Financing 3.99 vs 0%

[bzue207x]

I talked to many dealers before purchacing my tractor & many had told me that if I was planning to pay off my tractor early that I was better off going with the 3.99% financing & taking the rebate. I called Mahindra finance & found out that any extra money cannot be applied towards the principle unless you TRIPLE your payment. What???. This was not one dealer that was misinformed, every Mahindra dealer was telling me the same thing. Why is Mahindra not informing their dealer network of this? I am only posting this for Mahindra buyers to be aware that if you were to double your finance payment that you are only advancing the payment schedule & that while paying off your tractor early, you are saving nothing. As a matter of fact you are probably paying more in the long run. This should be made more clear.

 

[David Devuono]

I looked at the financing aspect with a local Mahindra dealer, we went through the different options and I recall him mentioning specific rates if one wanted to pay off the financing earlier. (Forgot the term he used) Financing was through Agra-Credit or something like that. Maybe different up here in Canada?

 

[kiotiken]

Again, maybe a Canada vs US difference, but I can currently borrow money against my secured line of credit at 3.49%, and bank prime shouldn't be going up anytime soon. I would look at that as an option, you can pay back as much as you want, when you want. I've only used the line of credit for the purchase of a car but what I did was figure out the payment it was take to make it disappear in 4 yrs, set that up as a regular payment, and then made payments on top of that when the opportunity came up. No penalties for early payment and in an extreme case, you could drop to interest only if you found yourself in an unexpected bind.

 

[lantxinNETX]

I talked to many dealers before purchacing my tractor & many had told me that if I was planning to pay off my tractor early that I was better off going with the 3.99% financing & taking the rebate. I called Mahindra finance & found out that any extra money cannot be applied towards the principle unless you TRIPLE your payment. What???. This was not one dealer that was misinformed, every Mahindra dealer was telling me the same thing. Why is Mahindra not informing their dealer network of this? I am only posting this for Mahindra buyers to be aware that if you were to double your finance payment that you are only advancing the payment schedule & that while paying off your tractor early, you are saving nothing. As a matter of fact you are probably paying more in the long run. This should be made more clear.

When I bought my 4035 I financed it through Mahindra Finance. After reading your statement above, I got out my contract and read through it. I believe your statement that extra money goes towards principal only if you make "Triple your payment" is incorrect. If you make two payments in one month, you DO save something as you are taking payments off the back end of your loan. Their method of calculating any possible refund of unearned interest charges is a little vague, but you certainly would not end up paying more than you would have just made your payments according to your loan schedule.

What was your other option to taking the 3.99% financing with the rebate? The current financing deal was not in effect when I bought mine last month. But my dealer offered me three prices - a cash price, a 2.99% price for 84 months and a 0% for 72 months price. But the sales price increased with the length of the financing. I certainly knew this, because nothing is free, not even 0% financing. While my choice of the 0% financing for 72 months cost me more $$$ for the purchase price, ultimately it was going to be less than if I had taken the 84 month financing. Given the 0%, there is no incentive to pay it off early so I have nothing to worry about.

My word of advise to anyone who has a question about financing anything - a tractor, a car, a house - is to talk to the actual lender just like you did bzue207X. My Mahindra dealer was a nice enough guy, but he was certainly NOT a financial expert! I doubt that Mahindra is "failing to inform their dealer network" as much as it is a case of the dealers being experts in tractors and implements and parts and service. Like I said, they are not financial experts. (When my dealer could not answer a question for me about the required insurance coverage on my tractor, I called Mahindra, who gave me a contact in the company that actually underwrites their insurance. After a few minutes of talking with that person, I had the answers to my questions. But if I had relied on my dealer - or even the rep with Mahindra in Houston - I would have come away with incorrect information regarding the insurance.)

 

[murphy1244]

I talked to many dealers before purchacing my tractor & many had told me that if I was planning to pay off my tractor early that I was better off going with the 3.99% financing & taking the rebate. I called Mahindra finance & found out that any extra money cannot be applied towards the principle unless you TRIPLE your payment. What???. This was not one dealer that was misinformed, every Mahindra dealer was telling me the same thing. Why is Mahindra not informing their dealer network of this? I am only posting this for Mahindra buyers to be aware that if you were to double your finance payment that you are only advancing the payment schedule & that while paying off your tractor early, you are saving nothing. As a matter of fact you are probably paying more in the long run. This should be made more clear.[/QUO

:welcome:to TBN

 

[bzue207x]

When I bought my 4035 I financed it through Mahindra Finance. After reading your statement above, I got out my contract and read through it. I believe your statement that extra money goes towards principal only if you make "Triple your payment" is incorrect. If you make two payments in one month, you DO save something as you are taking payments off the back end of your loan. Their method of calculating any possible refund of unearned interest charges is a little vague, but you certainly would not end up paying more than you would have just made your payments according to your loan schedule.

What was your other option to taking the 3.99% financing with the rebate? The current financing deal was not in effect when I bought mine last month. But my dealer offered me three prices - a cash price, a 2.99% price for 84 months and a 0% for 72 months price. But the sales price increased with the length of the financing. I certainly knew this, because nothing is free, not even 0% financing. While my choice of the 0% financing for 72 months cost me more $$$ for the purchase price, ultimately it was going to be less than if I had taken the 84 month financing. Given the 0%, there is no incentive to pay it off early so I have nothing to worry about.

My word of advise to anyone who has a question about financing anything - a tractor, a car, a house - is to talk to the actual lender just like you did bzue207X. My Mahindra dealer was a nice enough guy, but he was certainly NOT a financial expert! I doubt that Mahindra is "failing to inform their dealer network" as much as it is a case of the dealers being experts in tractors and implements and parts and service. Like I said, they are not financial experts. (When my dealer could not answer a question for me about the required insurance coverage on my tractor, I called Mahindra, who gave me a contact in the company that actually underwrites their insurance. After a few minutes of talking with that person, I had the answers to my questions. But if I had relied on my dealer - or even the rep with Mahindra in Houston - I would have come away with incorrect information regarding the insurance.)

Thanks, I am going back to the dealer tomorrow & talk about the financial options again. My original thought based on what I was being told was to take the 3.99 & pay the tractor off in about half the time but after talking to Mahindra finance I feel as though the 0% is a better option. I appreciate your added insight.

 

[deathtoblackberries]

Take the 0% the dealers are wrong. I ran the loan numbers yesterday, the break even point is 20 months. If I pay off the tractor on my 20th payment the total I will have paid is about the same with either 0% or 3.99% financing. Pay off the tractor before the 20th payment and I save money with the 3.99% financing vs the incentives I give up with the 0%. Pay off the tractor after the 20th payment and I lose money with the 3.99% vs the 0%. Over the life of the loan I would lose only the $1,500 in incentives with the 0% but would pay $3,694 in interest for the 3.99%.

 

[Reyer Farms]

I thought they get their interest up front on the payments. The longer the loans goes on the more principle you pay in each payment. When I looked at it it was better to finance third party and take the cash to dealer. I do know that for the most part it is a number shuffle that they are going to make money at.

 

[Coyote machine]

On some level what the OP is saying is there is a penalty for prepayment because the loan assumes for the lender a certain return over a certain period. Paying down early accrues less interest which is NOT what the lender wants; too bad for the consumer.
I can't speak to tractor loans in particular on pre-payment penalties, BUT in many states the law says one cannot be penalized for paying down a home, car?, loan. If you do pay down early on interest or principal, or both make sure to get bank receipts proving each payment so at the end you can verify the actual amounts. Banks do make mistakes !! HA ! HA!, banks make mistakes, now that's funny! :laughing:

 

[Ram4x4]

I discussed this heavily with my dealer when I bought. I ended up going with 0% for 60 months on my 5035HST. I got a $1,000 rebate, applied to the price, a "Dealer days" $400 rebate and a $250 Military rebate (I got a check in the mail for those two as they could not be applied to the loan). I also took advantage of the "Power Package" deal and got a discount on a cutter and box blade, plus the dealer took off another 10% because I bought the tractor from him. I also got the rear tires filled with beet juice, with another discount as well.

I know all the discussions about 0% not being 0%, and it isn't, but cash price only gave a $2500 rebate. Going with the 0%, the only extra cost was a $560 "buy down" that was put into the loan. That's it. No other extra fees or costs above and beyond normal.

If I had chosen 3.99% for 72 months, the payment was only going to be like $22 a month less, but for 12 more months of payments.

I got out the door with a 5035HST, front bumper/guard, FEL, 7' HD cutter, 7' HD box blade and filled tires, after taxes and fees for $35,000 and some change at 0% interest for 60 months...and got $650 in rebate checks a month later. I put no money down at all.

Had I gone with 72 months at 3.99% I would have ended up paying closer to $40,000 in the end. I didn't even look at payment for 84 months.

 

[kiotiken]

I discussed this heavily with my dealer when I bought. I ended up going with 0% for 60 months on my 5035HST. I got a $1,000 rebate, applied to the price, a "Dealer days" $400 rebate and a $250 Military rebate (I got a check in the mail for those two as they could not be applied to the loan). I also took advantage of the "Power Package" deal and got a discount on a cutter and box blade, plus the dealer took off another 10% because I bought the tractor from him. I also got the rear tires filled with beet juice, with another discount as well.

I know all the discussions about 0% not being 0%, and it isn't, but cash price only gave a $2500 rebate. Going with the 0%, the only extra cost was a $560 "buy down" that was put into the loan. That's it. No other extra fees or costs above and beyond normal.

If I had chosen 3.99% for 72 months, the payment was only going to be like $22 a month less, but for 12 more months of payments.

I got out the door with a 5035HST, front bumper/guard, FEL, 7' HD cutter, 7' HD box blade and filled tires, after taxes and fees for $35,000 and some change at 0% interest for 60 months...and got $650 in rebate checks a month later. I put no money down at all.

Had I gone with 72 months at 3.99% I would have ended up paying closer to $40,000 in the end. I didn't even look at payment for 84 months.

I think this helps show a big part of the problem, terms are becoming longer and longer and people are more concerned about the monthly payment than the price. Cash is king, but when that's not possible, a sizable down payment with as short of a loan term as possible will save you big bucks every time. Borrowing money to buy EVERYTHING is a new concept and everybody (if you work that way or not) is paying the consequences.

 

[Ram4x4]

Yeah, I agree. Normally I do like to put a sizable chunk down and go as short as possible, but in this case I had other expenses to use money on and didn't want to drag the bank account down too low.

Yeah, the payment is as much as a car, but other than the tractor and my mortgage, I'm debt free, car and truck are paid for and zero balance on the credit cards, no other loans, so the payment isn't a big deal.

I did the 0% because the buy down amount wasn't much and it gets it paid off in 60 instead of 72 or 84 months. Actually, I'll get it paid off sooner than that, but this way I end up paying less overall when it's said and done.

 

[kiotiken]

Yeah, I agree. Normally I do like to put a sizable chunk down and go as short as possible, but in this case I had other expenses to use money on and didn't want to drag the bank account down too low.

Yeah, the payment is as much as a car, but other than the tractor and my mortgage, I'm debt free, car and truck are paid for and zero balance on the credit cards, no other loans, so the payment isn't a big deal.

I did the 0% because the buy down amount wasn't much and it gets it paid off in 60 instead of 72 or 84 months. Actually, I'll get it paid off sooner than that, but this way I end up paying less overall when it's said and done.

Please don't take what I said as a criticism of your choice. I think I'm just trying to make the point that the cheapest way to do anything is not to borrow money, even if it's @ "0%". Banks are incredibly good at getting your money and still putting a smile on your face and it's getting worse all the time.

I was in the local shopping mall years ago and they had one of those mini boat shows going on. Nowhere on there could you find the price of the boats, but they all had some ridiculously low monthly payment number. In very small print, it showed that the term was 180 months! That boat will be sunk before the last payment is made.

You also don't even hear the monthly price advertised anymore for cars, it's always a bi-monthly number. "Only $89 bi-monthly for this $60K truck". What a farce in my mind. These are misleading tactics that appeal to a generation that got no real formal financial education in school. Shooting fish in a barrel comes to mind.

 

[Ram4x4]

Please don't take what I said as a criticism of your choice. I think I'm just trying to make the point that the cheapest way to do anything is not to borrow money, even if it's @ "0%". Banks are incredibly good at getting your money and still putting a smile on your face and it's getting worse all the time.

I was in the local shopping mall years ago and they had one of those mini boat shows going on. Nowhere on there could you find the price of the boats, but they all had some ridiculously low monthly payment number. In very small print, it showed that the term was 180 months! That boat will be sunk before the last payment is made.

You also don't even hear the monthly price advertised anymore for cars, it's always a bi-monthly number. "Only $89 bi-monthly for this $60K truck". What a farce in my mind. These are misleading tactics that appeal to a generation that got no real formal financial education in school. Shooting fish in a barrel comes to mind.

Oh, I agree with you. It's getting ridiculous how long they are willing to finance stuff for. Pretty soon they'll allow you to finance it for life and pass on the payments to your kids!

I also agree to the sales tactics, the "Only $169 per month!" sounds good, but...then the fine print tells the ugly story. Actually, most of the car pricing I see advertised on TV now is for a lease, not a purchase. Sure, it's "only" $169 per month, after you put down a sizable chunk and they only give you some ridiculously low amount of mileage allowed. That's where they get you too because the allowed mileage is so low the majority of people exceed it and that costs a lot!

When I finance anything, the first thing I look at is how much am I paying total for it when it's done, try to get the lowest terms (dealers hate me because I make them work through all options so I can see the numbers) and THEN see I if the payment fits my budget.

I would love nothing more than to pay cash for everything, but that's not realistic for me.

Just went through a discussion with my 17 year old son on all this. He has his first job washing dishes and we got him his first car. We bought him a 2001 Subaru Forester for $5,000. Bank would only finance it for 2 years due to mileage and he's paying $228 a month for it (actually, I just paid cash for it and he is paying us monthly because interest rate for a loan for him would have been 17%!). He didn't understand why he couldn't get a new car because the payments were "only" $149 per month for what he was looking at. We sat down, went over all the numbers and he finally understood. Yeah, $149 per month, for 6 years and with $3300 downpayment (which he doesn't have). He wasn't thinking about insurance as well. He now understands that he is only n the hook for the car for 2 years, vs 6 and overall it isn't costing him a lot of money. He doesn't like it, but he understands it. I've been showing him the numbers and the why's on everything we buy. I understand his youth and the "I want, I want" mentality, but it is important he understands how to manage his money and live within is means AND to make sure what he's doing makes sense financially.

 

[deathtoblackberries]

Oh, I agree with you. It's getting ridiculous how long they are willing to finance stuff for. Pretty soon they'll allow you to finance it for life and pass on the payments to your kids!

I also agree to the sales tactics, the "Only $169 per month!" sounds good, but...then the fine print tells the ugly story. Actually, most of the car pricing I see advertised on TV now is for a lease, not a purchase. Sure, it's "only" $169 per month, after you put down a sizable chunk and they only give you some ridiculously low amount of mileage allowed. That's where they get you too because the allowed mileage is so low the majority of people exceed it and that costs a lot!

When I finance anything, the first thing I look at is how much am I paying total for it when it's done, try to get the lowest terms (dealers hate me because I make them work through all options so I can see the numbers) and THEN see I if the payment fits my budget.

I would love nothing more than to pay cash for everything, but that's not realistic for me.

Just went through a discussion with my 17 year old son on all this. He has his first job washing dishes and we got him his first car. We bought him a 2001 Subaru Forester for $5,000. Bank would only finance it for 2 years due to mileage and he's paying $228 a month for it (actually, I just paid cash for it and he is paying us monthly because interest rate for a loan for him would have been 17%!). He didn't understand why he couldn't get a new car because the payments were "only" $149 per month for what he was looking at. We sat down, went over all the numbers and he finally understood. Yeah, $149 per month, for 6 years and with $3300 downpayment (which he doesn't have). He wasn't thinking about insurance as well. He now understands that he is only n the hook for the car for 2 years, vs 6 and overall it isn't costing him a lot of money. He doesn't like it, but he understands it. I've been showing him the numbers and the why's on everything we buy. I understand his youth and the "I want, I want" mentality, but it is important he understands how to manage his money and live within is means AND to make sure what he's doing makes sense financially.

^^^ this, total cost of ownership, exactly.