Cash or Low Rate, What's the Best Deal When Buying a Tractor (or Car, or Anything With Low Rate)?

[@Bob-vb8lc]

That was a great break down of the financial aspects of buying a major purchase. Thank you for sharing Mike.

[@johnmedlin5894]

Great video Mike, thanks for sharing. When I purchased my tractor I did that very thing, made a simple spreadsheet, and I find that when you put the details down to compare them side by side, it makes a lot more sense. I have found that even if one goes the route of paying a small percentage of interest and taking the cash rebate it often comes out as the best deal if one can't pay cash. Meanwhile, I have also found that if the interest rate is, for example, 4.99 (or anything for that matter), don't be afraid to ask the finance company if that's the best they can do. If you have a really great credit score, I have found on more than one occasion that you do have some negotiating power as a consumer.

[@swampwhiteoak1]

“It takes money to make money.” Whenever possible pay cash, have no debt, and not be beholden to anyone. Have a sense of pride in not enriching the money lenders.

[@TheFlatlander440]

I agree. If I can't afford to pay cash for something then I don't purchase it. I prefer to remain debt free.

[@ralphmowery2898]

@@TheFlatlander440 You have to look at it from all angles. Like 3 years ago I bought a new car because of zero % financing. I could have taken the money out of my IRA (being retired) however I have been making over 10 % per year on that money . Plus I would have to pay tax on it, probably would have put me in a higher tax bracket. I calculated that I would have about $ 5000 more in 7 years by financing. Hard to turn down almost $ 1000 per year. Last year I financed another care for the wife at 3% for 7 years. Still making lots on the IRA than if we had paid cash for it.

[@kdegraa]

If a needed capital good like a tractor can be purchased with a loan at zero to a very low interest rate, it makes financial sense to buy it with that loan. The capital not needed to buy the capital good outright can be used on other business expenses or investments. Also we are in inflationary times so if your loan payments of just say $1000 is worked out today, it looks like it will maybe the equivalent of $700 in today’s money in a few years time.

[@bradbruggeman6745]

One thing you need to add to the spread sheet is the insurance they require you to have to cover the tractor in case of damage until the loan is paid off. That would not be an added cost if paid in cash.

[@circuitbreaker9001]

I was also going to mention this. You will pay yearly insurance to the dealer to finance through them

[@johnmedlin5894]

Yeah, not sure about other insurance companies, but my homeowner's insurance covers my tractor as well at no additional cost.

[@davidhaskins9457]

I went low rate and made extra payments worked for me

[@BuckInfinidy]

Well explained Mike. Nice job. Most folks forget there is a cost to using cash.

[@johnthorpe1071]

Thank you Mike. I took the 0% and think I did ok. I asked the price and got a quote before any discussion about financing then went to a competitor and they were almost the same, so I was happy with the deal. Now that you explained this, I wonder if I could have done better.

[@stevemartinez6757]

That explains a lot. I purchased a tractor in 2018 and did the 0% financing option because the price that was quoted to me was based on that. I didn't know that there was another option(s). I could have purchased the tractor for cash (scenario #3 in your first example) and saved a lot of money. I'll bet that most people don't really realize or understand this. My thinking was "why use my money and instead use the "company's money" for financing? I could leave my money in the bank still earning interest (which is next to nothing). One other thing that ties into this is insurance, and I know that you covered this topic. When something like a tractor is financed (0%), an insurance policy is also required which is understandable. It protects the dealer as well as the consumer. However, if the consumer has insurance that would cover the equipment it's yet another added expense that adds to the total cost of ownership.

[@d.a.ballou9740]

Yup, you have to do the math! Thanks Mike.

[@MikeBrown-ii3pt]

It's always best not to finance if you can possibly avoid it. However, that's often not possible. Personally, I always arrange my own financing locally, after getting figures on the factory offers from the dealer. Even if it ends up costing a little more in the long run, I just like the fact that I can walk into my local bank and talk to a real person if questions and/or problems arise. It's also easier (for me anyway) to make extra payments on the principle and leave with a printout of the transaction right away.

[@kdegraa]

Recently we purchased a new tractor. The dealer worked out what I thought was a good price. I compared the quoted price with prices online for new and second hand tractors of the same or similar models and the dealer’s price came out around the same, within $1000. So I’m not sure if there is a cash rebate on this tractor as we did have the cash to buy the tractor outright and advised the dealer. Right now there is a shortage of tractors in Australia, both new and second hand. Maybe there are fewer cash deals around because the demand is there? We did not plan to buy the tractor we bought but the deal we made on another brand of tractor fell through because they could not get the tractor in time due to Covid restrictions. It was a pretty traumatic time as we had the cash, needed a tractor and could not get one.

[@mepezim]

Hi Mike. I would love some videos on chippers. How do you decide whether to get a stand alone chipper or a tractor chipper combination, if you do't yet have the tractor. I have a JD X758 diesel garden tractor that can mow my large lawn and do most things I need but it can't haul big wood and I can't put a chipper on it. I have 4 acres of big BC forest with a lot of treefall and I would like to clean it up and chip whats on the ground. How do I decide between buying a separate big tractor with an attached chipper versus hauling around a stand alone chipper and accepting that I will just have the small tractor. The chipper has to be at least 5 inch either way. It will be a lot more $ with the tractor but will the chipper on a tractor function better, is it worth the difference in price? And if it is on a tractor, can I believe the horsepower ratings that they require? If it says you need minimum 30 at the PTO, can I trust that or would going 40 or 50 be a whole lot better? Would 25 HP still work? - some dealers say it would. The stand alone chippers are very expensive if good quality like Wallenstein, just enough to make you feel bad for having bought one instead of the more expensive tractor chipper combo. So which way should I go?Thanks, Michael

[@dd_ranchtexas4501]

Agree with your method. Few people would have a CD for EXACTLY the amount the dealer wants. If the CD value was greater, then the lost interest "could" be more. Depends an many factors, though.

[@bearkatljl]

I've done this math everytime I've bought a piece of equipment. Most recently I purchased a Kubota RTV X1140 and Kubota was offering 20% off to members of AQHA and there was no restrictions as to how long you had to be a member. I could literally join the association from the chair in the salemans office and get this 20% discount but the price then became the MSRP and not the sales price. So bottom line so far everything I've bought was a better deal to take the 0 percent and pay a little more for the sale price. Now had I not needed to finance the purchase the AQHA discount would have been the better deal.

[@johnos4892]

Also depends on where money is, for example if a retired person takes money from his IRA, they pay taxes on the money withdrawn. This could be substantial, like 20%. Loan would be way to go rather than cash withdrawal.

[@CentralNH]

I financed the least amount possible because the insurance was 17.00 a month cheaper financing 3500.00 for 72 months. And I reaped all the benefits of discounts.

[@michaelcollins5529]

I really like the AGCO “Quick Quote”. So much easier than some other brands...

[@GreenMountainDIYGuy]

AGCO quick quote was thousands higher than the Massey dealer I purchased from earlier this Spring for my GC 1725MB!

[@mrflorida55]

Hi Mike can you do a video on securing a tractor and risks of someone stealing it?

[@TractorMike]

Here's one: kzbin.info/www/bejne/qKqvqYWOnceMhZY. Check out the comments for other ideas.

[@theElderberryFarmer]

Sadly, this kind of information is no longer taught in school. When I was in high school, we were required to take a semester of Home Economics class where in addition to cooking and sewing, we were taught how to balance a checkbook, write up a budget, and understand how to calculate the costs of taking a loan. Buying a car is similar to this process - but you will never get a lower price quoted if you let the dealer know that you are paying cash. The dealer makes money from the financing program, so I always take whichever program gives the lowest 'price' for the vehicle, make one monthly payment, then pay the loan off.

[@ralphmowery2898]

Seems that schools are not teaching the skills to live any more. We had to take many of the same things you mentioned. Now the people at many places can not make change for you if the cash register does not give out the amount of change.

[@charleskeene715]

Is zero percent for 84 months a good deal. Pay cash they offer 2000.00 off. This is a kubota tractor m4-071 deluxe

[@TM-uz1wk]

Someone always pays the interest. If there is zero interest to the customer, the dealer is getting reimbursed less by the lending company. The dealer is paying the interest for the customer. That's why they raise the price for zero interest. You never get money for nothing.

[@ralphmowery2898]

I had worked out a deal with the dealership for a car . Looked at his paper work and they were going to charge me about 3% interest. I told the salesman that on TV Toyota was advertising 0%. He said to me 'you want the car at this price and 0%. I told him again that the TV said 0%, I get that or no deal as do not need a new car anyway. The car I had was about 10 years old, but only had about 40,000 miles on it as it was my wife's car and she did not drive that much. I did get the car for the low price and 0% financing for 7 years. I guess that it is the Toyota company that got stuck with the loss.

[@brucerushing2363]

Excellent video

[@robsmith7681]

@Tractor Mike I love my canopy sir.

[@TractorMike]

Yay! Nice to be in the shade this time of year, isn't it?

[@robsmith7681]

@@TractorMike I’m going bald, so yes, it’s very nice. 🤣

[@fhuber7507]

Cash is King.

[@TriggerTravels]

Dealerships prefer you finance. If you come in screaming you're a cash buyer they're going to stick it to you for what they're losing on the back end. Cash is not king anymore. Do not discuss payment until the deal is locked in... Or, if you have the cash and the price is more for a cash deal then take the loan and pay it off in a year or whatever. If you walk in thinking you're about to get a killer deal because you have a pocketful of cash.... Get out your lube. This principle is discussed in tons of KZbin videos done by ex car dealers. I'm not sure about the tractor industry because they always offer a cash discount.

[@jacklabloom635]

I love math.

[@arlisspropertyservicesllc5943]

Always pay cash, don’t indenture yourself to a loan. Owe no one but yourself.