Why buy new

[rScotty]

A few folks have said in this thread they can't find 2% interest. Let me help you, American Express Bank (the arm that basically funds the purchases people make on their CC's) offer 2% for a small initial deposit, not an intro rate, FDIC insured. So that's your opportunity cost (you can actually get a little higher than that today, maybe 2.5% max with 0 risk; IE, FDIC insured). You give up that 2% if you pay cash for anything. Can you finance for less than that? Depends on the company. But, if the cash discount is less than 2%, and/or the APR is under 2%, you should finance, 100% of the time, and keep the money in the bank/stock market/bonds/etc.

Whenever I buy something new, it's a simple calculation to figure out if I should finance it or not. A few years back, almost everything should be financed because interest rates were so low. I took out 84 month+ loans on things that are making me a lot of money today because the money I would have spent is still sitting in my bank account. If it's 0% and there's no cash discount, the only question that should come next is "how long can I finance it for at 0%". 3 years, 5 years? Shoot, give me a 100 year 0% loan and I'll buy a 100HP skid and a matching excavator today (are you listening Kubota? Please feel free to reach me by PM!!).

Listen, dealers and OEMs do stupid things sometimes. My F150 is leased because, at the time, Ford was offering an effective .5% (yes, you're reading that right) on leases but 1.9% on financing. Yeah, that's just stupid, a lease is financing something with a put option (a guaranteed right to return it at a predetermined price and time), it should ALWAYS cost more because it's a safer product for the consumer (pay cash, drive the truck off the lot and it's stolen, you're in a world of hurt.. If it's leased, all leases have gap protection, you might not even make your first payment, just go back and get another one). However, my wife's SUV was financed (.9%) because they offered no cash discount and lease rates were higher. And my tractor (Kioti NX6010) I paid cash for because their low interest financing would mean I had to pay for the loader (5K) and their normal interest financing was stupid high (5.9% at the time, IIRC). Leasing was not an option.

There's no "right answer". All these financial products have a place, and all of them can be great deals or horrible ones. 0% financing for 3 years on a 30K car where you paid 5K more than the guy paying cash? Terrible deal. Same financing where you got the cash price? Great deal. With car dealers, always, always start off with "I'm looking at paying cash, but, if you can offer me good financing, I'll consider it". Get the cash price, compare that to something like KBB or invoice to see where you are and then get the finance details (APR for buying, money factor and residual for leasing).

My truck was actually a really silly lease, 2 years, 24K miles. I fully intended to buy this truck when I walked into the dealership, but, hey, if you're willing to float me 65K for 2 years for basically nothing, plus take the risk of theft, totaling the truck, having major problems that lead me to want another vehicle?? Well, sure, I'm going to do that and you (Ford) are kind of stupid for making that deal but who am I to complain?

That's an interesting take; thanks for posting. But what really fascinates me is that here it is again - more evidence that the financial part of tractor ownership hold more interest for more people than the technical and mechanical part- with actually using it being sandwiched somewhere inbetween. This seems to be a generational shift; those priorities used to be exactly reversed.

I don't see the shift as either good or bad, just another example of how the world has changed..... Although here's a thought: Technical education costs nothing and is available to everyone; there is no exclusivity in mechanical knowledge. Maybe that is part of why there is a declining interest in technical and mechanical things. Whatever the reason, tech topics have become less interesting and less valued in our affluent country today - while financial matters are very popular.
rScotty

 

[Overtaxed]

That's an interesting take; thanks for posting. But what really fascinates me is that here it is again - more evidence that the financial part of tractor ownership hold more interest for more people than the technical and mechanical part- with actually using it being sandwiched somewhere inbetween. This seems to be a generational shift; those priorities used to be exactly reversed.

I don't see the shift as either good or bad, just another example of how the world has changed..... Although here's a thought: Technical education costs nothing and is available to everyone; there is no exclusivity in mechanical knowledge. Maybe that is part of why there is a declining interest in technical and mechanical things. Whatever the reason, tech topics have become less interesting and less valued in our affluent country today - while financial matters are very popular.
rScotty

I think some of it comes down to most tractors available for sale today new are "very good" to "great" machines. It's not like JD is making a tractor that lasts 10,000 hours and Kubota is making one that lasts 500 hours. They are all good (or almost all are). So we're kind of down to comparing tiny little things between the machines, at least in the small/mid sized range (no idea about the very high end stuff). So, if all the products are pretty darn good, then things like the financing aspects become more interesting. If one was so much clearly better, well then, we'd spend a lot more time talking about that difference than the difference in interest rates.

 

[Tennsawdust]

I think some of it comes down to most tractors available for sale today new are "very good" to "great" machines. It's not like JD is making a tractor that lasts 10,000 hours and Kubota is making one that lasts 500 hours. They are all good (or almost all are). So we're kind of down to comparing tiny little things between the machines, at least in the small/mid sized range (no idea about the very high end stuff). So, if all the products are pretty darn good, then things like the financing aspects become more interesting. If one was so much clearly better, well then, we'd spend a lot more time talking about that difference than the difference in interest rates.

Even if it isn't a "very good" to "great" machine there is still a strong financial element to the decision. As long as it wasn't a "terrible" machine where you were concerned that it would not be capable of performing the work the question would be whether to buy an "acceptable" tractor at a bargain price, verses a "desirable" tractor at a higher price. So do you buy the used tractor that may not be exactly what you want or do you buy a new tractor that checks all the boxes? Obviously that depends in large part on how you intend to pay for it. If you happen to have the cash to pay for either option then it is simply a matter of deciding how much you are willing to spend. If financing is involved (as it is for most of us), then your options may be more limited.

I once bought a van. The dealer had three units that had just come off a 1 year lease. They were priced 25% lower than the equivalent new van (that was in line with market value). The problem was that they couldn't be financed as new and the best used vehicle rate at that time was 8.9%. On the other hand I could get 0% financing on a better equipped new van, being that it was model year closeout. I ended up with a top trim model for $2 more per month than one of the used vans was going to cost. For $120 over the life of the loan I got leather and power everything AND an additional year of service life. Financing can play a big part in the decision!

The only vehicle I ever leased was because at the time new financing had promo rates of 5.9 to 7.9% and Toyota Motor Credit was offering a lease rate of 0.9%. It worked out to be substantially less expensive to lease it then buy it out at the end. As it turned out that was a lucky move. Three transmissions, two ECUs, a power steering pump, a host of electrical issues and 34,000 miles later I was able to toss the dealer the keys and walk away from that lemon. In addition, mine wasn't the only one of that model that had issues so the resale value had plummeted. The residual used for the lease was substantially higher than what I could have gotten if I had tried to sell that heap. I dodged a big bullet with that one. In my current situation I couldn't do a lease because of the mileage I rack up, but it did work out that one time.

 

[CMV]

People need to be aware and it's confusing with different finance options. Every brand's finance arm is different. Rebates and other promos work differently too. So that's something buyers need to compare & understand just as much as different machine capabilities or features. Since there is a lot of overlap you could easily be in a situation where choice A, B, or C meet your needs and have offsetting pros/cons. So price becomes a huge separator among them. But their MSRP and then dealer quotes could still leave them basically tied. So not understanding that Dealer A was quoting you cash price and at time of signing papers he's gonna want more because you're financing, there is a significant difference in cash price discount with Dealer B, and you no longer qualify for an additional rebate choosing a different payment method from Dealer C could cost someone a lot of $$$. If they ultimately got the machine they wanted and are happy with it, that's great. But if it came down to price as the separator and you'd be equally happy with A, B, or C understanding all the details would put B way ahead in my example.

And others don't realize or consider there are more alternatives than wad of cash or dealer finance. In my case, I paid half cash, financed remainder thru my bank. To Kioti - since I wasn't using their 0% finance - it was cash price discount. Not using 0% meant i qualified for free loader rebate (may have either way, but don't think you could get both at the time).

As noted previously on a Kubota L example maybe save $900 paying cash. Those were my results too when getting Kubota quotes - there really was no/not much cash discount - about $600 in my case. Kioti on the other hand was a good 6% difference in price taking their 0% offer or cash price. So would be very easy to say it's stupid to take 0% offer or it's stupid NOT to take 0% offer. Just depends on the details. Had I taken 0% on the Kioti I would have paid 6% more AND not had free loader rebate. I did however lose the multiple implements rebate which is insignificant since Kioti doesn't count loader as one like Kubota and the rebate is less. But at the end of the transaction, after looking at all the factors, 0% finance would have me paying a good 10% more overall (and that's including the interest to my bank for the half I borrowed).

However, I couldn't tell someone looking at buying a new JD "you're an idiot if you take their 0% finance deal". No idea how their financing, promos, or rebates work. I couldn't even say that to someone buying a new Kioti today - the promotions change, interest rates change. But it is very sound advice to make sure you fully understand what you are being quoted, what differences there may be in final price arranging your own financing or writing a check, and all the rebates/promos in play and how they might stack or exclude one another. That's more important to me than something like 3pt lift arm max capacity or the dealer will weld some grab hooks on the bucket for free....

Another huge one that some people miss is seeing if there is a way to avoid state sales tax if that applies. In my case (NC) I was able to apply for a conditional farm exemption saving me 7%. That's huge. Buying used, buying out of state (not gonna argue the legality/morality there), farm exemption, whatever - that is also something worth exploring if your purchase would be subject to sales tax.

 

[shooterdon]

A few folks have said in this thread they can't find 2% interest. Let me help you, American Express Bank (the arm that basically funds the purchases people make on their CC's) offer 2% for a small initial deposit, not an intro rate, FDIC insured. So that's your opportunity cost (you can actually get a little higher than that today, maybe 2.5% max with 0 risk; IE, FDIC insured). You give up that 2% if you pay cash for anything. Can you finance for less than that? Depends on the company. But, if the cash discount is less than 2%, and/or the APR is under 2%, you should finance, 100% of the time, and keep the money in the bank/stock market/bonds/etc.

Whenever I buy something new, it's a simple calculation to figure out if I should finance it or not. A few years back, almost everything should be financed because interest rates were so low. I took out 84 month+ loans on things that are making me a lot of money today because the money I would have spent is still sitting in my bank account. If it's 0% and there's no cash discount, the only question that should come next is "how long can I finance it for at 0%". 3 years, 5 years? Shoot, give me a 100 year 0% loan and I'll buy a 100HP skid and a matching excavator today (are you listening Kubota? Please feel free to reach me by PM!!).

Listen, dealers and OEMs do stupid things sometimes. My F150 is leased because, at the time, Ford was offering an effective .5% (yes, you're reading that right) on leases but 1.9% on financing. Yeah, that's just stupid, a lease is financing something with a put option (a guaranteed right to return it at a predetermined price and time), it should ALWAYS cost more because it's a safer product for the consumer (pay cash, drive the truck off the lot and it's stolen, you're in a world of hurt.. If it's leased, all leases have gap protection, you might not even make your first payment, just go back and get another one). However, my wife's SUV was financed (.9%) because they offered no cash discount and lease rates were higher. And my tractor (Kioti NX6010) I paid cash for because their low interest financing would mean I had to pay for the loader (5K) and their normal interest financing was stupid high (5.9% at the time, IIRC). Leasing was not an option.

There's no "right answer". All these financial products have a place, and all of them can be great deals or horrible ones. 0% financing for 3 years on a 30K car where you paid 5K more than the guy paying cash? Terrible deal. Same financing where you got the cash price? Great deal. With car dealers, always, always start off with "I'm looking at paying cash, but, if you can offer me good financing, I'll consider it". Get the cash price, compare that to something like KBB or invoice to see where you are and then get the finance details (APR for buying, money factor and residual for leasing).

My truck was actually a really silly lease, 2 years, 24K miles. I fully intended to buy this truck when I walked into the dealership, but, hey, if you're willing to float me 65K for 2 years for basically nothing, plus take the risk of theft, totaling the truck, having major problems that lead me to want another vehicle?? Well, sure, I'm going to do that and you (Ford) are kind of stupid for making that deal but who am I to complain?

The most intelligent and useful answer in pages of junk with people getting angry.

Do whatever YOU think is best for YOU.

One other comment. If you are buying a "toy" that does not get used much, it is far different than someone who needs a machine to save a lot of money on things that MUST get done. If you can save $5k or more in a short time, even a 10% interest rate may make sense rather than saving years for a machine....assuming there is an ongoing need for a tractor. Unlike vehicles, these things do not depreciate much so that factors into it as well.

I have paid cash for every vehicle I have owned for the last 35 years. But I would finance a tractor if it made sense.

 

[Rmart30]

"Why buy used...."

That's EASY.
Some of us don't want SEVEN YEARS of payments!
Some of us don't want DPF, or other gagetry.
Some of us don't want Regen systems.
Some of us don't want electronic tractor garbage up the whazoo.
Some of us don't even want a factory cup holder.
Some of us do want to be able to fix it ourselves when it breaks.

To each his own.

I agree with that. My Massey 265 will still be going strong long after some of these newer DPF and DEF machines have given up the ghost.
I went ahead in 2013 and bought a new L4600HST Kubota.. I bit the bullet on it before DPF came the next year knowing this would be a tractor I owned for the rest of my life.
Now in 2019 if I was looking for another tractor I would buy a used 10 yr or older 55-70 hp over a new one without question. it may take some looking but there are deals out there and not all machines have been abused.

 

[kenmac]

I don't know why a post ''Why Buy New'' ? Turned into a finance vs pay cash.

You can buy new and pay cash, or you can buy new and finance.

The poster didn't ask whether to finance ,or pay cash.

 

[ovrszd]

I don't know why a post ''Why Buy New'' ? Turned into a finance vs pay cash.

You can buy new and pay cash, or you can buy new and finance.

The poster didn't ask whether to finance ,or pay cash.

Because as I and others have mentioned, understanding the group in this discussion, most decisions are based on financing. A lesser concern is the tractor itself.

 

[kenmac]

Reasons I can think of as to why buy new is.
1- If you can't find what you want used.
2- you want the latest and greatest features in a new tractor.
3- You can't afford to buy used for cash, and need to finance new at a better rate than used.
4- You can't work on the tractor yourself, or afford to pay someone to work on the tractor if something fails.

I really can't think of any reason to buy new

 

[woolyAcres]

And I don't know the answer. I've wondered about it myself. In fact, this obsession with buying new things is one of the strange generational changes that perplexes us older guys about the younger generation. We wonder about it a lot.

There's certainly no denying that people nowdays prefer to look at buying new before looking at buying used anything..... even houses.

One thing that forums like this have have taught us is that it probably isn't because new tractors are more reliable than used ones. Judging from the messages on TBN and several other forums, there are many more messages about problems with new tractors than with used ones.

So If the reason isn't reliability, my guess is that the popularity of buying new comes from a combination of wanting something today rather than tomorrow, not having mechanical skills, and already being trapped into buying on credit.

But is it really that simple? I'd sure like to hear some opinions.
thanks, rScotty

@rScotty- I'm early 40s and don't know if I belong in the 'old fart' camp on the young whipersnappers, not for me to decide .

In the last year I've purchased both a new tractor as well as a used one. And here's why:
Used - Antonio Carraro TTR4400 - this style tractor was a really good fit for our property (hilly, woods, as well as some pasture area with lots of trees). I spent months watching for something used, contacted the US importer inquiring about new, and contacted a few current owners to get their impressions of the machine. Turns out one of those fellows was actually looking to sell his unit. I ended up getting a 2008 model with about 800 hours. Not babied but not abused either. In this case I didn't want to spend the kind of money needed on a new one (~$33k) and I was able to find a used one from a person I trusted for well less than 1/2 that. I was also able to sell my YM240D for a more than I paid for it (after re-doing the hydraulics) so I had a bit of money to help cover the cost.

Kioti RX7320 - the farm needed a utility tractor that could do 'real' farm work and the old Case 1490 just needed to much work to get it going each time. The real farmer (father) has the time and knowledge but not the energy to keep it fixed and running. The young farmers (myself and wife) don't have the mechanical ability (her or me) or the time (I've got full-time job plus part-time work and wife has a part time job too) to keep something like that working. And I wanted my father to have something easy and comfortable to use in his 'golden' years and to make sure the farm work can get done when the weather cooperates and when I have the time (instead of fixing something first). We shopped for over a year for a utility tractor. The best I could find was a local non-dealer that has been in business for decades. He had a used NH 4.75 with 800 hours for $37.5k. I was tempted but it came with no warranty. I ended up with the RX7320; some specs on the Kioti are a bit better (hydraulic shuttle is nicer in the Kioti), lift capacities are a bit better on the Kioti as well, but the NH was a Tier4 interim so didn't have all the emissions stuff mine does, and it matches the color of one of our other tractors. In the end I felt like the 6 year warranty I got was worth more than the $2000 additional cost. The Kioti dealer has been around a long time and is capable of doing any needed work on it.

So far so good but only time will tell. So the answer for me was when I was able to find something I trusted and felt was worth the money I bought used and when the savings on used wasn't significant enough to go without a warranty I went new. I'm fortunate to have both machine paid off so financing didn't play any role for me.