I wouldnt say its people are dumb.....its just a sales tactic. Different wording to say the exact same thing.

IE: $20,000 tractor @ 4.99% interest (makes payments $377.33 over 60 months)

or

$22,640 tractor with 0% interest for 60 months. (also makes payments $377.33)

Sometimes they may also give you an option......like on said tractor above.....you can have $2640 cash back in lieu of 0% interest

Many different ways to say the exact same thing. Its all about what people like to hear. People like the illusion that they are getting something "free"....like interest. When actually, they are only paying 60 mos of interest up front instead of spaced over the life of the loan.

But the options are nice. Their 0% option or cash back options are usually based on an average interest rate. Lets say your credit is below average....and the best you can finance on your own through a bank is only 6.99%......then the 0% (where you pay 4.99% interest up front), is actually a better deal. If you have above average credit, and a good bank.....you pay be able to finance at 2.99%.....and actually pay less in the long run than their 0% interest.

My last tractor and two auto purchases.....werent financed. But prior to that.....I NEVER negotiated on sales price. I negotiate on what its actually gonna cost me. IE:...monthly payments for a given term. Sales price is irrelevant, thats only a portion of what one has to pay. Taxes, tags, title, document fees, interest, etc. And they all like to play with those numbers. I only care what my payment for a given term is gonna be, and negotiate basesd on that.

And even doing that, I have had some less than intelligent finance people who think I am an idiot. IE: when we were buying the wifes truck back about 10 years ago, my terms were simple.....$400/month and not a penny more....for 60 months. I told the finance guy its a simple yes or no.....can you do it or not. finance guy goes into the back room and comes back a few minutes later and says "great news, (as he shows me the paper with his figures) we can do it for $371.xx/month......for 72 months" I polite said that was not what I requested. 60 month term....no more. Well he flips his paper over and shows me a ~$425 payment for 60 months. I said thanks for your time, and the wife an I got up and left. Just as we were closing the doors to the car to go home, our salesman (good friend of mine) came out and wanted to know whats up. I told him that his finance guy must either think I am and idiot, or he is an idiot. As I asked for a simple yes or no as to weather they can sell me that truck for $400/month for 60 months. And that he tried to push a 72 month term on me that I didnt ask for. So we left. My salesman friend said "can you wait just a second and let me see whats going on". I told him I would give him 5 minutes then we were pulling out. In about 3 minutes he was back out and said would you still be interested in $400/month or less for 60 months. I said only if you throw in running boards now because I dont appreciate being jerked around by the finance guy.

Deal was done and it cost the $350 of running boards that it wouldnt have cost them the first time around.

My point of all that.....if you are financing.....negotiate towards paymet and term. Because that is what you are "actually" paying out of your pocket. They can screw with all the other numbers as much as they want....I dont care. The only thing that matters to me is how much I make the check out for every month, and how many times I have to make that check out.

 

[nikerret]

From October to December 2015, the 0% interest only cost $65 (document fees), not the usual $500 plus $65. Before that, Kubota bounced from 0.99% interest for 60 months, with $500 increase in finance price, to 0.00% for 60 months with $500 increase in finance price.

I bought mine when the rebates were the same, for cash and finance. On my paperwork, the $500 always came in on the line for the "finance rebate", when I got quotes for cash versus finance.

The JD dealers didn't have a true (or as low as $65 fee) 0%, in the two years I was looking.

Of course, I should have suspected something was up. Three months after I bought mine, they moved to a 6 year powertrain warranty. From what I've seen, the end of the year is the best time to buy, the beginning is the worst.

 

[KennyG]

There are legitimate 0% or money back promotions. If they come from the manufacturer, they are as advertised. If they dealer has to chip in, it comes out of his margin so you can get a better cash deal without the incentives. The auto dealers have to disclose this with (very) small print that says "Dealer Participation Required" or something like that. I haven't seen that on the tractor ads.

It's been 6 years since I bought my JD but when I did, they offered 0% financing for 3, 4 or 5 years. The 3 year option was all John Deere financing so it did not affect the sales price and I took that. If I had chosen 4 or 5 years, it would have increased the purchase price because the dealer would have had to pay a fee for it. My dealer was very up front and explained the whole system as soon as we started talking financing. The 3 years financing had no hidden fees or added costs.