Neophyte buying a tractor needs help.

MicroPilot · Aug 20, 2004

( ... I would think you can buy it for cost plus $2k/$2.5k max, certainly if its a cash deal....)

I've seen/heard this for years, that you get a better deal using cash. Why? It shouldn't make any difference to the dealer, they get their money, it doesn't matter if I use cash, credit card, debit card, bank financing or whatever. The only way it would make any difference is if the dealer himself were doing the financing, and even then they are going to get their cash in the end, PLUS interest.

Bird · Aug 20, 2004

( it doesn't matter if I use cash, credit card, debit card, bank financing or whatever )

Yep, it does make a difference; at least in some cases. I doubt that any one person could completely explain because it's different with different dealers, manufacturers, financing companies, credit card companies, etc., but just for a very limited information:

1. Any company that takes credit cards has to pay the card issuer (bank) some percentage of each transaction (that percentage varies),
2. On a cash sale, the dealer gets his money right now; might be a few days otherwise. Now it would seem that such would not be a big deal, but I've known dealers of some products for which it really is a big deal,
3. On some products, especially cars, RVs, trucks, etc., the dealer may actually make more if you let him finance it because he gets a portion of the finance costs (this, too, varies and many dealers have multiple financing sources with different interest rates, different rules, etc.)
4. A cash deal does reduce the amount of paperwork required of the dealer.
5. And if the dealer can sell you insurance, extended warranties, or service policies, he makes a few dollars there, too.

So, in some cases you'll get a better deal for cash and in some cases, you will not.

KiotiJohn · Aug 21, 2004

( Any comments from some of the dealers???????? If it's something on the lot, and you can figure out what the dealer paid for it, I would think you can buy it for cost plus $2k/$2.5k max, certainly if its a cash deal.)
I just imagine ANY dealer would be overjoyed to recieve that much profit. I've know a few dealers that typically make $1000 on the sale. And that's supposed to pay for the assembly etc. There's more profit in ZTR mowers. John

Desertdog · Aug 21, 2004

Sounds like I should conduct my tractor shopping in Florida. The so called Kioti dealer I visited today was a bust. Did not have a single Kioti on his lot, not happy with corporate for slow pay on warranty work. He is moving to TYM tractors.

I get this feeling I'm destined for a Kioti. The name alone is appropriate since every night at sunset I can hear Kioti calls echoing through the canyon. Heck they crap in my yard. Couple this with the support their tractors receive in this forum and my inability to find a dealer in my hemisphere ... seems like fate.

While the LK3054 advertized in Ohio is attractive, by the time I put a backhoe on it I'm over $20K and I know I can get a new one with FEL & Hoe for under $20K (albeit 8+ hour drive). Back to the drawing board although I am now determined to get my fanny on an LK3054 before I make any decision.

I did move some dirt today on a JD 4300 HST with FEL&Hoe that was in my budget. 444 hours, started right up, FEL sagged a bit, then stopped, hoe worked fine although you can see where it was beat up a bit, cylinders weeping a little oil although rods were clean. In terms of size, it seemed to be around the upper limit I would want to go. Any comments on this machine would be appreciated.

Libertine · Aug 22, 2004

KiotiJohn:

I just imagine ANY dealer would be overjoyed to recieve that much profit. I've know a few dealers that typically make $1000 on the sale. And that's supposed to pay for the assembly etc. 

Maybe this is a "trade secret", but is there any source for "dealer cost" that we can find out about????? Re: that much profit I would think because the volume (number of units) is much less than say an auto dealer, the average unit profit would have to be higher. The cost to be in business is VERY high what with facilities, insurance, taxes, help, lawyers, etc. etc. etc. People don't realize what it costs to run a business.

JEH

Libertine · Aug 22, 2004

Bird:

Yep, it does make a difference; at least in some cases. I doubt that any one person could completely explain because it's different with different dealers, manufacturers, financing companies, credit card companies, etc., but just for a very limited information: . . . 

I realize there are various plus/minus Re: cash vs. credit (as you point out). The cost to a business for credit card rebates (to the issuer) from the seller is steep. Most consumers don't realize the person they are buying from has to pay 2%, 3% or more of the charged amount as a kickback to the credit card issuer - and the seller builds this cost into the price one way or other. Sometimes the dealer may, indeed, make more on certain credit deals. But the consumer ALWAYS pays more in the end, one way or another, even if they are too dim witted to see it. Also, I have noticed that when you borrow, they usually expect you to pay it back.

So when you buy on credit, you are mortgaging your future, You are, in effect, agreeing to labor away in the future for so many hours, days, weeks, years of your life just to get money to pay off something already gone. (Yes, I realize that many things, such as tractors, have decent resale value, but you are, at the least, laboring to pay off the depreciation hit - and, with "easy credit" the consumer will often spend more than he otherwise would if he paid cash). I recall some years ago pointing out to a friend with whom I often had lunch, and we traded who bought lunch, and when it was his turn he used a credit card, that the REALITY of what was happening is that he was taking out a bank loan to purchase an asset (food) that would literally be flushed down the toilet before he even got the bill. The residual value of the asset he borrowed money to buy (ie. the exrement) wasn't even saved for the compost pile.

The only time it seems worthwhile to borrow is when you KNOW where the money is coming from to pay it back, and the SOURCE of that money is from the the item you are going into debt for. In Desertdogs case, if he is, for reasonable certainty, going to be earning more from having the equipment it might be worthwhile to finance IF the yield is HIGHER than the cost. If this is the case, his $17k "budget" could easily be upgraded safely.

JEH

Libertine · Aug 22, 2004

Desertdog:

I did move some dirt today on a JD 4300 HST with FEL&Hoe that was in my budget. 444 hours, started right up, FEL sagged a bit, then stopped, hoe worked fine although you can see where it was beat up a bit, cylinders weeping a little oil although rods were clean. In terms of size, it seemed to be around the upper limit I would want to go. Any comments on this machine would be appreciated. 

I would check to make sure the BH/FEL & frame hasn't been bent. Leaky cylinders can be brought up to new easy enough. The biggy is the engine/trans. If it has been maintained, and you're getting good oil pressure, it should have many, many hours left on it. Why is it being sold with only 444 hours? That's really just "broke in". These things should go 1,000s hours without anything major. Set aside an additianal couple thousand for initial repair/service and sounds ok to me. Are there any anomolies with this particular model? You might check in the JD forum. Good luck.

JEH

Bird · Aug 22, 2004

( used a credit card, that the REALITY of what was happening is that he was taking out a bank loan to purchase an asset (food) )

It depends on how he handles his credit card payments. He might be paying a high interest rate for that loan. When we eat out, I always pay with a credit card (including the tip, in most cases), but I pay my credit card bills in full every month; never pay any interest. So, of course, the restaurant paid for my "bank loan". Now if they gave me a discount for cash, I'd probably pay cash, but for me the credit card is a convenience (don't have to carry much cash and seldom visit my bank in person) and provides a record of what I've spent. And I pay the credit card bill online so I don't have to write a check, buy a stamp, etc.

Desertdog · Aug 22, 2004

There is also the case of taking advantage of credit card benefits. My wife and I use our American Express whenever possible. There is no interest for this short term loan if paid in full at the end of the month ... and I get something very valuable in return. Namely Frequent Flyer miles. To send a family of 4 back east a couple times a year is expensive and I can pay for roughly 1/2 the cost simply by using my credit card. I believe these card holder incentives are why many of the retailers are paying 2% for card holder purchases (although AMEX has been charging this before FF programs existed).

I want to pay for the tractor in cash because I am actively trying to eliminate debt. Where I now reside the cost of living is very low, particularly compared to my previous digs (NYC area). If I can pay off the house and a car, I could live on 1/5 what I needed in the east coast just to break even. Considering the high resale value of branded tractors, if for some unforseen reason my business venture does not take off, I can get out without too much cost. I also do not have to worry about making x$/month to ensure I at least payoff the tractor bill. It allows me to pick and choose the jobs I want as I could look at paying off the cost of the tractor long term.

I want flexibility and a monthly nut reduces it with no more debt. It may not make sense to everyone, but it works for me.

From a pure business stand point I can't see how a tractor dealer would be able to stay in business making $`1,000 on a $17,000 sale. This roughs out to 5.88% margin - slightly better than investing AAA bonds. I would sell the dealership and put all my money in long term cd's. The car dealers get away with small margins simply due to volume .... that a tractor dealer will never achieve. Even if you make $2,500 on $17,000, you had better have a profitable service/part department.

Libertine - thanks for the insights on the JD 4300. I will conduct due dilligence.

sneaky_pete · Aug 22, 2004

( ( used a credit card, that the REALITY of what was happening is that he was taking out a bank loan to purchase an asset (food) )

It depends on how he handles his credit card payments. He might be paying a high interest rate for that loan. When we eat out, I always pay with a credit card (including the tip, in most cases), but I pay my credit card bills in full every month; never pay any interest. So, of course, the restaurant paid for my "bank loan". Now if they gave me a discount for cash, I'd probably pay cash, but for me the credit card is a convenience (don't have to carry much cash and seldom visit my bank in person) and provides a record of what I've spent. And I pay the credit card bill online so I don't have to write a check, buy a stamp, etc. )

Me too Bird, on all those points. I download all my credit card transactions every week, directly from the cc web sites (I use two - one for personal and one for business) into Quicken, so I always know what I owe when the bill comes. Not having to buy stamps to mail checks pretty much pays for the online service, not to mention the time saved from not having to write out checks.

When I recently bought a CUT, I took advantage of Kubota's 0% financing for three years. That's free money to me - lets me deploy my cash elsewhere while Kubota waits for theirs.

Pete