Experience w/Reduced Init Pmts

[rockyridgefarm]

Deere is currently offering a program where the payments are calculated using a lower interest rate for the first 36 months, the go up a notch for the remaining. This would help me in my current situation; but is there a problem? Has anyone used this probram and regretted it?

<font color=green>Offer available October 26, 2002 through February 28, 2003.
5.9% fixed-rate financing and low introductory payments for the first 36 months on all new 4000 TEN Series, 90 Series and 4000 Series Compact Utility Tractors.

3Offer available October 25, 2002 through February 28, 2003. Subject to credit approval on John Deere Credit Revolving Plan, a service of FPC Financial, f.s.b.. Non-commercial use only. Promotional payments are valid for amounts financed of $30,000 or less and are fixed for a period of 36 months. The APR for the first 36 months will be 5.9% with a $0.50 per month minimum. After 36 months the minimum required monthly payment will be calculated as 2% or the original transaction amount and the APR will be 6.9%. Available at participating dealers. </font color=green>

Shouldn't that read: "...as 2% <font color=green>of</font color=green>the original..."

 

[Gary_in_Indiana]

"2% of" sure makes more sense. I guess either Deere's lawyers or someone doing the proofreading dropped the ball on this one.

As to lower initial payments, I have one bit of advice that may help you decide if that's something for you or not. Don't look at it as a lower payment now. Look at it as committing to a higher payment later if it works out that way. In fact, it may not depending on the specifics of your loan.

As a practical matter, try to pay as much off as you can while the rate is reduced. There will be less principle left to which the higher interest rate will apply when the time comes. Good luck with whatever you decide. I hope this helps. /w3tcompact/icons/smile.gif

 

[rockyridgefarm]

Excellant points!

I thought I'd add that several other factors are leading me to look at the Deere. I like NH's program better (just plain lower interest) Like was said elsewhere, the little differances in financing, alone, aren't enough to choose a product, over.

I have noticed that the big guys are able to work it to their advantage, over some of the other brands. A lower interest rate, for a little longer term makes a higher priced tractor, just as reasonable...

 

[JDGREEN4ME]

We bought our 4110 last month on the program Deere had going. As a general rule I like to put as much down as possible and pay it off ahead of time. HOWEVER we had a trade and some down money and financed over a longer period of time, the rate was 6.99% I believe. With buying land and wanting to build in the next year or two we needed the tractor but not the bigger payments of a shorter loan. I know we are paying more over the long run but that is the choice we made for this situation.

 

[bigpete]

Hi, RockyRidge.

JD, just like car companies and other companies that sell big ticket items, works very hard to identify personal financial conditions that keep people from buying or financing their products. Financing is really nothing evil and can be very helpful when a need arises.

The program you are talking about should be attractive to somebody who has, or might have, a lot of other cash flow outlays coming up in the first three years of the loan. I haven't read the program you mentioned, but most likely the interest is calculated on the average daily balance of the loan. These loans are called revolving loans, and most of the minimum payment goes to paying the interest that accrued during the last month. In this case, I'm guessing that a pretty small portion of the "minimum payment" in the first three years actually goes toward paying off the tractor. After three years, the same interest rate will apply and your minimum payment will go up which means you will the be required to pay more toward ownership of the tractor. They get their interest income from the loan steadily until you pay it off. even in the fourth or maybe fifth year, your going to be paying interest on a large part of the original amount financed. As was mentioned above, you can pay more than the minimum amount and whatever extra you pay goes toward building your equity (ownership) of the machine. The next month's interest will be calculated on a much smaller amount than if you had just paid the minimum.

Term loans, like car loans and mortgages, are set up so that the total interest is calculated when you apply. The interest is spread out over the life of the loan. Your payments in the first part of the loan are made up mostly of payment toward the total amount of interest calculated when you applied, and when the loan gets older, more of your payment goes toward the principal. That's why many people get depressed when they go to trade in a car after 3 1/2 year of a 5 year loan and figure out they still owe at least half of the amount borrowed!

I know this is repetitious, but no matter what the loan type, it's always better to pay as much as you can toward the pricipal each month. With both types of loans you'll be done with payments earlier, have full ownership earlier, and pay less in interest to the lender even if you add only $25-$50 to each monthly payment.

I've used a couple of these programs and paid off the item as quickly as possible, and the insurance was knowing that if I had a finacial disaster, or needed something else that required a big chunk out of cash flow, that all I had to do was pay the minimum. An even better program, in my opinion, is the type that has a 0% rate for an extended period of time, say a year. That gives you a year to pay off as much as you possibly can before they start applying their interest. If the rate they apply after the year is up is reasonable, and if it fits your economic needs, that type is better. Don't confuse a "low intro minimum payment" with a loan that offers a low rate the first year, or two, then an increase in the rate after that. 5.9% for the first three years, then 6.9% is better than a kick in the head but your better off with a lower stable rate and pay extra on the monthly. What you are looking at is better than one that simply offers a "low minimum payment."

Either way their really offering a way for a variety of people to get into the tractor they want or need.

Good luck!

 

[Gary_in_Indiana]

Mike,

I'm glad I was able to offer something that might help you make the best decision for you in your situation. Good luck with whatever you decide. /w3tcompact/icons/smile.gif

 

[timb]

To second what bigpete explained so well - I've noticed that in recent new car financing I've been through - there are typically more attractive interest rates offered on the short term loans. 36 months being lower than 48, and 48 lower than 60, etc.,. However - I've taken the angle of signing up for the 60 month loan - then paying extra (all going towards principal) each month to pay off the loan early. All the while I have the "security" of being able to drop down to a lower minimum payment of the long loan should there be a bad month or two. At the end of the repayment - if I add up what I actually paid over the 30 or 36 months it took to pay off the car - and calculate the *effective* interest rate - it pretty much matches what was offered on the 36 month loan in the first place. So I didn't lose anything - and had that "fall back" if needed.

 

[rockyridgefarm]

In talking to the dealer, i came to realize that this is Zero down. One thing that I see it is a whole lot easier to get into s Deere than, say Long or Kioti. (NOTHING against those fine tractors...) Raise the interest up and require a 20% down and suddenly a few thousand cheaper, isn't that big a deal.

Of course, it is to my advantage to put as big a downpayment as I can....

So according to Pete's comments; this would be the better plan:

<font color=green>Offer available October 26, 2002 through February 28, 2003.
With a trade-in valued at $2,500.00 (U.S.) or more, get 12 Months No Interest and No Payment, followed by 6.9% Fixed-Rate Financing up to 60 Months on all new 4000 TEN Series, 90 Series and 4000 Series Compact Utility Tractors.
Offer available October 26, 2002 through February 28, 2003. Subject to approved credit on John Deere Credit Installment Plan, for commercial and personal use. Requires a trade-in that exceeds $2,500.00 value. Based on $9,499.00 (U.S.) with $2,500.00 (U.S.) trade-in, up to 60 months at 6.9% APR. Taxes, freight, setup and delivery charges could increase monthly payment. Available at participating dealers. Prices and models vary by dealer. Offers available on new equipment and in the U.S. only. </font color=green>

But it requires a trade in, and I don't WANT to give up my Yanny! I think that all considered, it is worth more to me than the savings... Mut I am going to work the numbers, sometimes all isn't as it appears...

 

[TerryinMD]

Guys... guys...

Take whatever lower interest rates that are offered and do the following:

1) Check into a second mortgage to pay off the loan. This allows you to write off the interest and get some of your money back.

2) Believe it or not, check into 0% interest rates for credit card balance transfers. Why you say... cheap money!! A lot of the credit card companies are offering 0% right now on balance transfers with the rate good for 1 year. What you then do is watch for other deals to come along, in other words look for another low interest loan/balance transfer.

No matter how you look at it, you typically have to borrow the money from somewhere. So, why not take advantage of the various offers and programs presented so that you may save money. Our family (particularly our CFO) has been doing just this for the past few years and we have saved thousands of dollars!! In fact, using these cost saving measures has allowed us to pay down most of our debt and allowed us to save money.

It's not rocket science! Just financial discipline. It sounds crazy, but I've been told and have realized over time that if you can use someone elses money.... do it. If you can't pay cash for something, be creative. With today's interests at an all time low, take advantage of them. Case in point, a five year loan at 0.9% on $25k has a total compounded interest of $500. Work the math.... it can save you lots of money for other toys, er tools, storage building, vacations, etc.....

Terry

 

[Gary_in_Indiana]

<font color=blue>"But it requires a trade in, and I don't WANT to give up my Yanny!"</font color=blue>

Mike,

If they need a trade-in, give them one. Just make a deal with the dealer to "buy" on of his used pieces then trade it back in to him for the same money on your negotiated price on the new one. Problem solved! /w3tcompact/icons/clever.gif

I'm sure the dealer is savvy enough to work that deal with you. It's a little extra paperwork for him but it sells him a tractor he might not otherwise sell and ingratiates a customer to him. /w3tcompact/icons/smile.gif

Good luck with whatever you decide to do. I hope this helps. /w3tcompact/icons/smile.gif