When 0% Works and When it Doesn’t
Embroidery machine financing is just like financing any commercial equipment.
Your payment depends on 3 things:
The price of the equipment you finance
The term of the lease
And 0% doesn’t change any of that.
It’s pretty simple math. If you finance an embroidery machine that costs $10,000, you’ll get one payment. If you finance one at $15,000, you’ll get a different number.
But it’s not exactly the price of the machine that makes the difference. It’s the amount you actually finance.
For example, if the embroidery machine you want to finance costs $15,000, but you put 10% down then your payment will be based on $13,500.
Purchase amount: $15,000 —Minus the down payment of $1,500 = Equals your finance amount of $13,500
Let’s just say that payment is advertised at $285/month for 60 months.
This down payment idea is particularly important because that’s one of the first things you’ll see the fine print of the ad.
Company A may list a payment of $315 on their embroidery machine.
Company B might list $285 on the same priced unit however when you read the fine print it says *with 10% down payment.
How Long Will Your Lease Last?
Embroidery machines are solid pieces of industrial equipment. They last a long, long, LONG time!
Just like financing anything though, the number of months of your lease has a big impact on the payment.
So, for now, let’s leave interest rates and down payments out of the equation.
If you were to calculate payments for a $12,000 embroidery machine for 60 months you would do it like this:
$12,000/60 = $200/month
Now let’s say you wanted to pay it off sooner and only financed for 48 months. It would look like this:
$12,000/48 = $250/month
Your payment went up as the lease TERM went down.
Lastly, if you figure that same amount and extended it to 6 years or 72 months your payments would go down to $166.66/ month.
$12,000/72 = $166.66/month
Back to those low payment ads for leasing an embroidery machine now.
You can see how the same machine at the same price can look VERY different when it comes to payments, right?
Your Credit and the Lease Payment
No business ever advertises a lease payment based on bad credit.
Or so-so credit.
Or for a brand-new business.
Or for any other circumstance other than very good credit.
So, when you see that add for $283/month with 10% down that’s not a guarantee. It will depend on your credit too.
And that just makes sense, doesn’t it?
It’s a bigger risk for a bank to lend to a brand-new business or to someone with bad credit – so they want to make more money for taking the risk.
You can almost always get financed at some interest rate and payment, but the payment will be higher. That’s just the way it is.
If that’s your situation and you see a payment of $250 for a lease advertised, it’s probably going to be a little more for you if you’re a new business or have tough credit. If so, you might also have to add some down payment. Or cut the banks risk in some other way.
The GOOD news is that if you have to put extra money down– you’ll be in a great position when you want to lease your NEXT piece of equipment.
When 0% Financing Can be a Terrible Idea
It can be a terrible idea because there are some embroidery machine sellers online that are using the same financing approach as your local furniture store – and they shouldn’t be.
Basically, the 0% financing for an embroidery machine works, in that case, is really a “store credit card” that’s designed for face to face purchases.
Like when you go to a furniture store and they offer 0%, you’re often getting a new credit card with a preapproved balance on it.
It’s not really 0% at all.
You’re just being charged enough that the credit company gets all of its interest rate in the selling price of the equipment.
So, it’s like saying “I’ll sell you this machine for $12,000 at $200/month financing. But they’re getting $12,500 and the bank is getting $2,500.
In that case, it just doesn’t MATTER that you’re getting 0% interest. Everything is the same. It’s just where you’re looking.
BUT HERE’S WHERE IT DOES MATTER
You can never miss a payment.
You can never be late on a payment.
Because the whole deal goes sideways if you run into any problems.
You’re interest rate goes to the maximum allowable by law. Maybe 24%.
And these credit arrangements are on your PERSONAL credit. Not your business credit.
So now the next time you need to lease commercial embroidery equipment things are not looking so good.
When 0% Financing on Embroidery Machines is OKAY
Nothing is going to change the 3 things we talked about at the beginning.
The 3 things that determine your lease or finance payment are:
- The price of the equipment you finance
- The term of your lease
- Your Credit
Some people would rather put a lot of cash down because they’re focused on the monthly payment.
Some would rather shorten the finance term because they want to pay off their equipment faster.
Some have a great credit score and want to USE it by getting lower interest for the longest term possible.
In order to qualify for a 0% LEASE deal, you’re going to have to have GREAT credit. And you’re probably going to need 2 years in business.
And there’s still some tradeoff between down payment, credit, terms and the price of the machine of course.
Some people are just really focused on the interest rate and would rather see the price of the machine go a little higher, or the term change, in order to see that.
Final Thoughts on 0% Financing for Embroidery Machines
Never do this through a store card or a credit card arrangement. The downside is just tooooooo great.
It does not mean it’s a better deal. You might see Avancé embroidery machines advertise 0% financing. And that’s because there are people that WANT that.
- Just like a discounted price.
- Just like included accessories or equipment.
- Just like more warranty.