Financing a secondhand tractor

But..but...but....no money in cattle. We are told this on here. Often. No money in it. £12.50 for a bale of straw ?....no way....we'll sell the cooos rather than pay that. No money in it you see. Not paying more than £150 ton for barley...no way. No money in it at that. Not funding arable farmers skiing trips. Sell the cooos rather than fund skiing trips. No way. No money in it you see. On here we are told this. Often. No money in it.
Need slatted shed, then it doesn't matter how much straw is then :love:
 
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Massey mad

Member
Having never been able to buy any piece of machinery out right in my entire life because we simply don't have the cash in the bank to do so I wouldn't think twice about buying something out right instead of constantly worrying about the next finance payment and then by the time you've Payed for it it's worn out and time to start the whole process again
 

Alan young

Member
Livestock Farmer
Having never been able to buy any piece of machinery out right in my entire life because we simply don't have the cash in the bank to do so I wouldn't think twice about buying something out right instead of constantly worrying about the next finance payment and then by the time you've Payed for it it's worn out and time to start the whole process again
It's an all too common story in farming....Work away do as much as you can...think your getting somewhere and then watch costs guzzle up all that you have made ...... we must all be mad....🙈
 

box

Member
Livestock Farmer
Location
NZ
It's an all too common story in farming....Work away do as much as you can...think your getting somewhere and then watch costs guzzle up all that you have made ...... we must all be mad....🙈

I'm very narrow minded (and some would say simple minded), so I may be completely wrong.

But.

My understanding is that even with tax deductible interest on the financed machine, you're still left with less money in your hand at the end of the financial year than if you had bought the machine outright. Cashflow might be an issue, but that's why you save money and have plenty of cash on hand in the first place.

At the end of the day we're here to make money, right? Why carry all that stress of farming and do all that work just to line the pockets of a finance company?


Some people seem to think that the aim of the game is to pay the least amount of tax possible, they then go and "waste" money on gear so they have a lower tax bill. When the numbers get crunched at the end of the year, they don't have much tax to pay.....nor are they making much money.

I've got a theory that this is why so many old farmers are so unbeleivably bogged down in debt with mortgages that they never paid off, they wasted their days avoiding paying tax instead of paying the money back to the bank. Forever asset rich and cash poor, forever paying interest, forever paying overdraft and bank fees. Wasted money. But it's OK, because they didn't pay much tax.....

Finance has never made any sense to me (except 0%). Unless ofcourse, you've got a mortgage or other major farm based debt and you can finance the machine at a lower rate than your current loan and you absolutely need the machine.

In that situation, one would have to ask themselves whether borrowing more for essentially a "spare" tractor is a wise use of the money which could otherwise be used to pay down the pre existing debt.

If this was a thread about borrowing money to buy land, I'd have a different answer :)

That's just my (debt free) 2c. Of course, I'm just a farmer, not an accountant or financial advisor.....like I said, I might be completely wrong.
 
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box

Member
Livestock Farmer
Location
NZ
You're right.

What I'm sort of getting at is why borrow the money, when you can put your plans on hold for a couple of seasons, save some money and then use that instead.

It's not as if OP "needs" the tractor. Plenty more fish in the sea, grab one at a later date.
 

Renaultman

Member
Arable Farmer
Location
Darlington
I'm very narrow minded (and some would say simple minded), so I may be completely wrong.

But.

My understanding is that even with tax deductible interest on the financed machine, you're still left with less money in your hand at the end of the financial year than if you had bought the machine outright. Cashflow might be an issue, but that's why you save money and have plenty of cash on hand in the first place.

At the end of the day we're here to make money, right? Why carry all that stress of farming and do all that work just to line the pockets of a finance company?


Some people seem to think that the aim of the game is to pay the least amount of tax possible, they then go and "waste" money on gear so they have a lower tax bill. When the numbers get crunched at the end of the year, they don't have much tax to pay.....nor are they making much money.

I've got a theory that this is why so many old farmers are so unbeleivably bogged down in debt with mortgages that they never paid off, they wasted their days avoiding paying tax instead of paying the money back to the bank. Forever asset rich and cash poor, forever paying interest, forever paying overdraft and bank fees. Wasted money. But it's OK, because they didn't pay much tax.....

Finance has never made any sense to me (except 0%). Unless ofcourse, you've got a mortgage or other major farm based debt and you can finance the machine at a lower rate than your current loan and you absolutely need the machine.

In that situation, one would have to ask themselves whether borrowing more for essentially a "spare" tractor is a wise use of the money which could otherwise be used to pay down the pre existing debt.

If this was a thread about borrowing money to buy land, I'd have a different answer :)

That's just my (debt free) 2c. Of course, I'm just a farmer, not an accountant or financial advisor.....like I said, I might be completely wrong.
However, if inflation is running at 10% and it takes you 3 years to save that money your £100,000 machine would cost you a further £33,000
Planned and structured borrowing is an important business tool IMHO
 
However, if inflation is running at 10% and it takes you 3 years to save that money your £100,000 machine would cost you a further £33,000
Planned and structured borrowing is an important business tool IMHO
That's always how it seems to work, I remember wondering where would I ever find 350 a month for a tractor, then when I had it 6 months I got another lol, reminds me of a local farmer who got fed up with farming and went and bought 3 new tractors to give him something to work for, it worked for him anyway, same man went to leave a tractor in for a service and noone remembered to go and collect him, so he signed for a new tractor and brought it home, said they wouldn't forget to lift him next time
 

essexpete

Member
Location
Essex
However, if inflation is running at 10% and it takes you 3 years to save that money your £100,000 machine would cost you a further £33,000
Planned and structured borrowing is an important business tool IMHO
Someone I know far more astute than me, once said "borrow money in times of high inflation is the best business move you can make". The £1k borrowed today will be worth considerably less in a few years. The caveat is being able to service the debt.
 

box

Member
Livestock Farmer
Location
NZ
However, if inflation is running at 10% and it takes you 3 years to save that money your £100,000 machine would cost you a further £33,000
Planned and structured borrowing is an important business tool IMHO

You're right, borrowing is important. Borrowing to buy land, housing, borrowing for capital improvements, stuff that you can guarantee is going to increase in value at atleast a rate greater than the interest you're paying is fine (although I still believe some peoples mentality towards borrowing is fundamentally wrong and the amount of debt in the world is worrying to say the least).

Borrowing for something that you need is different. If OP had come in and said "I'm short on cash, I need a tractor because my old one has shat the bed and crops are due to be harvested", then absolutely financing would be the right option. But for a spare tractor? It's only going to lose value, cost money to insure, cost money to maintain and then you add interest and fees into the mix. I'm not convinced it's the right option at this stage.

It's highly unlikely that the same make/model/year second hand tractor will be 30% more in 3 years (unless it's reached some bogus "classic" status dreamed up by people with too much money and not enough work to fill in their day). Worst case it'll be the same price, best case it will have dropped slightly because it's 3 years older.

I've always been very risk averse when it comes to money and for the most part it's worked out well for me. Life's bad enough as it is, why put another noose around your neck? The hamster wheel never stops no matter how fast you run, but at least you can set the speed.......and if you don't owe any money, you can step off when ever you like.
 
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Bill the Bass

Member
Livestock Farmer
Location
Cumbria
You're right, borrowing is important. Borrowing to buy land, housing, borrowing for capital improvements, stuff that you can guarantee is going to increase in value at atleast a rate greater than the interest you're paying is fine (although I still believe some peoples mentality towards borrowing is fundamentally wrong and the amount of debt in the world is worrying to say the least).

Borrowing for something that you need is different. If OP had come in and said "I'm short on cash, I need a tractor because my old one has shat the bed and crops are due to be harvested", then absolutely financing would be the right option. But for a spare tractor? It's only going to lose value, cost money to insure, cost money to maintain and then you add interest and fees into the mix. I'm not convinced it's the right option at this stage.

It's highly unlikely that the same make/model/year second hand tractor will be 30% more in 3 years (unless it's reached some bogus "classic" status dreamed up by people with too much money and not enough work to fill in their day). Worst case it'll be the same price, best case it will have dropped slightly because it's 3 years older.

I've always been very risk averse when it comes to money and for the most part it's worked out well for me. Life's bad enough as it is, why put another noose around your neck? The hamster wheel never stops no matter how fast you run, but at least you can set the speed.......and if you don't owe any money, you can step off when ever you like.
I like your thinking. However, I am in a similar predicament here, I am staring into an almighty clustetfuch in the house at present, an additional tractor would save us a fair bit of time and labour allowing me to help abit more as a caregiver in the house but the farming reality is it doesn’t justify it or need it - however it could just help give us what we need in terms of time
 
Someone I know far more astute than me, once said "borrow money in times of high inflation is the best business move you can make". The £1k borrowed today will be worth considerably less in a few years. The caveat is being able to service the debt.
Yes, the theory is you're paying in the future with depreciated money. So, if you're paying £1,000 per month and a bullock is worth £1,000 then it takes 1 bullock to make the payments. If inflation halves the value of money then the bullock is worth £2,000 and you only need half a bullock to make the payments. What could possibly go wrong :ROFLMAO:

The same theory is applied to Government debt, that's why they need inflation. An alternative name is called kicking the can down the road a bit:ROFLMAO:
 

Lincsman

Member
Arable Farmer
Location
Lincolnshire
I'm very narrow minded (and some would say simple minded), so I may be completely wrong.

But.

My understanding is that even with tax deductible interest on the financed machine, you're still left with less money in your hand at the end of the financial year than if you had bought the machine outright. Cashflow might be an issue, but that's why you save money and have plenty of cash on hand in the first place.

At the end of the day we're here to make money, right? Why carry all that stress of farming and do all that work just to line the pockets of a finance company?


Some people seem to think that the aim of the game is to pay the least amount of tax possible, they then go and "waste" money on gear so they have a lower tax bill. When the numbers get crunched at the end of the year, they don't have much tax to pay.....nor are they making much money.

I've got a theory that this is why so many old farmers are so unbeleivably bogged down in debt with mortgages that they never paid off, they wasted their days avoiding paying tax instead of paying the money back to the bank. Forever asset rich and cash poor, forever paying interest, forever paying overdraft and bank fees. Wasted money. But it's OK, because they didn't pay much tax.....

Finance has never made any sense to me (except 0%). Unless ofcourse, you've got a mortgage or other major farm based debt and you can finance the machine at a lower rate than your current loan and you absolutely need the machine.

In that situation, one would have to ask themselves whether borrowing more for essentially a "spare" tractor is a wise use of the money which could otherwise be used to pay down the pre existing debt.

If this was a thread about borrowing money to buy land, I'd have a different answer :)

That's just my (debt free) 2c. Of course, I'm just a farmer, not an accountant or financial advisor.....like I said, I might be completely wrong.
There is something in what you say, since I have scaled down due to my labour force setting up his own business, half the farm fallow, some is seasonally let out, but i still farm about 25% of the farm to be a "farmer". This means the tackle is paid for and will last years, profits are now higher than anytime in history for me and Tax bills, but it is more relaxing to pay the Tax than buy 2 new fendts and farm 16 hours a day.
As an example; fuel use is so low I am still refueling at 47p/L and some 3 year old DAP in the shed at £305.
 

Farmer_Joe

Member
Livestock Farmer
Location
The North
Someone I know far more astute than me, once said "borrow money in times of high inflation is the best business move you can make". The £1k borrowed today will be worth considerably less in a few years. The caveat is being able to service the debt.

This is true the governments covid debts are getting less now with high inflation!
 

Massey mad

Member
There is something in what you say, since I have scaled down due to my labour force setting up his own business, half the farm fallow, some is seasonally let out, but i still farm about 25% of the farm to be a "farmer". This means the tackle is paid for and will last years, profits are now higher than anytime in history for me and Tax bills, but it is more relaxing to pay the Tax than buy 2 new fendts and farm 16 hours a day.
As an example; fuel use is so low I am still refueling at 47p/L and some 3 year old DAP in the shed at £305.
Well I appreciate what you're doing but if every farmer in the UK adopted this strategy then British agriculture be would be no more
 

j6891

Member
Location
Perth & Kinross
I like your thinking. However, I am in a similar predicament here, I am staring into an almighty clustetfuch in the house at present, an additional tractor would save us a fair bit of time and labour allowing me to help abit more as a caregiver in the house but the farming reality is it doesn’t justify it or need it - however it could just help give us what we need in terms of time
If your a one man band like myself an extra tractor is still probably cheaper than an extra body/wage to find. If this frees up your time then all the better. Although money wise it might not be the best use but whats the point in having money if it doesn't make your life easier/better
 

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quote: “Red Tractor has confirmed it is dropping plans to launch its green farming assurance standard in April“

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