Tractor Financing Rates: How Much do Tractor Loans Cost?

We talk to a lot of folks about tractor financing.

Your first question is always...

Here's what really matters...

How much are the monthly payments on a tractor? 

(Since profit is revenue minus costs... the most important thing for a business is how much that tractor is going to make you after the payments.... right?)

Most resources on the internet don't really tell you the costs, or they tell you fake costs that only apply to the top 1% of people who contact them.

Let's go over what real rates are going to be, based on different situations, ones that we come across all the time.

Want to hear what your real costs will be?

Monthly payments on a tractor loan are based on several things:

1. Where you get the loan

2. Your credit

3. How long you have been in business

Let's go over these items in detail...

Tractor Loan Costs - Dealers vs Leasing Companies

Many times, your best option will be financing through a dealer, assuming the following:

• You're buying new or almost-new equipment

• You have good credit (700+)

• You've been in business for at least 2 years

If all three of the above are true, many dealers, such as Kubota, offer zero percent financing - which of course nobody else can compete with. Your credit has to be very good - since the dealer loses money by offering the financing they need to know they're going to be paid back.

If you're not buying brand new equipment, have thin or low credit, or haven't been in business for very long, you'll likely end up using an equipment leasing broker.

Going through an equipment leasing broker will cost more than dealer financing. How much higher depends on your situation - we'll go over this shortly. 

Tractor Financing with Bad Credit (or Good Credit)

Banks and lending companies use math to analyze who to lend money to. Want to know who pays their loans most often?

If you answered, "people with good credit..." you'd be 100% correct. 

Now... that doesn't mean you need perfect credit to finance a tractor.

What it does mean is that the more challenging your credit is, the higher the payment will have to be to offset any additional risk.  

With that being said, what are the payments you could expect with good, ok, or bad credit? Let's look at a $25,000 tractor, and assume you're going to lease over 5 years. What would your payments likely be?

What holds many people up is the total cost of financing. You can make total financing costs lower by having a shorter term. Often a 36-month term will have payments slightly higher but may save a substantial amount in finance charges as compared to a 60-month term.

New Business Tractor Financing

If you're new in business  (under 2 years), ignore the numbers we just went over.

As a new business you're in a "special" risk category.

Special means a little harder to get financing for, as the risk of roughly half of small businesses not making it in their first 5 years has to be factored into the financing decision.

This means it's harder to qualify for financing if you're new. This is particularly true in 2020 with the Covid-19 pandemic. Lenders are looking just a little more carefully, and this is particularly true for startups. 

With that said, startups can expect to pay higher rates if they are approved. Referring to the payments above, the best credit customers may expect a payment of around $600, which marginal credit customers may experience payments closer to $800. 

Yes, those are high payments for a $25,000 loan. It's reality though.

Are you ready to get your tractor financed? Give us a call at (866) 631-9996 or click on the picture below to get started.