Interest Free Financing

[R Barger]

When you can buy a tractor $3500.00 cheaper for cash how is that interest Free financing?

 

[CloverKnollFarms]

When you can buy a tractor $3500.00 cheaper for cash how is that interest Free financing?

Well, you are right. It's not.

Nobody lends money for free... That is just bad business sense.

Or, they offer 0% financing because they have already rolled it into the MSRP and EVERYONE pays for it

 

[WM75Guy]

Marketing gimmick. You still pay interest, it is rolled into your final price. Hence the cash discount if you don't go the 0% route, they subtract the interest from the final price. Usually 0% financing allows people who cannot make a large down payment or pay cash for something to buy on credit. But sometimes the cash discount is so small that 0% makes better financial sense. When I bought our Kubota RTV-X I had the option of $300 cash discount or 0% for 48 months. The $15,000 I would have paid for the cash discount makes me $600/yr in interest, so I opted for the 0% financing and left my money in the bank. I don't mind using other people's money if it makes me money.

 

[EddieWalker]

I ignore the wording invented by the Marketing Department and run the numbers when buying.

For me, interest free financing added a little over $3,000 to the cost of my tractor, but the lowest interest rate they offered added more than twice that much by the time the loan was paid for.

 

[ArlyA]

When sales drop for any ol product, company's sometimes lower the prices, or offer lower or free interest rates to keep the production line going. A plant shutting down, then reopening it a year later is quite costly. We got zero percent on our Ranger back in 2019. Was that just stupid? Not everyone is sitting with a bank account full of $$.

 

[CloverKnollFarms]

No, because they keep paying interest

 

[Rdrcr]

Some dealers pay the finance charge for the customer making the cash price the same as finance price.
But, ultimately, yes, someone is paying for the interest.

Mike

 

[Michael_J]

Nothing's really free. The factory pays the bank so they can say 0%, and that cost's built into the price. Cash buyers just skip that part and get the discount.

 

[Slomotion]

If it's a major purchase, or a special credit card (big box store) purchase I'll ask for six months or twelve months interest free on the item then double up on the payments to be done long before the contract expires. They're betting you're going to go over the allotted time then they get all the back interest too.

 

[dodge man]

I bought my current JD at 0% and they would not lower the price for a cash discount. It was already discounted quite a bit so I took the 0%, for 5 years as I recall. I agree though, it’s not really free.

 

[KennyG]

If the dealer provides or participates in the loan, it's not free and you can usually buy cheaper with cash. If it's all manufacturer provided, it's kind of free. The manufacturer wants to move product and they can lower the price, provide 0% financing, throw in accessories, etc. Then the cash price is the same as the financed price. If it's a good deal the interest free loan is just a bonus.

When I bought my tractor (years ago) I got a few thousand off the list price and 0% financing. I asked about paying cash and the dealer told me the financing all came from John Deere, so he didn't care, the price would be the same.

 

[jaybrad]

I bought my current JD at 0% and they would not lower the price for a cash discount. It was already discounted quite a bit so I took the 0%, for 5 years as I recall. I agree though, it’s not really free.

Same with our Massey Ferguson several years ago. The dealers i checked with all quoted the same price, cash or 0%. They said the finance company paid them in full right away, so they had no incentive to reduce their profit.

 

[shirleyujest]

My experience with Deere (several years ago) was that there was a healthy "origination fee" to apply for the 0% interest loan.

 

[KennyG]

My experience with Deere (several years ago) was that there was a healthy "origination fee" to apply for the 0% interest loan.

That's interesting. There was none on my loan (15 years ago.) I guess things change constantly.

 

[R Barger]

My experience with Deere (several years ago) was that there was a healthy "origination fee" to apply for the 0% interest loan.

I think if the amount you have in your tractor at the end of the contract is the same amount you would have had in it if you had paid cash that's 0% interest. Anything other than that is a dealer sales joke.

 

[NUTTERDW]

Marketing gimmick. You still pay interest, it is rolled into your final price. Hence the cash discount if you don't go the 0% route, they subtract the interest from the final price. Usually 0% financing allows people who cannot make a large down payment or pay cash for something to buy on credit. But sometimes the cash discount is so small that 0% makes better financial sense. When I bought our Kubota RTV-X I had the option of $300 cash discount or 0% for 48 months. The $15,000 I would have paid for the cash discount makes me $600/yr in interest, so I opted for the 0% financing and left my money in the bank. I don't mind using other people's money if it makes me money.

In 2014 when I bought a Kubota 23 hp mower, I was offered free interest for five years, but I had to buy their insurance at 800 dollars per year times 5 years which would be 4000 dollars. I paid cash! My State Farm policy already covered it.

 

[EscapedSuburbia]

When I bought a Kubota a month or so ago I got a $3500 discount for cash instead of the 0% interest. It's hard to call a $3500 upcharge "zero interest". Car dealers are the opposite - they practically beg you to get a loan and offer $500 or more off it you finance.

 

[aircommuter]

Like my dad use to say “nothing is free just paid for another way”.

 

[dodge man]

I don’t think there were any crazy fees when I got 0% on my JD. I only made on payment a year also for 5 years, it was a big one though.

 

[mx842]

I bought my current JD at 0% and they would not lower the price for a cash discount. It was already discounted quite a bit so I took the 0%, for 5 years as I recall. I agree though, it’s not really free.

Same here, I wanted to just buy mine right out, but the dealer talked me out of it. After thinking about it and looking at the supposedly cash discount, $500 it made sense to me to hold on to my cash and take the 0%. I don't like payments but this way I can still pay it off if I want to or just ride it out until it's paid off.