Does 0% financing for a short term (12 months to 36 months) help farmers make a buying decision? Or is it better to have higher fixed rate for a longer term? What kind of financing options help the farmer the best?
Personally I think a little higher rate with a longer term is better (60-72 months) because in most cases it keeps your payment lower. Another option that I like is an open ended contract that allows you to pay it off early with no penalty, (sometimes that bumper crop and great prices meet). I think the 0%,short term contract only benefits the well established farmer (cash flow)
Wtih most of the deals we do, If there is a 0% program out there, we recommend the 0% option and then refinance with another company and or bank towards the end of the 0% program. It can save a farmer thousands of dollars. It seems like on most deals, I can get the farmers the 0% program and then after two years or three years of no interest, I can get them a 5% to 6% fixed rate for 60 months. This is a great way to get the terms out to 72 months. The only reall problem is the payment amount for the first couple of years. As with most beginning farmers, it always comes down to cash flow, so we try multiple different ways to help them out.
I am with Kevin I like the longer term every time we have checked into buying equipment the longer term with the higher rate was always cheaper payments and easier to cash flow. Also if you can pay it off early with no penalty that is a plus too.
You can see my response to Kevin. Most contracts do not have that early pay off , at least the ones we offer. Again, we try and take advantage of the 0% followed by a 5 to 6% fixed contract. Usually though if there is a 0% contract offer, the low subsidized loan programs usually have rates of 2.9 fixed up to 4.9% fixed, so it is just a matter of choosing a program that best works for that individual famer.