$78,000 Cash. $84,000 at 0%. Same compact track loader, same dealer, same afternoon.
For a contractor, the decision factor is the gap between those two prices. A 0% offer can be built into a higher financed price, so it isn't always the cheapest money. Get the cash price and the financed price in writing, turn the gap into a rate, and compare it with borrowing elsewhere.
General info, not legal or financial advice.
Why can a 0% deal cost more than paying cash?
Because the price can move. Buyers in equipment forums report getting a lower cash price than the 0% price at the same dealer. Ask whether taking the promo means giving up a cash discount or rebate. When the financed price is higher, the 0% isn't zero. The cost sits in the price.
That doesn't make every promo a bad deal. Sometimes the prices match and 0% is the best money you'll find. You only know once both numbers are on paper.
How do you turn the price gap into a rate?
Treat the cash price as the real amount borrowed. Then ask what interest rate would turn that amount into the 0% payment.
Worked example
All names and numbers are made up.
Clearwater Site Work wants a compact track loader. The dealer quotes:
- Cash price: $78,000
- 0% Price: $84,000 over 48 months, or $1,750 a month
The $6,000 gap is the cost of the 0% deal. Borrowing $78,000 and paying $1,750 a month for 48 months works out to about 3.7% APR. That is the hidden rate.
Now compare. Clearwater's bank offers 8.5% for 48 months on $78,000. The payment is about $1,923 a month, and total interest is about $14,283. Next to that, the 0% deal's $6,000 cost is the cheaper path.
Flip one number. Say the 0% price was $92,000 instead. The gap is now $14,000, close to the bank's interest. At that point the deals are about even, and the bank loan may come with fewer strings.
Does a shorter 0% term change the math?
Yes. The same $6,000 gap costs more per year when the term is shorter.
Run Clearwater's quote at 36 months instead of 48. The 0% payment becomes about $2,333 a month. Paying that on a true price of $78,000 works out to about 4.9% APR. Same dealer, same gap, higher hidden rate.
A shorter term also means a bigger monthly payment. Check that $2,333 against your slowest month, not your best one. A winter with two idle months can turn a cheap rate into a cash squeeze.
Does federal truth-in-lending law protect a business buyer here?
Mostly no. Regulation Z, the federal truth-in-lending rule, exempts credit extended primarily for a business, commercial or agricultural purpose: https://www.ecfr.gov/current/title-12/chapter-X/part-1026/subpart-A/section-1026.3
So the dealer may not hand you an APR box like a car buyer gets. State rules vary, so check your state's financial regulator. Either way, do the math yourself.
What should you ask the dealer in writing?
Put these on one quote sheet:
- Cash price, out the door, with the same attachments
- Financed price at 0%, term and monthly payment
- Whether rebates or cash discounts are lost by taking 0%
- Any documentation fee, required insurance or service plan inside the financed price
- Prepayment terms, if you pay it off early
Then get the same machine quoted at a second dealer. Machine price and financing terms are separate choices.
When does paying cash still make sense?
When the cash won't be needed for the next payroll, materials or retainage gap. A loader paid for in cash can't make payroll. Before you pay $78,000 up front, check your slowest month of the last year.
If cash is tight, the 0% deal can keep it in the bank at a known cost. SBA 7(a) loans can also be used to buy machinery and equipment through a lender: https://www.sba.gov/funding-programs/loans/7a-loans
Dealer financing is an equipment loan, not a merchant cash advance. The difference is here: https://mcafax.com/notebook/equipment-financing-vs-merchant-cash-advance
More on the machine choice: buy, lease or rent at https://mcafax.com/notebook/contractor-buy-lease-or-rent-excavator and down payment basics at https://mcafax.com/notebook/contractor-equipment-down-payment. The contractor funding guide: https://mcafax.com/notebook/construction-business-loans. Funding types side by side: https://mcafax.com/notebook/where-to-get-business-funding
