Long term financing for new tractor purchase

[frank29]

I will not finance a car for longer than 4 years; but, I am considering 6 years on a tractor. The purchase price, including various options, will be about $25K.

My thought process is that tractors seem to maintain a very high resale value and this would reduce the likely hood of being upside down. If life throws me an unexpected curve before the tractor is paid off, I would be able to sell it for at least what I owe.

Do you guys agree with this logic?

 

[JasonH]

Yes and no. With some basic care, and as long as you're not abusive, the tractor should last for many years. You could finance it for ten years and still have a good machine when you send in the final payment.

Your logic is understandable but every perk is offset by a negative. You want to finance for 6 years obviously to keep the payments a little lower. That's reasonable. But you're hanging a financial obligation out there for six years. Six years is a long time to have to make a payment on something. If you can get a super low interest rate, you should never owe more than the tractor is worth. On the flip, people who buy used tractors tend to be tight with the finances and are probably looking at a used tractor as a means of getting a good deal. It may be worth more than you owe, but try getting someone to pay for it.

We don't know what could happen to us tomorrow. While it's good to be prudent when undertaking a financial obligation of this magnitude, don't let it consume you. Hope that helps a little bit.

 

[frank29]

Jason, everything you post is exactly in line with my thinking. Let me ask you, and the group, a related question: how easy is it to sell a used tractor for premium dollar?

My initial posting was based on the "fact" that tractors depreciate slowly. For that very same reason, I plan on buying a new tractor....why pay 80%-90% for a two year old tractor when a small premium gets me a brand new tractor?

I bet, if it was me, and I needed to sell a two year old tractor, I couldn't get 90%, the prospective buyers would rather get a new one for a comparitively small premium(the same reason I plan on buying new).....if this is true, how can the resell value be so high?

 

[gizmo]

Here's what I do. I get long terms and structure my payments for short. For instance, I have a 30yr mortgage, but I have setup my payment schedule for 15ys. That way if something unexpected happens I can alway drop my payment without a penalty. The down side for this case is that I have to pay about 1/2% more in financing charges. I also did the same with my truck. I got 5yr terms and structured the payments for 3yrs. Never upside down and my truck have been paid off for 4yrs now.

 

[JoeR]

I do my finances like Gizmo too. I go long term, and setup my own personal finance plan in which I pay extra to principal every month. This takes a little more discipline, since it is easy to divert funds and still make all your payments.

Joe

 

[Soundguy]

I do as gizmo does as well. Set a loan term that gives me leeway, then do extra payments to get ahead.

Soundguy

 

[755inNY]

<font color="blue"> My initial posting was based on the "fact" that tractors depreciate slowly. For that very same reason, I plan on buying a new tractor....why pay 80%-90% for a two year old tractor when a small premium gets me a brand new tractor?
</font>

Frank29,

I think you've got it. The tractor's slow depreciation hurts if you needed to sell it in the first couple of years. The price is too close to new and the there is usually very good financing on the new stuff. I think another thing that is affecting the used tractor market is the more frequent model changes. It seems like the tractor model/design used to stay the same for 8 or 9 years. I could be wrong here but it seems that way. If you were looking at a 4 year old tractor, it looked the same as the new ones in the show room provided it was cared for properly. Today the model numbers and design are changing in 4 or 5 years. When you go to sell that 4 year old tractor you are fighting against the new model in the show room.

Jeff

 

[Big_Cajun]

Great post! Everyone seems to have reaffirmed my thinking on the subject...quick, mass email my wife and tell her I'm not loony /forums/images/graemlins/tongue.gif

BC