Financing 101

[flwiii]

Here in Phoenix the orange and blue dealer has dropped the 0% 36 month but now offers 0% 24 months. The green dealer is still offering 0% at 36 months.

 

[BarryinMN]

Realistically the "0 % " cost of capital is built into the sales price of the machine there is no free lunch...

Buying now or later you still pay...

My local off brand dealer had sources of subsidized ag investment capital, ie discount rates. They help keep business local, banks, CU's etc. Talk to local dealers they know how to put financing together.

I didn't follow up as I didn't finance anything but was surprised by the unadvertised specials.

 

[unreconstructed]

No doubt the ) percent financing is built in to the price of the tractor. I had saved enough to pay cash for mine even though the salesman couldn't understand why I did not go the payment interest free method ( the Dave Ramsey thing again). I wasn't smart enough to ask him for a cash discount since he had already beat my first quote by a large margin. /forums/images/graemlins/frown.gif

Has anyone on TBN asked for a cash discount?

If no discount for cash, then the cash customers are paying interest too. /forums/images/graemlins/blush.gif

 

[MikePA]

<font color="blue">even though the salesman couldn't understand why I did not go the payment interest free method </font>
While I like having no debt as much as the next guy /forums/images/graemlins/grin.gif paying cash instead of getting a 0% loan, means you're losing whatever interest you were earning on the money.

 

[flwiii]

Of course there is no free lunch, but which would you choose if you had no other option than to finance. With the price being the same since i'm financing, I would rather have 36 payments with no more interest than 72 payments with another 4.9% thrown into the mix. If you can afford to pay cash by all means do so because the value of money today is worth more than the same amount 5 years from now.

 

[flwiii]

Unreconstructed:
I asked for one when I bought my LT180 as I paid cash for it. It cost $3000 whether I financed or not, so by the information provided by BarryinMN, cash customers here pay the cost of capital too.

 

[MikePA]

<font color="blue">because the value of money today is worth more than the same amount 5 years from now. </font>
This is only true in an inflationary period. /forums/images/graemlins/smile.gif Not sure we're in one now, maybe the start of one?

The only time it makes sense to pay cash for an item is if the interest rate to borrow the money is greater than the interest rate you're earning on the money. In the case of a 0% loan, you will lose money by paying cash. If this logic is wrong, help me understand. /forums/images/graemlins/grin.gif

Also, if the dealer doesn't offer a discount for cash it might be because he's receiving an incentive from the manufacturer or from whomever is handling the financing.

 

[jjcc246]

I was going to pay cash for mine, but they offered 0% for 60mo. I took my cash, invested it a fed. bond. While that's making interest i'm paying NH no interest. There was no discount for cash. I think now is the time to by while the 0% is still offered. Just go to the dealer of choice, make your best deal and say "charge it". If you wait you may not get the deal later. I think we can all agree these "TOYS" are a big investment and if your going to do it, do it now, while you have the advantage of low financing. A used tractor (unless it's an exceptional deal) will cost you just as much because banks charge a higher interest on used equipment often a personnal loan which can easily get to the 8% range. good luck.

 

[flwiii]

MikePA:
I agree with your viewpoint that taking money from an interest bearing account to pay for something as opposed to a loan at a lower interest rate than you are earning is not wise. My point was based on the money being in a non-interest bearing account such as a basic checking account that does not earn interest (IE spending cash). Money devalues over time no matter; because inflation occurs eventually. Ten grand 10 years ago bought you more than 10 grand today. What someone could retire on 15 or 20 years ago and live comfortably won't cut it today. Taking money from an interest bearing account would be a last resort for me. The lower the principal the less interest you will earn.

 

[BarryinMN]

I hear you. Making sure you can cash flow the monthly expense in wost case scenarios is important as cash is always king.

Getting the same quoted price cash or credit makes sense as the manufacturer carries the note, not the dealer & dealer acquisition cost is the same either way. (Ignoring potential dealer inventory financing expense, loan fees, commissions, etc.)

A local financial institution may have better terms & conditions to fit your cash flow especially if you buy used from a private party. Remember cash is king & talks louder on a private party sale /forums/images/graemlins/grin.gif

Marketing 0% dealer financing has moved a lot of hardware, but is not really 0%. Dealers are trained masters on solving problems and making it easy to transfer your pocket full of money to theirs /forums/images/graemlins/confused.gif

On my tractor, I surveyed stocking dealers within 1000 miles on pricing. My local dealer was still lowest, he pays cash for his inventory, & I took the cash back option from the manufacturer.

Have fun & keep your options open /forums/images/graemlins/grin.gif