Financing 0 % financing

[IHUNT]

What is the advantage of 0% financing for 36 months. If you have all the money to buy a tractor than I see its advantage by keeping your money working for you and then after 3 years pay it off. But if you don't have all the money to buy your tractor then i see that you have to finance at a certain % for so many years. This keeps your payment down. In my case I am thining of going with 4.99% at 48 months. Other people tell me that I am nuts and should go with the 0%. The only thing I see that doing is increasing the payment. Could someone please clear me up with this.
Chris

 

[thatguy]

I am betting you will get very different (and extreme) different opinions on this.. I thought (there i go doing that again) that the 0% for 36 mths had to be equal payments over the term - not no payments and then pay off at the last payment..

A while back on ar15.com there was a discussion on whether buying a house was a good investment or not - I had always heard it was, but some ppl did the math to prove it was a poor investment..

Brian

 

[cheesehead]

Using a loan calculator shows that a $28000 loan with a 4.99% interest rate and 48 months would be $644.69/month payments and cost $2924.28 in interest. A $28000 loan with 0% interest and 36 months would be $777.78/month and would cost nothing in interest. If you can afford the difference in payment the almost $3K in interest and faster ownership of the tractor are the deciding factors. If you can't afford the higher payment, the penalty is $3K and one more year of payments. Either plan is better than bank financing on the same tractor.

If you already have the money the 0% financing for 36 months is a great deal. You could keep the money in the bank and earn interest while Kubota finances the tractor at 0%.

 

[crbr]

Using a loan calculator shows that a $28000 loan with a 4.99% interest rate and 48 months would be $644.69/month payments and cost $2924.28 in interest. A $28000 loan with 0% interest and 36 months would be $777.78/month and would cost nothing in interest. If you can afford the difference in payment the almost $3K in interest and faster ownership of the tractor are the deciding factors. If you can't afford the higher payment, the penalty is $3K and one more year of payments. Either plan is better than bank financing on the same tractor.

If you already have the money the 0% financing for 36 months is a great deal. You could keep the money in the bank and earn interest while Kubota finances the tractor at 0%.

Nuff said...

Free for 36 is the way to go, in my opinion. They even have on-line electronic payment set up.

 

[ahenthus]

I went with 0% Wednesday. It was the way to go for me. I've got me a new B7610 w/FEL and 60" mmm and don't have anything out of pocket until June 1st. Man, this is a great country. I can keep the decreasing principle working for me for the next 3 yrs. The way I look at it is that it reduces the selling price of the tractor. Maybe there's an accountant out there that can chime in and calculate the amount saved. The drive out price was right at $15K. The fact you have to take into consideration that there will be a decreasing balance for a 3 yr period and yada, yada, yada just hurts my head to think about. I would, however, like to know approximately how much I saved.

 

[archerynut]

You can also think about it in a different way. The dollar that you spend on that tractor today is worth less in the future. Let me explain, the dollar you spend now is worth a dollar. The dollar than you spend 3 years from now is worth less due to inflation. If there is a 3% inflation rate then the dollar you spend 3 years from now is worth closer to $0.91 cents. So all things being the same and interest rates and cost of living increases the dollar you spend three years from now will be worth less, or you will have more dollars.

 

[b33b]

As Cheesehead points out, you can buy a 28,000 tractor for 28,000 over three years or 30,900 over four years. The real question is if the higher payment is worth the lower cost.

Yes, the present value of a dollar may be worth more now than in the future and you should pay with the cheaper, future dollar but that is more meaningful over a longer mortgage period and not the shorter tractor loan.

Or you could have put that present dollar into Deere or Case/New Holland stock earlier this year and have it worth much more now than it was back then.

So it comes down to what is the best use of your money. It's not as if you don't have to eventually pay the 133 month difference. For me, I do not want to not spend the 2900 extra for interest.

Cal

 

[kaferhaus]

There are zero downsides to the 0% option, and at least one for all the other options.

Take the cash, put into a money market account.... if you account for the interest savings, + the earnings on that investment over 3 years (should easily net over 15% more likely 20%) and account for the inflationary cost of money over time.... at $30,000 loan (if you invest the cash) will end up costing you around $20,000.... so you saved $10 grand on that tractor...

Now if you don't have the cash..... it's still a great deal..... save approx $3,000 on the interest.

Never pay cash when you can use the other guys money for free....

 

[woodchuckie]

When I bought my tractor and equipment at 0% three years ago I had to pay about four thousand down if I remember correctly and the monthly payments were 337.00. The amount down was based on the finacial information I gave them. I believe I could have gotten it lower but I had saved some money for a tractor and didn't mind lowering the payments like that.

 

[Tom59]

The Inflation Calculator

You only put down enough to keep your payments where its feasible. Especially if you don't have the full amount laying around. Not so sure about the 10k savings on 30k tractor , but its significant none the less.

If you got 5% interest over three yrs that not 15% its 9% after tax. Nevermind the interest you would have paid @4.99%. If you need to keep the payments down then wait till you have the coin. This would be what papi calls throwing good money after bad if you use the 4.99% - 48 option.

0-36 is a great way to go some even have 0-60 months iirc.
...loan should never IMHO be longer than the warranty.

If you have the full bounty there are several ways to go. Paying interest ain't one of them. Nevermind its hard to have a pre-payment penalty on 0% interest.

 

[kaferhaus]

The $10,000 figure is correct.

30,000 loan at 4.99%

Interest = $3120.00

Return on money market investment at 7% (easily done)

Investment return = $4464.00

Inflation (loss of your money's value over time due to increased costs) 3% annually.

Inflation = $3600.00

Cost of money over time in true dollars = $11,184.00

Obviously this only works IF you have the cash and don't invest it.

If you don't have the cash, subtract the investment losses and that's the cost of your money.

Even at the 5% rate, if you have the cash, taking the loan is the way to go IF you invest the cash.

 

[crazyal]

It all depends on what you can afford. If you don't have the extra money for the 3 year no interest then it's not an option. You'll either have to go with the 4 year (or longer) or save up and hope Kubota (or whoever) offers it again when you can afford the 0% intrest payments. That $2924.28 is about $2 a day. Is the $133.09 less a month you'll pay but the extra year you'll be paying it worth it? Only you can answer that but don't forget the quality of life factor too. That $133 savings could be spent elsewhere for some other form of enjoyment.

 

[GaryCrowell]

The
Return on money market investment at 7% (easily done)

I'd like to know where there's a money market account paying 7%. In recent years the stock market would usually yield 7%, but you've got the risk of losing that much or more to go along with it. The highest CD I've seen over the last couple of years was 5.5.

I'm not trying to be a jerk, but I often see folks making claims that they can earn high interest rates with no risk. Maybe they know something I don't, but I haven't seen it. What are the basis of these claims?

 

[Turbys_1700]

Of anyone who has paid cash in lieu of the 0% financing, has anyone ever recieved a discount on the purchase price of the tractor? I would think that a substantial discount would / could apply to cash purchases if the dealer has to participate in the low financing option.

 

[witel]

Of anyone who has paid cash in lieu of the 0% financing, has anyone ever recieved a discount on the purchase price of the tractor? I would think that a substantial discount would / could apply to cash purchases if the dealer has to participate in the low financing option.

Kubota offers some instant rebates. I've noticed that the rebate amount is less and less each quarter when they update the site. For instance, the rebate for the L39 (that I've been looking at) was $1500 last quarter, and is half that at $750 this quarter.

 

[riptides]

Of anyone who has paid cash in lieu of the 0% financing, has anyone ever recieved a discount on the purchase price of the tractor? I would think that a substantial discount would / could apply to cash purchases if the dealer has to participate in the low financing option.

I always ask for discounts on cash first when starting the negotiations
on pricing. These past few years with 0 percent, it was a mute point with me.


Some dealers deal, others don't, cash maked no difference to the sellers I bought from. But, like I said, I always bring it up.

-Mike Z.

 

[N80]

Most dealers, especially car dealers, don't give a rip about someone paying cash up front since most dealers are doing the financing and making their money that way.

I take a totally opposite approach. I deal based on the the sticker price only. They moan and groan and act like you are killing them, but they go back to the finance manager who lowers the sticker price but happily jacks the interest rate through the roof.

The last truck I bought I walked out of the dealer with an interest rate of 10%!!!

Of course as soon as I got home I re-financed with USAA at about 4%.

The dealer called back about a month later wondering if we weren't happy with their financing!

 

[kcook]

Most dealers, especially car dealers, don't give a rip about someone paying cash up front since most dealers are doing the financing and making their money that way.

I take a totally opposite approach. I deal based on the the sticker price only. They moan and groan and act like you are killing them, but they go back to the finance manager who lowers the sticker price but happily jacks the interest rate through the roof.

The last truck I bought I walked out of the dealer with an interest rate of 10%!!!

Of course as soon as I got home I re-financed with USAA at about 4%.

The dealer called back about a month later wondering if we weren't happy with their financing!

I agree about Financing, I have also been told some banks will give a kick back if they can get the dealers to sell higher interest rates.

KC

 

[N80]

I'd like to know where there's a money market account paying 7%.

Bingo. If there is one, let's don't keep it a secret! I'll cash out my 401K for money markets!

I did the 0% on my L4400. Put about 1/3 down to get payments reasonable. Paid for about 8 months and then got a little bonus at work and paid it off. For a cautious person like myself, paying no interest now is better than possible interest dividends somewhere else.

 

[thatguy]

I love that approach.. I would have never thought if doing it that way

brian

Most dealers, especially car dealers, don't give a rip about someone paying cash up front since most dealers are doing the financing and making their money that way.

I take a totally opposite approach. I deal based on the the sticker price only. They moan and groan and act like you are killing them, but they go back to the finance manager who lowers the sticker price but happily jacks the interest rate through the roof.

The last truck I bought I walked out of the dealer with an interest rate of 10%!!!

Of course as soon as I got home I re-financed with USAA at about 4%.

The dealer called back about a month later wondering if we weren't happy with their financing!