How Financing at 0% Helps You vs Paying with Cash
Financing at 0% with a modest down payment allows you to keep more money invested or available for other needs.
When purchasing a compact tractor (or other equipment), you might consider financing part of the purchase instead of paying the entire cash amount upfront.
How does putting 20% down and choosing a 60, 72, or 84-month financing plan help you? It simply lets you keep more of your money working for you without the cost of interest.
Here's a Step-by-Step Example using a $25,000 Tractor
Step 1: Calculating Your Down Payment
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Tractor price: $25,000
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Down payment (20%): $25,000 × 0.20 = $5,000
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Amount to finance: $25,000 – $5,000 = $20,000
Step 2: Finance the Remaining Amount
Let’s say you qualify for 0% financing for 60, 72, or 84 months.
Here’s what your monthly payments would look like using a straightforward example:
| Term | Monthly Payment ($20,000 at 0%) |
|---|---|
| 60 mo. | $333.33 |
| 72 mo. | $277.78 |
| 84 mo. | $238.10 |
No interest means you’re only paying back the amount borrowed.
Step 3: Invest the Cash You Didn’t Spend
Instead of paying the full $25,000 upfront, you put $5,000 down and finance the rest. That leaves you with $20,000 in cash that you can invest elsewhere (such as a high-yield savings account, mutual funds, or paying off other high-interest debt). Remember, a dollar saved is a dollar earned!
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If this money earns a return (for example, 4% per year in a high-yield savings account), you’re growing your wealth while making your monthly tractor payments and you'll own it entirely at the end of the loan
Step 4: Your Overall Net Worth
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No interest on your equipment loan: You aren’t “losing” money to financing costs when utilizing a 0% plan.
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Money earning on the side: The $20,000 you kept continues to increase your net worth through investment returns.
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No added risk: Since the financing is at 0% and your investments are in safe vehicles, you avoid both added cost and additional risk.
Yearly Earnings Example (with simple interest and not paying off your loan ahead of time, for illustration):
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$20,000 invested at 4% a year = $800 interest earned per year
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84 months = 7 years
- 7 years of no interest = $5,600
- By not paying cash, you just earned $5,600.
*we do not control the interest rates of high-yield savings account. This is an approximation.
Why This Works
As long as you’re not paying any interest on your financed amount, you can let your money work for you elsewhere, helping to:
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Increase your savings or investments
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Grow your business or net worth by keeping cash on hand for opportunities or emergencies
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Reduce the pressure on your budget since payments are spread out over several months
Financing at 0% with a modest down payment allows you to keep more money invested or available for other needs. As long as your investments grow at a positive rate and you’re not paying loan interest, your overall net worth is the same, or even higher, than if you’d paid cash for the tractor all at once.