Tractors are expensive. They can range anywhere from a couple thousand of dollars to over $600,000. As a result, it’s not realistic for most people to outright purchase a tractor. The alternative is to finance the total cost of the tractor over a period of time. And to get the best rate, you’ll need a good credit score.
To finance a tractor, you can have any reasonable credit score of at least 600, however the higher your credit score, the better rate you’ll get for financing.
Most financial institutions will lend money to anyone with a credit score of at least 600. However, you’ll get better interest rates with a higher credit score because they know you’re more responsible with loans and finances.
So it’s not so much a matter of can you finance a tractor with a lower credit score, but how much you’ll pay in interest. This brings us to our next point of what your credit score should be to finance a tractor.
What should my credit score be to finance a tractor?
This part is a little tricky because you can’t magically make your credit score increase depending on the answer here. So let’s talk about your options.
The simple answer is that you want the highest possible credit score if you’re going to finance anything, including a tractor.
The reason for this is that the financial institution will loan money to you at a cheaper rate with a higher credit score. For example, if your credit score is 800, you may receive a loan with a 2% interest rate. If your credit score is closer to 600, you may receive a loan with a 5% interest rate.
If the total cost of the loan and tractor is $500,000, here is what you’ll pay at each interest rate:
| Interest Rate | Interest Cost to You in $ |
|---|---|
| 1% | $5,000 |
| 2% | $10,000 |
| 3% | $15,000 |
| 4% | $20,000 |
| 5% | $25,000 |
With a good credit score and a 2% interest rate, you can expect to pay the bank $10,000 just to loan the money. That doesn’t even include the price of the tractor.
However, with a 5% interest rate, that same loan all of a sudden costs $25,000. That’s an extra $15,000 just to loan the money because of your credit score.
Therefore, it’s not an answer of what your credit score needs to be to finance a tractor, but more likely what you can afford with your credit score.
Can you afford the monthly cost of the loan with your current credit score? If you can, then great you have a credit score that allows you to finance the tractor. If you can’t afford the monthly cost of the loan with your current credit score, then you shouldn’t take the loan.
It’s not a one size fits all answer to this question. You need to take into account your budgets and what you can afford. There are also handy calculators out there that will give you an estimated monthly payment.
Should I lease or purchase a tractor?
The decision to purchase or lease a tractor can only be made by you and your specific situation. There are pros and cons to each option, so we can’t definitively tell you what is the right choice for you. But let’s talk about those two options now.
Financing a Tractor
Financing a tractor means you are paying to eventually own it. You take a loan from the bank, they buy the tractor for you, and then pay back the loan to the bank. Once it’s all paid off, you own the tractor. Let’s cover the pros and cons of that option now.
Pros of Financing a Tractor
- You own the tractor at the end of the loan
- There are no more monthly payments at the end of the loan
- You can sell the tractor at any time during the loan period to end it
- There are no restrictions when it comes to maintenance, mileage, or more
Cons of Financing a Tractor
- The monthly payments are much more expensive than a lease
- You may not finance the latest model
- Any maintenance problems are your problem
- The value declines over time, which means your investment declines in value
Leasing a Tractor
On the other hand, you have the option to lease a tractor, which means you’re just renting it. You still pay a monthly fee, but at the end of the lease you have to give back the tractor. While it doesn’t sound as great as purchasing, there are pros and cons.
Pros of Leasing a Tractor
- You get the latest model or one of the more recent models
- With the more recent models, you get the benefits of technological advancements
- Because you get later models, there are generally less problems with it
- You don’t have to worry about the value declining or trading it in later
- You sometimes have the option to purchase the tractor at the end of the lease
Cons of Leasing a Tractor
- If you always lease, you’ll always have monthly payments
- Leasing is cheaper in the short run, but more expensive in the long run
- There are restrictions, such as max mileage per year with leasing
- You can pay extra fees if you don’t do regular maintenance
- You don’t have a tractor at the end of your lease
Ultimately, the decision to lease or finance a tractor boils down to what you can afford and how long you’ll need the tractor.
First, what can you afford? Can you afford to finance? If so, that may be the right decision in the long-term. If you can’t, then you can lease and potentially finance once you are in a better financial spot.
Second, how long will you need the tractor? If you only need it for a few years, then leasing is probably a better option. If you feel that you will need the tractor for decades, then maybe financing is the better option.
How can I get a tractor with 0% financing?
This is a common question that comes up often. The only way to get 0% financing is if a dealer offers that as part of their deal. And it’s not very common that it happens, but it can.
Ultimately, a dealership’s decision to go with 0% financing can be for a number of reasons. Whether it’s a competitive market and they’re trying to increase market share or they’re trying to get rid of old inventory.
If you come across a deal with 0% financing, you should definitely consider that in your decision. Over the course of a loan, you can save thousands of dollars. That’s nothing to shake a stick at.
Conclusion
Over the course of this article, we covered a lot of financial topics related to a tractor purchase. From what credit score you need, to what credit score you should have, lease vs. purchasing, and how and why you can get 0% financing.
Ultimately, these types of financial decisions should be made with a lot of careful thought to what you can afford and your specific situation. We highly recommend talking to a financial or business advisor to get advice specific to you and your situation.
The content in this article is purely for informational purposes only and should not be taken as official financial advice.
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