Tractors often represent one of the biggest investments on the farm, and the way they are financed can have a big impact on the farm business. Spreading new machinery purchases over multiple years using finance is a common way of easing the burden on cashflow.
This also helps farms to budget more accurately, as newer machines are less likely to incur unexpected repair bills, and often have comprehensive warranty packages as a further safety net.
Is 0% always best?
Interest-free finance is typically offered on a maximum of 50% of list price, meaning you will need to pay a deposit (or provide a part-exchange machine) and then pay the balance off over a period of time; this type of financing is often referred to as Hire Purchase.
0% finance means that you pay no interest on the money that you have yet to pay, you simply repay what you owe over a set number of years.
For some operators it’s the monthly payment figure that’s the most important, rather than the overall cost of the machine. In these cases, spreading payments over a longer period might bring the monthly payment down to a level that works for them, and here interest may be charged to cover the cost of this extended lending.
This works well for those who plan to do low hours, and keep a machine for a longer period, but want to plan their costs.
Other options include finance leasing, operating leasing and contract hire. It’s recommended to speak to an accountant about the tax implications of each before making a final decision.
Dealers are very experienced at finding the right package for a particular situation, so be up front about what is important to you.
Monthly versus annual
‘1+3 annual payments’ is a common offer, and means that you pay a quarter of the purchase price immediately on delivery, and then annual payments at the end of the year for three years. This suits those who have an irregular income over the year and can save towards an annual payment.
For others, a monthly arrangement such as ‘3+33 months’ is preferable. In this case, the amount on finance is split by 36, with three months’ worth paid up front, and then 33 further payments, one at the end of each subsequent month.
This a popular choice for dairy farmers in particular, where income is much more even throughout the year.
There is also the option to have the best of both worlds and customise retail finance payments around cashflow.
Here, you can increase payments at the times of year when you have more cash, perhaps when crops are always sold, and also plan payment holidays at times where cash is tied up, perhaps prior to livestock sales.
By speaking with your dealer or retail finance team at the time of purchase, they can plan and customise your repayment plan to meet your exact needs.
Spring Deals from Case IH
For a limited time, you can purchase any new Maxxum, Puma, Optum, Magnum or Quadtrac with 0% finance* on a 1+47 monthly payment profile. This offer is only valid until May 31, 2021. What’s more, all tractors from the Maxxum 145 and above come with a free 3-year, 3000-hour manufacturer’s Safeguard Warranty, with no minimum claim value or excess fees for the entire three years.
(*50% of list price. ROI business users only, T&Cs apply.)
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