Buying Advice - Kioti, LS, TYM Compact Tractors

[Torvy]

I know of no finance company corporate or otherwise, that allows anyone to to borrow their money for the item you purchased for nothing.

I've explained this before, banks borrow money and lend money. They are heavily regulated. Banks don't look at your individual deal the way people think. Even in the bank doesn't sell their loans, they bundle them into time-frame groups called tranches (sounds like launches, but with a t). The bank makes more money on sub prime loans but they bring in greater risk. Regulators require banks to be within ranges of risk. So banks use 0 percent where they technically lose money on individual deals to leverage the risk portfolio and can lend more dollars at higher rates to people with lower credit. If they don't offer 0% (or lower than market during high rate periods) then the people who can qualify for those rates will pay cash. Cash doesn't help the bank at all. They are much better off giving 0% to some people and making money off of the others. The regulators also force banks to loan to people who really don't qualify. It's all about balanced tranches to the bank. As long as your credit and collateral meet their requirements, they are happy.

Not saying that Kubota doesn't use it to manipulate. I have no direct knowledge of them. Just saying that there are 100% banks that will intentionally lose money on a loan.

 

[arrow]

I've explained this before, banks borrow money and lend money. They are heavily regulated. Banks don't look at your individual deal the way people think. Even in the bank doesn't sell their loans, they bundle them into time-frame groups called tranches (sounds like launches, but with a t). The bank makes more money on sub prime loans but they bring in greater risk. Regulators require banks to be within ranges of risk. So banks use 0 percent where they technically lose money on individual deals to leverage the risk portfolio and can lend more dollars at higher rates to people with lower credit. If they don't offer 0% (or lower than market during high rate periods) then the people who can qualify for those rates will pay cash. Cash doesn't help the bank at all. They are much better off giving 0% to some people and making money off of the others. The regulators also force banks to loan to people who really don't qualify. It's all about balanced tranches to the bank. As long as your credit and collateral meet their requirements, they are happy.

Not saying that Kubota doesn't use it to manipulate. I have no direct knowledge of them. Just saying that there are 100% banks that will intentionally lose money on a loan.

This was an answer to the tactics of Kubota corp. finance. Most tractor sellers have their own corporate finance.

You may be referring to banking institutions associated with individual businesses such as mom and pop car dealerships, construction or home improvement or furniture sellers using a plethora of institutions doing what you say to divide risk.

 

[rScotty]

I've explained this before, banks borrow money and lend money. They are heavily regulated. Banks don't look at your individual deal the way people think. Even in the bank doesn't sell their loans, they bundle them into time-frame groups called tranches (sounds like launches, but with a t). The bank makes more money on sub prime loans but they bring in greater risk. Regulators require banks to be within ranges of risk. So banks use 0 percent where they technically lose money on individual deals to leverage the risk portfolio and can lend more dollars at higher rates to people with lower credit. If they don't offer 0% (or lower than market during high rate periods) then the people who can qualify for those rates will pay cash. Cash doesn't help the bank at all. They are much better off giving 0% to some people and making money off of the others. The regulators also force banks to loan to people who really don't qualify. It's all about balanced tranches to the bank. As long as your credit and collateral meet their requirements, they are happy.

Not saying that Kubota doesn't use it to manipulate. I have no direct knowledge of them. Just saying that there are 100% banks that will intentionally lose money on a loan.

Thank you Torvy. You've just proven to me something that I always suspected - that the world is bigger than what I know, and works differently than I understand. Frankly I'm glad of that. All I knew before was my simplistic view of finance had to be wrong, because it wasn't helping me to understand some simple things that I knew were happening - like that there really are zero percent loans. Or why moving money is sometimes the same as making money.

BTW, this last year my bank got bought out by another. They said they would move my accounts to their new bank at no charge to me. But I got riled up and decided I wanted to move to a different bank. Guess what? Some banks will pay you to move to their bank! Not only do they not charge a fee, they will pay a nice fee to get new accounts.

I'm guessing it is sort of like that for zero percent loans. Banks do it for reasons that make sense to them, whether or not it makes sense to us is beside the point.

rScotty

 

[Torvy]

This was an answer to the tactics of Kubota corp. finance. Most tractor sellers have their own corporate finance.

You may be referring to banking institutions associated with individual businesses such as mom and pop car dealerships, construction or home improvement or furniture sellers using a plethora of institutions doing what you say.

No. Many of the places with captive lenders (Kubota, Ford Motor Credit, etc) also send the info to banks with whom they have a relationship. (Banks are the experts and have much more money to lend) The same concept also happens with people going to get tractors financed from individual banks. Balanced tranches are the way.

Even Kubota Finance has to follow US law here. They are most assuredly doing the same thing. Other threads have explored the delta between cash price and zero %. Often you are better off with the zero. Loan terms are pretty straightforward with zero percent. Illegal for Kubota to require their insurance, but they must require some insurance. Most people who qualify for 0% aren't likely to fall for upsell ideas like underbody coatings or extended warranties. It's just the price divided by months. Those loans allow Kubota finance to carry more paper on less qualified buyers. Win-win for captives. That doesn't mean Kubota isn't trying to max out their individual deals, but they would not be able to offer much financing in the US if they cannot get high credit people to go with the loans. O% gets people who could pay cash to consider financing. The biggest problem for people outside of lending to understand is that it is not about that one deal for the lender, even a captive lender (though it probably is for the salesman, finance guy and 'store').

 

[arrow]

Thank you Torvy. You've just proven to me something that I always suspected - that the world is bigger than what I know, and works differently than I understand. Frankly I'm glad of that. All I knew before was my simplistic view of finance had to be wrong, because it wasn't helping me to understand some simple things that I knew were happening - like that there really are zero percent loans. Or why moving money is sometimes the same as making money.

BTW, this last year my bank got bought out by another. They said they would move my accounts to their new bank at no charge to me. But I got riled up and decided I wanted to move to a different bank. Guess what? Some banks will pay you to move to their bank! Not only do they not charge a fee, they will pay a nice fee to get new accounts.

I'm guessing it is sort of like that for zero percent loans. Banks do it for reasons that make sense to them, whether or not it makes sense to us is beside the point.

rScotty

It’s gotten political with accusations of “red lining” where actual bank buildings are located to say nothing of who gets loans.
Banking is not so simple these days but make no mistake, 0% is definitely and mostly used as usury manipulation.

 

[arrow]

No. Many of the places with captive lenders (Kubota, Ford Motor Credit, etc) also send the info to banks with whom they have a relationship. (Banks are the experts and have much more money to lend) The same concept also happens with people going to get tractors financed from individual banks. Balanced tranches are the way.

Even Kubota Finance has to follow US law here. They are most assuredly doing the same thing. Other threads have explored the delta between cash price and zero %. Often you are better off with the zero. Loan terms are pretty straightforward with zero percent. Illegal for Kubota to require their insurance, but they must require some insurance. Most people who qualify for 0% aren't likely to fall for upsell ideas like underbody coatings or extended warranties. It's just the price divided by months. Those loans allow Kubota finance to carry more paper on less qualified buyers. Win-win for captives. That doesn't mean Kubota isn't trying to max out their individual deals, but they would not be able to offer much financing in the US if they cannot get high credit people to go with the loans. O% gets people who could pay cash to consider financing. The biggest problem for people outside of lending to understand is that it is not about that one deal for the lender, even a captive lender (though it probably is for the salesman, finance guy and 'store').

Corporate financing was an attempt for them to cash in on the extra money customers were using to buy time.
Banking regulations have nothing to do with manufacture retail pricing and this is an area where all kinds of finance structuring can be designed to capture time buyers. 0% is simply frosting on this cake.

 

[Williy]

For 0% check the price of the unit and compare it with the
total price of the loan you may be surprised!

willy

 

[jyoutz]

For 0% check the price of the unit and compare it with the
total price of the loan you may be surprised!

willy

Mine is the total price divided by the number of months financed. Nothing surprising.

 

[jreed1337]

Thanks for all the advice and suggestions everyone.

I still haven't made a decision. I went and looked at all the tractors last Monday, then that Wednesday, my work canceled all overtime for the next 4-8 weeks.

So until that gets sorted out, I will most likely not be getting a tractor. Can't jeopardize the well being of my family for a tractor. Obviously 200 bucks a month isn't going to break us, but I don't need to be adding any expenses to our budget without knowing I have the option for overtime at work.

The LS dealer is really pushing me though, dropped the MT225S down to 18k at zero percent. Hard not to take that deal, that's a lot of tractor for the money.

 

[CloverKnollFarms]

If I had a piece of advice, I wouldn’t buy anything if overtime would impact my decision. May not be a popular decision… but taking on a payment that is long term, when non guarantee income affects the decision to do so, is probably something to avoid.
I could have bought a tractor to do the work I needed, for half what I spent. Easily. I didn’t though, because we had saved for a while and paid cash. Just saying, options may exist outside your existing search.
I can truly appreciate your hesitation when adding another payment to your budget. That is what a good provider does, manages risk for the good of their family.