Hey there,
Has anyone experienced financing or payment plans for a horse purchase (mid-high five figures)? Or do these transactions typically happen with full cash? I’m asking for a friend, I don’t have any good advice nor experience with payment plans and if they’re a good idea or risky.
I’m also unsure if owners through professional selling organizations (such as German Horse Center) offer the finance rate or if it is decided by the owner.
Thanks in advance!
Someone might allow several payments over time as a favor to a friend or an inbarn sale to a student. But it’s very risky for the seller. And honestly no one should be buying a horse they need to finance.
I have no idea if any sellers offer financing through a bank in Europe. That would take the direct risk off the seller but would a German bank finance a horse to be exported to America where they might find it hard to enforce payments?
A horse is a luxury purchase, NOT something that should ever be financed! If she wants an expensive horse, she should save up the money and then buy it. If she isn’t capable of saving up that much, then how on earth would she be capable of making the payments? 🙄
I met a fellow from kentucky whose job was financing horse semen LOL. I’ve know of a couple of people who bought horses with a payment plan between seller and buyer, most others I know of, if they needed to finance anything did so between a lender and themselves so seller got full payment. Not sure how it’s done when you reach the really big figures.
Occasionally done between private buyer and seller in lower price ranges. But it’s most often done as a cash sale for agreed upon price or as a full lease at a percentage with option to purchase at the end for the predetermined price in the contract. If no lease in place, horse would never leave the sellers property until fully paid for.
Cannot imagine the Germans or anybody else over there would export any horse to another country if not paid for in full or offer any financing options, that’s what banks and other financial institutions are for. Professional horse dealers over here don’t offer private financing on 50-90 k horses either. They might help establish value with a lender ir recommend one that will finance a horse.
If friend is shopping mid to high five figures, they can secure a loan so seller gets paid in full before horse ships, which is pretty standard anywhere if buyer has good credit.
I have heard of payment plans, but they’re rare. Generally speaking, a seller wouldn’t be willing to let the horse leave his/her possession until all payments were made. Unless, of course, we’re talking about a lease-to-own, which is a somewhat different arrangement.
Nobody NEEDS a horse, so if you can’t afford the purchase price you shouldn’t be buying one on credit. The purchase price is always the cheapest part of ownership, so if they can’t afford that how are they going to pay for all the other expenses like board, unexpected vet bills, insurance, etc.
I did know a dealer who always kept a few sales prospects at the barn I rode at, and he was very generous in letting people who rode there to do long trials and a few who bought horses from him and paid him off over time. I have no idea what the financing arrangement was, except that they gave him a deposit and made monthly payments until the horse was paid for. Luckily none of the horses ever got hurt or went lame before they were paid for as far as I know, but I thought it was a big risk for the seller. I also knew a trainer who would import a few nice horses at a time and sell to clients, some of the clients would buy on time but no papers or bill of sale was exchanged until the horse was paid in full. Most of these horses were in the $50k price range, give or take a few thousand, and they had to be stabled on the premises.
I sold my horse for $15k on a payment plan. He didn’t leave the barn until the payments were complete, and we agreed to a schedule in writing for the payments. She had the long term ability to pay for upkeep, was just at a weird spot with paycheques/freeing up money, etc. I was nervous at first but she actually paid it off earlier than we laid out, and it’s been an absolutely wonderful home. I wouldn’t advise it in every case but it can work!
eta in this case, in acknowledgement of the payment plan, the buyer did not attempt to negotiate price and paid my asking price. Which I think is a good expectation- don’t also haggle the price if you are asking for a payment plan.
Like any other luxury purchase, I would not expect the seller to finance unless that was advertised/offered as terms of the sale.
Can friend not get a loan from her bank?
My 1st horse was almost named Refi, as his purchase price came from the proceeds of refinancing a mortgage.
Not 100% of the funds, but a small part.
Not enough information to know. Interest rate is determined by the the party that bears the risk on nonpayment / default. You’d have to know the contractual relationship between the German Horse Center and horse owner to know which party bears that risk. Could be that GHC pays the horse owner $xxx and handles the sale, so the buyer’s money goes to GHC and not the owner. (and therefore GHC is on the hook if the buyer defaults on the loan). Or maybe GHC is just a pass-through, where they handle all the transaction paperwork, but the horse owner retains the risk (ie the buyer’s payments go to the owner, through GHC.
One can borrow money for anything (legal) as long as one has assets which secure that line of credit. (More specifically, assets that the lender believes that they can reliably convert into money to be ‘made whole’ if the borrower defaults. For certain types of purchases, like a car or a house, the thing being purchased can be the asset that secures the credit (the lender can repossess and sell that car/house). I don’t have first hand knowledge of a horse loan like this, but I would be shocked if any bank would consider the horse to be a valid asset that secures the loan, since it could be rendered worthless in the blink of an eye in a pasture accident.
In the end, not sure it matters who is setting the interest rate for your friend’s deal. It is what it is-- that’s the amount that particular lender needs to make the loan to this buyer. Take it or find a lender that offers a better rate, such as a bank loan. Anyone who is spending that much on a horse would/should have enough assets to get a traditional bank loan. They may have to put their house on the line to do so. If a person is forced to resort to nontraditional lenders because they can’t get credit, or if they’re not sure enough about this purchase that they don’t want to put their own assets at risk, then it’s a very high-risk endeavor that will commend a high interest rate no matter who is the source of the money / who’s setting the rate. A very high interest rate is something that should cause the borrower to pause and seriously consider their choice.
I know of a few cases in-barn (where owner ultimately retained control of the horse until the end of the payments) or for youngsters (again, with the breeder retaining the horse until payments are complete).
Frankly, if the buyer cannot secure their own financing from a bank, the seller would be taking a pretty big risk in accepting payments. And if they are willing to do so, it should come at a hefty premium. Generally, there is no reason for the seller to subsidize the seller’s purchase, and bear the risk of the buyer not paying, or the horse being injured. Which doesn’t mean that exceptional circumstances don’t exist, or that a particular seller might not be willing to take on the risk at the right price/rate.
I have sold a couple of horses in the mid-high 5-figure range on payments plans. In both cases the family had the money to spend but the household provider (happened to be dad in both cases) was not willing to hand money over in one chunk. Ironically, the people who haven’t had the money (and truly needed a payment plan to afford the horse) have taken out 3rd party loans and handed me a check (or done a bank transfer).
In my cases, I set the interest rate and told the people up front that it would be higher than anything they could get through regular channels. Although with that being said, I didn’t apply an actual interest rate, I just said “if you make payments price is $75k, if you pay me in a lump sum it is $70k.” The longest term I ever dealt with was 6 months, so >50% was paid in one lump sum and then 3 or 4 payments were made after. In one case dad definitely did not know about some of the payments. Non-negotiable was the very thorough contract detailing exactly what would happen if a payment was missed/late.
I think this is probably done more than people know. There is certainly no reason to “out” the payment methods in a horse sale in general.
My mare was $12k and was bought on a payment plan. We paid $6k upfront then an additional $1k until paid off. The buyer had our numbers, address, email, everything. I bought her while at a barn where they were friends with the trainers but I soon moved home. The mare came with me, but she knew the new location and we never missed a check.
Buyer held papers and I was made to keep her insured, which i still do. People were shocked she let us take the mare off the property but by that time we had proven our honesty. I never missed a text, I always updated her and she always got pictures. Once bought I now never speak with her. But I can imagine this is incredibly rare.
We also drew up a very cut throat contract. The only thing we didn’t add was the mare needed to stay on the property until paid off (which I’m grateful for because me and the trainers had a falling out).
It also doesn’t mean the person can’t care for the horse. I’ve never held back money from my mare. She gets all the chiro/massaging/shoeing that she needs and then gets the supplements, treats, injections anything that’s a necessity as well (and to her treats are indeed a necessity😂).
So TL;DR: it can happen but it’s not usual and a contract should be drawn up that both parties sign and have a copy of.
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