Tractors are for more than just farming. True, they can be used to clear land, feed livestock and harvest produce. But they’re also ideal for construction, landscaping and shoveling snow.
Finding a use for a tractor is easy. But paying for one is a bit more complicated if you don’t have the money upfront. We take a look at your financing options to help you decide which is best for your needs.
What is tractor financing?
Tractor financing is a way to purchase or borrow a tractor when you don’t have the money to buy it upfront. The two most common tractor financing options are equipment loans and equipment leasing. Equipment loans
An equipment loan provides a lump sum of money that you can use to cover the cost of a new or used tractor. Your loan is typically secured by the tractor or other farming equipment you’re buying with it, which can result in decent interest rates — whether fixed or variable. And you’ll pay interest on what you borrow through monthly repayments.
The best deals on equipment loans tend to go to businesses that have been around for at least two years, have excellent credit and are looking to buy a new tractor.
Banks, credit unions and online lenders often offer business equipment loans, but you might find a better deal through a dealership like Kubota or John Deere. Monthly payments for loans tend to be higher than you’ll find with a lease, but you end up owning the vehicle once it’s fully repaid. It can also be cheaper in the long run if you plan to use the vehicle for a long time.
Top four online lenders to consider for a tractor purchase
Manufacturers are known for offering solid deals. But you might find similar options with an online lender offering competitive rates and flexible terms.
Use one of OnDeck’s business term loans to buy or lease a tractor. It accepts personal credit scores of 500+, but you might not qualify if your business is too new or too small for its requirements.
National Business Capital offers equipment financing to business owners with almost any credit score. It has a high approval rate with quick turnaround and doesn’t require collateral.
Excel Capital Management offers equipment financing that often doesn’t require a down payment, and leases come with an option to buy. You need good credit to qualify, however, and the process can take longer than with other lenders.
Tractor leasing
An equipment lease is an extended rental contract for a tractor or other farming equipment. As with any lease, you make payments on the equipment as long as you’re using it. But payments can be lower than those that come with a loans, because you aren’t paying off the tractor’s full cost.
Leasing can be a solid option for new businesses, those that have a low credit score or if you aren’t looking to use the tractor over a long time. It can also free up your capital for other business purchases or investments.
Aside from lower payments, you won’t need to worry about your tractor’s value decreasing over time. And if you do fall in love with it, most lenders give you the option of buying it at the end of your lease with one large payment (though taking out a loan is generally a better deal).
Equipment loans
Good long-term value: You make higher payments over a short time, but you own the tractor at the end of your loan.
Typical tractor loan cost: $17,030.36 Typical loan: $15,000 at 12% APR over 24 months
Be a US citizen or resident and prove you’re able afford payments.
Good short-term value: You make lower payments over any period of time, often with the option of buying the tractor in the end.
Typical tractor lease cost: $6,144 to lease a $15,000 tractor with 9% APR over 24 months. You’ll have to pay at least $11,250 at the end if you want to own it.
Be a US citizen or resident and prove you can afford payments.
There’s lots of talk about how leasing a tractor can save you big on your taxes. Some say that your lease payments are deductible, compared with only part of the cost of a new tractor.
But there’s a catch: The IRS might not consider your tractor lease a true lease if it offers a buyout option at the end. If saving on your taxes is a deciding factor, consult a tax professional to make sure you’re getting a good deal.
Top tractor financing providers
Unlike other equipment, it’s common to get tractor financing directly from a manufacturer dealership — and they can offer better deals than you’ll find with a traditional lender.
Here’s an overview of some of the most popular tractor manufacturers in the US that offer leasing and loan options.
John Deere
John Deere’s big name means you probably won’t have trouble finding a dealership near you. But it also means it can get away with bigger price tags than other manufacturers.John Deere’s loans and leases don’t come with prepayment fees and sometimes offer 0% interest for the first six months. You might have to make a large down payment on loans, however, and rates can be high after the intro period.
Kubota
Kubota is arguably the second most recognized tractor brand in the US. It offers periodic promotional 0% to 4.99% APR loans requiring no down payments, although standard APRs hover around 6%. Borrowers say it’s also more forgiving than John Deere if you have fair to poor credit.
TYM
TYM tractors tend to be cheaper that Kubota and John Deere, but it could be hard to find a good promotional rate. Still, your overall costs could be lower — TYM’s standard APR tends to be lower than the competition. You might sacrifice quality, however: TYM tractors can be prone to breaking down more often, and finding parts can be more difficult.
Kioti Tractors
Kioti is an up-and-coming tractor manufacturer that started offering financing in 2011. Its promotional deals lean toward rebates and free equipment, rather than lower rates. It also has a more limited dealership network than some of the bigger names.
More online business financing options to compare
Narrow down top-rated lenders by minimum amount, maximum amount and more to find the best for your budget and financial goals. Select Compare for up to four products to see their benefits side by side.
If you own a farm, you could benefit from government financing
The US Department of Agriculture’s Farm Service Agency offers operating loans that you can use to buy a tractor. Funding comes from the USDA’s budget, and interest rates are determined by the government, rather than your credit history.
They’re an affordable opportunity for young farmers and those just starting out. The FSA also offers programs for women, minority and veteran farmers.
Financing your tractor can be a little different than financing for other types of equipment. You can find traditional business term loans from banks, credit unions and online lenders. But you may want to consider manufacturer dealerships, which tend to be the heart of the tractor-financing industry.
Then, just because they’re the heart doesn’t mean they have the best deal. Compare your full range of business financing options to find the best loan you qualify for.
Frequently asked questions
When is the best time of year to buy a tractor?
Depending on where you live, you might be able to find some deals on older models in the winter. But don’t let this limit your search — you can find good deals any time of year. A better strategy might be to plan ahead, rather than wait for when you really need a tractor. That way you have time to make a careful comparison.
How do I get financing with bad credit?
Look for a lender that accepts lower personal credit scores. For example, credit unions can be a good option because your established banking history may matter more than an external credit score. Learn more about bad credit business loans.
Are new farms eligible for tractor financing?
Yes, but you typically won’t get the lower rates you’ll see after you’ve been around for a couple years. Be prepared to put something down for collateral and budget more than $1,000 in monthly payments.
What size tractor do I need for my farm size?
It depends on what kinds of projects you need a tractor for, and that tends to matter more than farm size. Smaller projects like spreading fertilizer are great for compact tractors, but harvesting a large crop might call for a bigger machine.
Aside from size, consider variables like horsepower, lift capacity and types of transmission to find a tractor that fits your needs. Owners of larger farms might want to consider investing in a quality machine with a longer lifespan that can handle your acreage.
Anna Serio is a lead editor at Finder, specializing in consumer and business financing. A trusted lending expert and former certified commercial loan officer, Anna's written and edited more than 1,000 articles on Finder to help Americans strengthen their financial literacy. Her expertise and analysis on personal, student, business and car loans has been featured in publications like Business Insider, CNBC and Nasdaq, and has appeared on NBC and KADN. Anna holds an MA in Middle Eastern studies from the American University of Beirut and a BA in Creative Writing from Macaulay Honors College at Hunter College, CUNY.
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