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How Long Can You Finance A Tractor? (Explained)

How Long Can You Finance a Tractor?

Financing a tractor takes between 1 to 5 years in most cases. However, some financing programs allow for a maximum repayment period of 7 years maximum.

Tractor finance is better than buying a tractor on installment or leasing a tractor. However lease payments are similar to financing but the difference here is that when you lease a tractor, at the end of the day, the tractor goes back to the owner, while under the financing; the tractor becomes your legal property at the end of the repayment period. So getting a loan to finance your tractor is far better than leasing a tractor.

Financing a tractor starts at an interest rate of 5%. So, the longer the repayment period, the bigger the compound interest. However, there are special provisions of loans for beginning framers with very low-interest rates. An example is the USDA – backed loans.

Also, the financing rates for tractors fluctuate depending on your credit history, stage in business, and other factors. Those with bad credit may experience very high rates, this goes with startups. That is why you must talk to your local lender to weigh different programs so that you choose what suits you and your business the most.

You must know that when paying off the loan on the purchase of a tractor, at the end of the day, the tractor, and all the value created by it after depreciation, are all yours – this calls for effective tractor maintenance.

Interest Rates to Finance a Tractor

As stated earlier, the flat interest rate for the purchase of a tractor is 5%. For example, if a tractor costs $300,000. To finance it, you will have to make a 20%.

A 20% down payment of the amount, which in this case is $60,000, and the remaining amount plus 5% interest is spread across the repayment duration.

How to Choose the Right Tractor to Finance

You need to know how to choose the right tractor for financing. In the case where you don’t know the exact brand and model you want, you should consider two factors which are – compatibility and power.

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The first thing to consider while choosing the right tractor is to consider how compatible the tractor is with your farmland. If the tractor is too small for your farm, it can result in wastage of labor time, underproductivity, underutilization of the land, and can wear up the tractor too soon. So the tractor shouldn’t be too big or small, go for the one that is compatible with your farmland.

Secondly is the horsepower degree – if the tractor’s horsepower is too powerful for the task on the field, it might cause damage to the engine because the tractor is not allowed to run at its proper temperature, and if the horsepower is low for the task, it will lead to wastages.

Don’t put price first or else you might be tempted to compromise in terms of compatibility and horsepower and this may affect the end product of the farm. When these products are carefully examined, then you can consider the price.

Which Tractor is Better to Finance – New or Used?

Normally used tractors are cheaper to finance, so if cost is the major thing you are on the lookout for, you can go for the used tractor. However, this is not very advisable because tractors are a major investment, so going for a quality, reliable and durable one.

However, this doesn’t mean that used tractors aren’t good. Moreover, good tractors are built to maintain their value over time.

The only thing is that if you are going for a used tractor it is better to make research on a good tractor that maintains quality, know the precise tractor model and style, and go for it. If you are going for a used tractor, you should know that the average life of a tractor is around 15 years. 

The lifespan of high-hours tractors can go beyond 15 years if properly maintained. But even so, keep in mind that many of these tractors will require overhauls and engine rebuilding of 5,000 to 10,000 hours.

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Another major thing is that before purchasing a used tractor, consult a professional for an inspection. if you are conversant with tractors, you can do the inspection yourself. In inspecting, you have to check out the overall tractor appearance, including the engine compartment, hydraulic power, joint points, cab, and PTO shaft. Also, ensure the tractor is worth the cost before financing it.

I will say based on experience that buying a new tractor is better, as it gives you greater access to a range of modern technologies and innovations, a better warranty, and more financing options. In a new tractor, you will learn how to take off your tractor better, and here you aren’t scared of any unidentified issue, or that part of your tractor lifespan is used up.

You can find a used low-horsepower or high-hours tractor for less than $10,000. Also, you can get a quality low-horsepower tractor for $12,000. This does not include the money you may spend possibly on fixing some of the tractor’s worn-out parts.

For the new tractors, the ones with more than 400 horsepower (HP), you can get them for $300,000 or more depending on the brand and style.

How to Finance a Tractor

Tractor financing is more beneficial to farmers with good credit records. If you have a good credit score, you are open to more financing options with low-interest rates that offer long-term financing. To finance a tractor, you can visit the website directly.

For instance, The Kubota Credit Credit Corporation, U.S.A. is providing a financing offer that is expiring on 6/30/2022. The offer has a maximum repayment term of 48 months, no initial deposit, monthly payments per $1,000 Financed $20.83, and A.P.A 1.99%.

Many other tractor companies do give out discounted financing offers, so check their websites always. Also apart from the financing, these tractor companies will direct you through the process.

On the other hand, it is difficult for individuals with bad credit history, to secure financing – it’s a rough ride for them

Importance of Financing A Tractor

The first thing to do before applying for a financing offer is to get the tractor – don’t tell yourself that you need to secure a financing offer before you can go find the tractor, and pay for it. It doesn’t work that way.

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It is better, and it makes sense more to finance the right tractor for your farm – not too small or cheap.

Financing is of great importance, and below are just a few of it

  • With the aid of financing, you can easily buy equipment to expand your business instead of facing underproductivity because of lack of it.
  • You labor costs by buying larger equipment to get the work done faster
  • Financing helps you to buy the right tractor for your farm instead of settling down with a questionable used tractor or small tractor because of budget.
  • Equipment financing fees and the initial purchase costs are most times tax-deductible as business expenses.

What Credit Score is needed to finance a Tractor?

To secure the best tractor financing programs, you will require a credit score of over 680. Oftentimes, you can get a program that accepts a credit score of below 500, depending on factors like the cash flow, collateral, or other social-geographical factors.

Conclusion

Tractor financing is a good avenue for you to get your perfect tractor to enhance and expand your business.

However, ensure you consult your local lenders to be able to go for the best offers – remember that not all financing offers are good for you. There are highly competitive offers with low interest, and the local lender being an expert can help you choose.

Mark Lockett

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