Alternatives to John Deere Manufacturer or Dealer Financing
At a Glance:
Whether you’re a farmer, business, or homeowner, you may be able to find lower-cost financing available elsewhere. Before sitting down with a John Deere dealer, consider other options like personal loans, business loans, and credit cards.
The John Deere company was founded in 1837, started by a blacksmith-turned-manufacturer. In the last 180 years, the company has designed, created, and built equipment that is used by industries all over the world, including farming, agriculture, landscaping, forestry, and even the military. In addition, John Deere has provided tools and equipment for the individual homeowner for lawn and garden care.
John Deere equipment, however, isn’t cheap. Their smallest model of lawn tractor, for instance, is about $1500, and higher-line models can run as much as $12,000. Farming equipment can run as high as $100,000. Financing is often a requirement for the average homeowner, farmer, or business. Many John Deere dealers offer financing in-house, but that’s not necessarily the only—or even the best—option.
Alternatives to John Deere Financing
While people often think of personal loans as being small and for a very short term, the truth is that the personal loan market is pretty vast, offering a wide range of options, rates, and offers that make them pretty attractive to those looking for an alternative to dealer financing on John Deere equipment.
Personal loans are offered by most banks, online lenders, credit unions, and you may have an easier time getting approved if you’re already a customer of the bank you’re looking to apply to for a loan. You should always, however, compare personal loan companies before choosing to sign on the dotted line for a loan.
Today, personal loans are available in amounts up to $100,000 from Lightstream and SoFi. Earnest, another popular company, offers personal loans up to $75,000. Unlike traditional dealer financing, online personal loans are usually unsecured, meaning that your John Deere equipment will not be secured to your loan repayment. In other words, if you fail to repay an unsecured personal loan you will not necessarily lose your John Deere equipment.
Often times, personal loans have lower interest rates than dealer financing; they’re usually based on your credit score. In many cases, even buyers with excellent credit will end up paying more at the dealer than if they went elsewhere. For individuals without the greatest credit score, you may still be able to get a fairly decent interest rate on a personal loan—and keeping the loan account in good standing by paying it back with on-time payments each month will only help that credit score increase.
Some community banks and credit unions occasionally offer loan promotions; in which you can take out a loan without paying interest for a period of time or with no fees to be compounded onto your balance later.
Personal loans with a fixed rate are easy to deal with, can be budgeted for, and offer security. You don’t need to worry about your payment suddenly going up or being told that you’re going to end up paying more because your variable interest rate increased.
There are times when a credit card can be your best option for purchasing John Deere equipment as well. If you want or need the travel rewards offered by your credit card or have some other perk that comes with your card account, you may want to use that instead.
Keep in mind, however, that credit card interest accumulates quickly, and on a large purchase, you could find yourself with a maxed-out credit line. If you do choose to use your credit card, always pay more than the minimum, and don’t continue to use the card while you’re paying off the John Deere equipment. Credit cards are not typically the lowest cost financing option.
If you’re a farmer or business owner purchasing equipment through a business entity, such as a partnership or corporation, you may want to talk to your bank about an equipment-specific loan. Business loans typically have different terms and rates than a personal loan. Moreover, it is standard for business loans to be used by businesses for making large equipment purchases.
Importantly, business loans typically have larger borrowing limits compared to a personal loan. Business loans are usually available as both unsecured or secured products. A business banker can work directly with you to find the right solution that makes sense for your business without costing an arm and a leg.
Pros and Cons of Financing Through a John Deere Dealer
There are several good reasons to finance through a John Deere dealer. It’s often clear-cut, straightforward, and chances are you’ll be dealing with a sales and service department that knows the products very well—and stands by them. If you need repairs or parts, the dealer can often offer better service than outside mechanics as well. In some cases, dealers even come out to your farm or location to help get you going again if your equipment breaks down.
Pros of Dealer Financing
Dealer financing often comes with a fair amount of flexibility as well. You may be offered a line of credit that allows you to buy equipment as you need it instead of creating a new loan every time. You can also choose a fixed or variable interest rate and work out the monthly payment date that works best for your business or personal finances. Dealer finance professionals want your business—and they’re willing to work with you to get it.
The biggest pro to dealer financing is the idea of one-stop shopping. When you can go to the dealer, choose your equipment, and immediately start the process for financing before you even leave the dealership, it’s hard to pass up that kind of convenient process. John Deere currently offers equipment loans, equipment leasing, and lines of credit.
Cons of Dealer Financing
Even with all that convenience and clarity, however, it’s not always the perfect option. Dealer financing is usually more expensive than alternatives, and that means you’ll pay more for your equipment in the long run. On a large purchase, even 1% more in APR translates to thousands by the time the loan is paid off—and it’ll take a lot longer to repay.
Instead of financing through the John Deere dealer, take a look around. A zero-interest special, for instance, even for only six, 12, or 18 months, can save you a great deal. Pay attention to the fine print, however, and make sure that interest isn’t accruing in the background, waiting to be compounded onto the loan at the end of the introductory zero-interest period. If you can find a lower interest rate elsewhere than the dealer, you’ll save money.
Loan structure is another key consideration that can either save you money or cost you a lot more. The length of the loan term and how it’s set up can greatly impact total cost. Stay away from balloon payments; they can cause you financial difficulty later. Also check for prepayment penalties and origination fees; if upfront fees are amortized into the loan, you’ll end up paying interest on those as well.
Look for a fixed interest rate loan with a constant monthly payment. In fact, before you take on any type of loan for John Deere equipment, you might want to consider a personal loan first.
If you’re needing to purchase John Deere equipment, then you already know you’re going to be spending a fair amount of money. While financing at the dealer is convenient and may offer some extra perks, flexibility, or other benefits, in the long run you’ll want to spend the lowest amount possible. By shopping around, there is a chance that you may be able to save yourself money over the life of your loan—and that means more money in your pocket.
Author: Jeff Gitlen
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