Tractor Financing Explained
Sooner or later, anyone who has land in the country, whether for agriculture or for hunting purposes, will have a need for heavy equipment. Land clearing, land maintenance, roadway and passageway construction, there’s a long list of improvements which can be made and they all require machinery and this may require securing tractor financing.
However, just going to the tractor dealership in the area and writing a check for a new or used tractor or other piece of heavy machinery is not a possibility for most of us. Most of us will need financial help when it comes to buying a major piece of land working equipment.
Working with institutions which commonly finance agricultural equipment purchases is a wise decision for anyone who is in need of buying a tractor or other implement. These land-oriented institutions know about farming and land development, and they know about financing the equipment which makes this work possible.
Darren Hammonds is the principal loan officer in the Montgomery, Alabama branch of First South Farm Credit, gives us some good advice and direction for those who may be in the market for land improvement equipment for hunting land.
Tractor Financing – Rates and Terms
One thing that is certain in any situation now when a land equipment loan is being sought- rates are changing on a daily basis. A landowner who is in need of equipment to improve the land whether it’s farm land or hunting land will want to keep a close eye on the current interest rates on loans for financing a tractor.
“I expect rates to go up with the current economic situation,” Hammonds said.
He tells us that at present, farm equipment loans are running in the 4% to 5% range.
“Most farm equipment loans are made for three to seven years, and most loans are made for under five years,” he noted.
Tractor Financing – Down Payments
When it comes to down payments on farm equipment financing, Hammonds said that First South Farm Credit has options to find customer’s needs.
“We have a couple of different options. If someone is interested in finding a loan for equipment, they can call one of our branches for information on a loan, Typically there would be a 25% down payment. However, if the borrower has other equipment, we can take other equipment as collateral to make up that 25%, so there’s a couple of different options there we can look at,” Hammonds said.
Another option for potential land equipment buyers is to go to an approved Farm Credit Express dealer. This is a point of purchase type program where people can go directly to dealers approved by First South Farm Credit and buy equipment.
Used Tractor Financing – Used Equipment Rates
A very important point for landowners to consider when looking at farm equipment is that used equipment is a red-hot market, and used machines will not be cheap .
“There’s a 25% down payment, but we do have another option called Farm Credit Express,” Hammonds explained. “It is a point of purchase-type program where people can go directly to approved dealers throughout the state and they can buy used or new equipment and get up to 100% financing. Typically the terms would be as we had discussed earlier. That would be anywhere from three to seven years and rates would still be in the mid-fours or lower fives through that program. The great thing about this program is that it’s kind of like when you go to buy a car. You show up at a car dealership, and you walk in and you get approved. That’s how this would work and typically it takes a few minutes for someone to go through that process”
Some folks might want to know about a private party sale- person to person and if First South Farm Credit can work with that situation. Hammond says the answer is yes.
“Yes, we can certainly do that. That would just be dealing with a party that was not part of the Farm Credit Express System, but it would be a direct loan,” he said.
Hammond advises that landowners who need tractor loan for equipment are not limited to new equipment.
“People are wanting to get pre-DEF models (equipment older than emissions control additions) whether they’re using the equipment on their hunting lease or whether they’re using it for full-time farming, but we’re seeing that the used equipment is highly valuable right now,” Hammonds said.
Tractor Financing – What Kinds of Equipment Can Be Financed
“We make loans on equipment for any kind of landowner. As long as the equipment can be considered a piece of ag equipment, we can make a loan on it. And that would include all of your tractors, implements and things like that,” Hammonds explained. “Most people would not qualify for a loan on an ATV, but this depends on the use of the machine. It might be different for a full-time farmer who uses the ATV as part of the farm operation.”
“The older tractors are bringing in a lot more money than what they have been bringing. So you just have to weigh your different options and see what fits you and your finances. And the important thing to remember about First South is that we can do either one. We can do the new models or the used equipment. It doesn’t matter either way. We will try to format a program around your needs,” he concluded.
First South Farm Credit