How to get financing for a used farm tractor?

To buy used farm tractor major investment is the priority factor. It requires financing help. While offering big upfront savings over new equipment, buying used still involves a significant outlay of capital. What financing options work best for getting approved for a used tractor loan?

Preparing your finances

Getting your financial house in order goes a long way toward tractor loan qualification and locking in better interest rates.

  • Boost credit score – Having higher personal credit scores over 680 improves approval odds and means better loan rates. Pay down debts and resolve any issues on your credit reports in advance.
  • Calculate affordability – Figure your annual equipment operating budget and determine maximum monthly payments you can realistically handle. Include potential repairs and cost of downtime for older used tractors as well.
  • Grow down payment – Putting 20-30% down signals the lender you can manage payments long-term. Trade-in value from old tractors helps avoid dipping into farm operating capital needed elsewhere.

Financing routes

Multiple financing paths exist for used tractors from traditional loans to dealer/manufacturer programs.

  • Local bank – Given extensive agriculture lending experience, community banks and farm credit unions offer very competitive used tractor loan rates, flexible terms, and better approvals. Providing full financials helps them customize loan offerings.
  • OEM captive lender – Captive finance companies from tractor manufacturers also cater loans specifically to farmers.
  • Dealer financing incentives – Many farm equipment dealers now provide financing incentives on certain used stock. This includes discounted interest rates along with small down payments. But it may limit your selection to in-stock models only.

Protecting your investment

Once approved for financing, protect your used tractor investment by inspecting rigorously, buying warranty coverage, and maintaining properly per factory guidelines.

  • Seek pre-approval first – Before visiting dealerships and getting attached to a specific used tractor, talk to your bank or lender and get pre-approved for an equipment loan up to a certain dollar amount. This gives you greater negotiation leverage later knowing your existing buying power.
  • Certified pre-owned benefits – Consider a certified pre-owned (CPO) used tractor from a brand dealer. While costing slightly more, CPO tractors undergo dealer inspection/reconditioning and usually include a limited warranty. This provides peace of mind on condition. CPO may also open access to better finance rates and terms via dealer captive lenders.
  • Closely inspect condition – While exciting to operate an affordable used tractor model, don’t get blinded by the price tag. Invest significant time inspecting it firsthand for engine compression, oil analysis, transmission functionality, hydraulic leaks, electrical issues, tire wear and all other components. Catching brewing problems early prevents busting your budget later on repairs.
  • Attach service contract – If the used tractor is older or out of warranty, attaching an additional multi-year service contract as part of your financing helps buffer against repair bills down the road. This avoids nasty surprises if the engine or transmission unexpectedly fails which could impact loan repayment.

While used tractors provide big upfront cost savings, taking some precautions via thorough inspection, basic warranties, protected financing and diligent maintenance helps ensure that big investment doesn’t later turn into a major headache. Avoid skimping on any of these aspects just to chase initial price points when buying used.