Financing Financing

[CMV]

I found it to be quite convoluted with different incentives. Shopping multiple brands made it tougher to keep it all straight as this brand has these incentives at the moment, another brand has something almost the same - but different, another has this other incentive going on.....

0% finance was NOT. You pay a higher price for the machine overall by either not getting a "cash discount" or you get the 0% in place of another incentive like "free loader" or something - but in effect you somehow simply prepaid the interest.

The only case that wasn't true was Kubota - at least the two dealers I shopped both quoted me prices and cash price was same as 0%. Could get the multiple attachment rebate with 0% too and loader counted as one. Since I ultimately decided on a different brand, I didn't get far enough with them to find out if there were some other discount/incentive/rebate forfeited by choosing their 0%. So Kubota might be like everyone else, but my perception was choosing their 0% finance or writing a check was same. Kioti, Mahindra, LS, New Holland were all some sort of "you lose a good discount by opting for 0%"

How mine ended up working out was cash was best deal by far. But I was only able to write check for appx 1/2 of it. In that case, borrowing some from anywhere but manufacturer finance was more favorable. Home equity line or auto refinance are about lowest interest out there for stuff like that. At the time, and with Kioti and the offers they had then, bottom line was about $2300 more for 0% for a CK or smaller, $4500 for an NX or larger. Not sure where DK fell in that since I didn't get one quoted. Either way, worked out to roughly what 6% interest on a 5 yr loan would be.

So you really have to get everything down on paper. Stories here from people who were quoted cash prices, then at closing time discovered they were paying more than they thought because they chose 0% and dealer neglected to tell them the original # he threw out was based on cash purchase. If total purchase price (including interest if that applies) is a separator for you comparing competing models, really have to spend the time understanding the true cost of each.

 

[KennyG]

Re: ************* TANSTAAFL **********

!!!! There Ain't No Such Thing As A Free Lunch !!!!


And there is not 0% financing. You will pay for it one way or another.

Or stated another way, If they are offering 0% financing, there is a discount to be had somewhere.

As explained, this is not true in every case. If the manufacturer is offering the discount or low interest financing, the cost of the machine to the dealer is not affected by the incentive. Unless you can find a way to negotiate a discount directly with corporate John Deere, Kubota, etc, you can't get a better deal with cash. If the factory is forcing the dealer to offer the rebate or financing deal, negotiation is possible.

 

[Geotech]

What is more risky?
1) having 100K in debt and 100K in a savings account.
2) having no debt and also no cash?

This does not have to be a binary decision in real life, of course, but if the poop hits the fan, I'd much rather let the tractor go to the repo man and I keep my cash. Alternatively, if I have enough cash to pay it off, I can make my monthly payments with that reserve and have the option of repo or pay off at my discretion. Who knows, maybe I'll find a way to make things work out and not need that $25-$30K tractor money to fund the entirety of the rest of my life...

These are my criteria to responsibly financing large capital purchases:
1) have a retirement account with a current balance appropriate for my age and retirement goals.
2) have enough money to comfortably make bills and loan payments (including for a tractor) while making monthly retirement savings deposits appropriate to current balance and goals.
3) never buy a boat, lol.

Dave Ramsey has great advice for financially illiterate folks and folks who are irresponsible by nature and need a simple path to steer away from temptation. Interestingly, Ramsey lost everything once and now he's doing fine. The simple soundbites sell better than the actual nuances of financial management, evaluating present and future value of money, etc. Dave Ramsey is rich because he knows that the simple soundbite sells, not because he doesn't take out loans.

 

[Diggin It]

Re: ************* TANSTAAFL **********

As explained, this is not true in every case. If the manufacturer is offering the discount or low interest financing, the cost of the machine to the dealer is not affected by the incentive.

I'm seeing something on a Yanmar listing, but I don't know if it's from them or the dealer. $0 down, 0% --OR-- a $2,000 rebate and 5.99%

 

[Geotech]

Sometimes the discount and the cost of financing are the same, sometimes they are not. You pay $500 for 0 percent financing for Kubota - that's a good deal. But you also pay more for a tractor in general when you buy a Kubota - maybe not a good deal...

A lot of times there will be an option for Price A with 0 percent interest or lower price B with X percent interest. The difference in A and B might be the interest cost over the life of the loan at X percent. In this case, its better to go with lower price B and X percent interest rate so if you decide to pay it off early, you don't pay the entire finance charge up front as you are essentially doing when you buy at price A and 0 percent interest.

To determine what is better with Yanmar (it might be a wash), just calculate the interest cost of the loan over the life of the loan. Use any loan calculator app to do this.

 

[rngrrymd]

What is more risky?
1) having 100K in debt and 100K in a savings account.
2) having no debt and also no cash?

This does not have to be a binary decision in real life, of course, but if the poop hits the fan, I'd much rather let the tractor go to the repo man and I keep my cash. Alternatively, if I have enough cash to pay it off, I can make my monthly payments with that reserve and have the option of repo or pay off at my discretion. Who knows, maybe I'll find a way to make things work out and not need that $25-$30K tractor money to fund the entirety of the rest of my life...

These are my criteria to responsibly financing large capital purchases:
1) have a retirement account with a current balance appropriate for my age and retirement goals.
2) have enough money to comfortably make bills and loan payments (including for a tractor) while making monthly retirement savings deposits appropriate to current balance and goals.
3) never buy a boat, lol.

Dave Ramsey has great advice for financially illiterate folks and folks who are irresponsible by nature and need a simple path to steer away from temptation. Interestingly, Ramsey lost everything once and now he's doing fine. The simple soundbites sell better than the actual nuances of financial management, evaluating present and future value of money, etc. Dave Ramsey is rich because he knows that the simple soundbite sells, not because he doesn't take out loans.

Worded very well.

 

[Will_C]

I financed tractors and other purchases through my local small town bank before. I have also borrowed against a retirement plan-just a thought.

The 0% promotions have been discussed here many times. I bought Kubotas in 2009 and 2013. Both times my salesman told me there was cost for the 0%-told me I could sign a check or a loan application for the same amount, so I took the financing.

Just bought a L3560 2 months ago. Same salesman told me that I could take 0% financing or he could discount the price $700 more if I didn't use the 0%. I really didn't want to pay cash for the entire purchase, but I was only going to borrow around 14,000- $700 seemed a high cost to to get the 0, so I paid cash.

Will

 

[atsah]

Hey, I sure didn't mean to offend anyone. I'm just a normal person like I assume most of you on here are. I have a family a house and vehicles. I spent most of my life with debt. About 7 years ago I stumbled onto Dave Ramsey. we took his FPU class and it has changed our life. I don't sell anything for Dave, but I have coordinated several FPU classes and I see how it can change lives. Enough said. This will be my last post to this thread, and again if I offended anyone I am sorry.

Most people will have debt until they die, that's the way it is these days, my dad wouldn't finance anything, house, tractor, nothing, like a lot people that were born in the 30's and 40's.. I see nothing wrong with financing equipment at 0% for long periods of time, it free's up cash for other things and enables people to purchase things they need while they are still above ground. I have spent many hours listening to Ramsey, what he has to say is common sense and some of what he says is just plain foolishness..

 

[Diggin It]

Got a letter that my adjustable rate tractor loan has dropped to 2.49%. I was planning on making some extra payments to bring the principle down but now not so sure.

 

[Diggin It]

Thoughts on that extra payment thing?

Sure, it'd be nice to get rid of the loan, but that would still take a few years. With a low rate, is there any advantage to tossing them an extra $50-75/mo?