Kubota still offering 0 percent financing

[Hay Dude]

The difference here is that the lender is looking at their entire tranche of loans and how those loans as a group make money. If they make all loans at zero percent, the money has to come from somewhere else. In the real world of finance they may give 0% to 5-20% of their customers. The other customers, with worse credit, pay higher rates. The government tells lenders they have to keep their overall risk at X%. (It changes so that is why X rather than a fixed number). The bank can literally loan out more money by giving excellent credit customers a 0% loan. Many of those customers would pay cash otherwise and those numbers don't offset the riskier deals.

So yes, the bank is going to lose money on some deals, but that helps them make even more money on other deals. The concept is similar to loss- leaders in retail. The grocery store can afford to sell some things at less than cost to get customers in the door. They will make up the difference on other products.

Agree, but no bank could exist if ALL loans were 0%. That’s fairy tale stuff or socialism where the government buys down rates to 0 with taxpayer money.

 

[Torvy]

Agree, but no bank could exist if ALL loans were 0%. That’s fairy tale stuff or socialism where the government buys down rates to 0 with taxpayer money.

Agreed, no bank advertises 0% to all either. I am happy to use their money. I can always get 0% if they are offering.

Now that I have my house deal done, I can start looking with a little more urgency for a tractor.

 

[rScotty]

Your lack of understanding the difference between a Vanguard fund and an S&P indexed fund is the problem. Vanguard is just a company that sells investment products. An S&P fund uses the same 500 stocks that make up that index. Vanguard is just one company that offer that type of fund. Basically, the fund goes up and down with the broader market. Other funds have completely different makeups and goals. They can have more or less risk than an S&P fund and provide more or less income. Over time (5-7 years) the S&P has almost always produced 10% returns. So yes, I would 100% bet my house on that. The only way I lose would be if we descend into anarchy.

The beauty of an S&P fund is that there are no mistakes to make. They are only invested in those 500 stocks. It is buy and hold. They are not playing games with trying to chase peaks and troughs. They are spread across industries which mitigates risk.

Yep. What he said.... it is simply buy and hold. What you lose is instant access to your cash. What you gain is more of the same. I was going on 60 when it finally dawned on me how it works.

I've no clear idea of how we got into this discussion, but there's no secret magic to that type of widely based index fund. It does work. It can't help working because that is the way the world of money works. The downside is it takes time. The profit happens on its own schedule, not ours.

good luck out there, its a bit of a tar pit.
rScotty

 

[arrow]

Yep. What he said.... it is simply buy and hold. What you lose is instant access to your cash. What you gain is more of the same. I was going on 60 when it finally dawned on me how it works.

I've no clear idea of how we got into this discussion, but there's no secret magic to that type of widely based index fund. It does work. It can't help working because that is the way the world of money works. The downside is it takes time. The profit happens on its own schedule, not ours.

good luck out there, its a bit of a tar pit.
rScotty

"Your lack of understanding" is simply a tactic by the less endowed. So if you're a "what he said" follower of this guy, first attempt to denigrate then spew what you need to spew as if it's gospel. You Scotty seem more of a gentleman to simply tag along with arrogance.
His students must adore him if he is so arrogant w them as well.

It is mostly the companies themselves offering this as they have product to tag a price on that incorporates an interest calculation built into the pricing of the product.
If say Kubota company is offering 0% loans, that is their own financing company doing so.
Of course there are manufacturers who use banks for true percentage loans. I also realize that unions between banks and companies exist if the company is not doing its own holdings.
If such companies offering 0% are indeed in coo hoots with a bank who is doing the holding, you can rest assured that the bank has skin in that game directly from the manufacturer.

I have witnessed no advertising from a bank or credit union that has stated "borrow $10,000 with no interest for 84 months". I would need to be enlightened in that regard.
I have seen this with cars, tractors, furniture where actual goods were being traded.

 

[ljjhouser]

Don't think I will comment until I visit the library. When I saw the name of the thread I know we were in trouble???

 

[arrow]

Agreed, no bank advertises 0% to all either. I am happy to use their money. I can always get 0% if they are offering.

Now that I have my house deal done, I can start looking with a little more urgency for a tractor.

Oh I see.
It is of little wonder that you would bet your new house since you have no sentimental attachment as yet...
Also, what bank do you know of that is simply in the business of making money, offers 0% loans directly?

 

[jyoutz]

Oh I see.
It is of little wonder that you would bet your new house since you have no sentimental attachment as yet...
Also, what bank do you know of that is simply in the business of making money, offers 0% loans directly?

My credit union offers extremely low interest loans for new vehicles: 1.9%

 

[arrow]

My credit union offers extremely low interest loans for new vehicles: 1.9%

Yeah, so does mine. 1.7% or they did 3 months ago when I purchased the wife's new CX 5.
I am not thinking they would offer me what I financed for nothing however.

Jyou, you're an old timer here as i am. Nice to see some of the veterans still around.

 

[rScotty]

Yeah, so does mine. 1.7% or they did 3 months ago when I purchased the wife's new CX 5.
I am not thinking they would offer me what I financed for nothing however.

Jyou, you're an old timer here as i am. Nice to see some of the veterans still around.

In that case, you don't even care if the bank offers to finance you for nothing. You can do better than nothing! Because at a 1.7% loan today, anyone with the price of a new CX 5 in the bank - for example in a retirement account - can create their own 0% loan.

my local bank just sent me an bulk mail email advertisement saying they had raised their interest rate on savings accounts to 2.1%.

So by using only local institutions and staying with FDIC insured accountsm, suppose we were to shift enough money to cover the CX 5 loan from something like a retirement account over to that bank's savings account. Now we can take the CX 5 loan at 1.7%, cover that with a bank account paying 2.1%, and not only write our own zero percent loan.... we are still making 0.4% interest.

This is exactly how financial bubbles happen and then burst.

But until they do, if we widen that type of dollar shuffling out to include international banking & government incentives - we can see how Kubota might be able to do something similar to offer a real 0% financing on their tractors.

rScotty

 

[arrow]

The trouble w this plan scotty is that Kubota has a propensity of offering 0% all of the time. They were doing this even in 2012 when i was looking for a new machine. Back then I could not equate what i was looking at to the price they were demanding. I was saying "this is a $17,500 machine. Where are they getting $21,500 from?". I asked "what's the cash price" and was told "$21K". That was laughable.
Not 5 years before, this was a $12,500 tractor but thats when steel prices went crazy. Besides, we all are well aware that Kubota isn't shuffling anything.
They are simply putting their finance charge within the purchase price and calling it a 0% loan.
In reality, they are covered legally speaking to do such but it is still an around the bend tactic in my mind.
I will say it is an ingenious plan because it gives the "appearances" that everyone is a winner.

As far as my credit union goes, they average about a .17 to .5 roi on savings and checking. They do offer over 2% as incentive for about 6 months on new checking accounts, then it disappears.

Another old-timer eh Scotty. Do you also wonder where the time went?

 

[Cahaba Valley Farm]

They are simply putting their finance charge within the purchase price and calling it a 0% loan.
In reality, they are covered legally speaking to do such but it is still an around the bend tactic in my mind.
I will say it is an ingenious plan because it gives the "appearances" that everyone is a winner.

I will add to this the finance charge to each customer is determined by the time horizon they are willing to approve the customer for. When I was crunching the numbers a few months ago a 60 month loan from Kubota for what I was purchasing came out to be somewhere around 4% interest over that 5 year period. That % would obviously drop the longer time horizon you were approved for.

I also liked what you pointed out when you said the following:

I have witnessed no advertising from a bank or credit union that has stated "borrow $10,000 with no interest for 84 months". I would need to be enlightened in that regard.
I have seen this with cars, tractors, furniture where actual goods were being traded.

No, I have never seen that either. And you won't. That was a great point made Arrow.

 

[jyoutz]

Yeah, so does mine. 1.7% or they did 3 months ago when I purchased the wife's new CX 5.
I am not thinking they would offer me what I financed for nothing however.

Jyou, you're an old timer here as i am. Nice to see some of the veterans still around.

Yeah, I joined in 2000, was active for years, then became inactive. When I decided to upgrade my tractor, I decided it was time to become active again. Hello to a fellow old-timer.

 

[rScotty]

OK to all you 0% non-believers. I don't know exactly what or how Kubota does its financing and forgive me if I doubt that anyone of us actually knows.

One thing is sure: People tend to believe whatever makes them most comfortable, regardless of whether it is true or not. Nothing wrong with that, either. It makes the world interesting.

But do yourself a favor and keep in mind that every investment business big and small has people whose job is simply to make sure that their business investments return more than their loans cost them. They can accept some negatives, but overall they need to stay positive. Banks make a business out of doing nothing else but that.

It is simple to include some zero percent loans in that mix in a way that costs the company nothing. I'm not saying that Kubota does that; I don't know.
But it wouldn't surprise me to find that they do.

Balancing income and expenses is such a common practice that lots of ordinary people do it with household budgets as well as their savings.....so why would Kubota be any different?

If you think it cannot be done, it may be worth your while to look again.

rScotty

 

[arrow]

No Scotty. It is quite easy to see what Kubota is doing. They are inflating their purchase price to cover their financing scheme of 0%.
Let's not over think this. You're mixing two different ideas. It is quite fine if you don't believe what I'm stating. I am simply "relaying" from my experience and background knowledge.

The company I work for (Mahindra) does the same thing. I've seen this with my own eyes. A tractor that was say $22K one year, sustains a price increase of $3500 within 6 months or the next model year.
It's the same tractor with a different number variation such as 2816, 3016, 1526,1626, etc. These are all the same tractor just about with a smattering of cosmetic alterations and built by Mitsubishi.
What's different other than the model number: Next to nothing except 0% has been added to the sales scheme at different points on selected tractors. They have it covered

The only difference between Kubota and Mahindra is Kubota sustains their 0% for years while Mahindra seems to go on and off with the scheme.

 

[rScotty]

SNIP

The only difference between Kubota and Mahindra is Kubota sustains their 0% for years while Mahindra seems to go on and off with the scheme.

Arrow, I'm glad you posted that. It's a difference could explain everything. One really basic interpretation would be that that Kubota has accummulated enough investments that they are able to take a longer view. They no longer have to go on and off with the scheme.
If you look back over our discussion here, you'll see that the size of the account is always the goal that allows a person - or a firm - to ride over short downturns or zero percent income and still stay self-supporting. Pension funds all do that.

It's the same reason that family trust funds after they reach a certain size can carry some family members along who are users rather than contributors. There is a size where it just doesn't matter.

It doesn't surprise me that Kubota could reach that point before Mahindra. Ford Motor Co. reached that point years ago.

I appreciate that you are in a position to give us some insights. But I don't think that because Mahindra does it a certain way that necessarily says Kubota does it the same.

rScotty

 

[Hay Dude]

No Scotty. It is quite easy to see what Kubota is doing. They are inflating their purchase price to cover their financing scheme of 0%.
Let's not over think this. You're mixing two different ideas. It is quite fine if you don't believe what I'm stating. I am simply "relaying" from my experience and background knowledge.

The company I work for (Mahindra) does the same thing. I've seen this with my own eyes. A tractor that was say $22K one year, sustains a price increase of $3500 within 6 months or the next model year.
It's the same tractor with a different number variation such as 2816, 3016, 1526,1626, etc. These are all the same tractor just about with a smattering of cosmetic alterations and built by Mitsubishi.
What's different other than the model number: Next to nothing except 0% has been added to the sales scheme at different points on selected tractors. They have it covered

The only difference between Kubota and Mahindra is Kubota sustains their 0% for years while Mahindra seems to go on and off with the scheme.

Thanks for adding some sanity to the “0% financing” scheme discussion. I have never believed 0% financing is true. It’s “(pay a higher price and we will give you) 0% financing”.

 

[Torvy]

Oh I see.
It is of little wonder that you would bet your new house since you have no sentimental attachment as yet...
Also, what bank do you know of that is simply in the business of making money, offers 0% loans directly?

Heck, I'll bet my current house. I worked in banking for nearly 30 years. Both top 10 U.S. banks. Both had deals. Auto loans are not typically direct, though there are some that do direct loans. Banks make the offer. Dealerships typically have up to 2% more they can add in. Dealerships make money on that. The trick for them is if they push on a super prime customer, they will walk. The bank can encourage the dealer to remain at 0% on those customers and make it their margin on others.

I am sorry if I sound arrogant. If you would open your mind to our knowledge of banking and finance, like I open my mind to your knowledge of logging, perhaps it would not sound so much like arrogance. I come here to learn about what I don't know in exchange for sharing what I know. I have no interest in you or anyone else here being taken advantage of.

 

[jyoutz]

Thanks for adding some sanity to the “0% financing” scheme discussion. I have never believed 0% financing is true. It’s “(pay a higher price and we will give you) 0% financing”.

Except that the cash discount is negligible. So the higher price is just part of buying Kubota. Periodically they run better cash discounts. I think another part of the 0% financing is that the buyer must buy KTAC insurance during the finance period. And of course the financial odds are always with the insurance company.

 

[Torvy]

I will add to this the finance charge to each customer is determined by the time horizon they are willing to approve the customer for. When I was crunching the numbers a few months ago a 60 month loan from Kubota for what I was purchasing came out to be somewhere around 4% interest over that 5 year period. That % would obviously drop the longer time horizon you were approved for.

I also liked what you pointed out when you said the following:

No, I have never seen that either. And you won't. That was a great point made Arrow.

Nearly every bank offers 0% loans. Use a credit card. You use the banks cash and pay nothing for 30-45 days. As long as you pay in full, you pay nothing extra.

The time horizon on loans actually varies. Sometimes you get a better rate with shorter terms, less often with longer terms, but it does happen. Check Bankrate.

 

[Hay Dude]

Except that the cash discount is negligible. So the higher price is just part of buying Kubota. Periodically they run better cash discounts. I think another part of the 0% financing is that the buyer must buy KTAC insurance during the finance period. And of course the financial odds are always with the insurance company.

If one is paying a higher price and has to buy their overpriced insurance, then your vaunted “0%” Kubota financing is just a scheme.
KTAC insurance was much more expensive than what my insurance company charges when it was offered to me, so they are making even more off their 0% buyers forced into accepting it. I have bought a new M-7040, L-39 and M126X over the last 20 years and their insurance offer was significantly higher.