BristolUK

I had one of those buy appliances by credit flyers in the mailbox today.

I'm always amazed at how much things cost through these rip off merchants.

This one has a side by side fridge/freezer with ice & water dispenser. 23 cf. Monthly payments of $150 for two years. Total price = $3600. (not sure if the 'lease price' is included or on top )

Now, I can quite understand how $150 might be manageable and might be the only way of getting one.

But the very same model in Sears and not on special is $1400.

Speaking personally, if I knew I could get it for that price rather than $3600 and that if I could afford $150 a month then it would only take me 10 months to save it, then I'd make my choice from the following options.

• Find some way of getting it for $1400 - perhaps by credit card, an expensive method if not paying off in the required period but still much cheaper than $3600

• Borrow it from elsewhere - eg family

• Do without for the time being

Of course, for this last option it might be something that you really can't do without. But this doesn't apply to a fancy side by side fridge with water&ice dispenser.

If I had nothing, then I'd use my $150 on a used one and buy the 'dream fridge' 10 months later. Or, more likely, make do and then buy a perfectly adequate one 5 months later.

But what I find even more of a puzzle is the quoted cash price for the items in this flyer.

This $3600 over 2 years fridge can be had for $2400.

But why would you pay $2400 from this rip-off company when you can get it in Sears for $1400? Who would buy it from this company when they could save $1000 by going to Sears?

I can imagine there are people for whom paying up front (even by credit card) is impossible. But do they only ever look at these things in the flyers or the shop of the companies that do this and not realise there are better cash prices elsewhere?

Surely they must pass a shop window and notice a price? Or see any number of flyers or TV ads from Leons, The Brick, Best Buy, Sears etc and see.

This same flyer has a 32" TV for $40 x24 = $960 or $630 cash.
You can get a 32" TV for $169 in two well known stores here.

There's a basic washer/dryer pair for $100 x 24 = $2400 or $1600.
$850 locally. Could even buy a front loader washer as part of the pair for $1500.

So accepting monthly instalments might be the "only way" - although one could wait or compromise - if you were to pay up front, why would you do so from these companies?

What am I not considering?

Alan2005

This is the brighthouse model. It's incredibly shitty.

withabix

See also Payday Loan sharks...

We have people in our construction crew and those of our subtrades who go straight to the cheque cashing place with their paycheque on the way home from work every Thursday. They don't even have bank accounts (or if they do their debts are maxed out and they have no intention of paying them or their child support or whatever...)

What you aren't considering is 'people'.

Those 'people' who buy other big ticket items on credit like cars and keep turning them in every few years for a new one without ever paying one off, because the new payment is lower than their current payment...

I paid $32,000 cash for a new car two years ago. The Stealer was desperate for me to buy it on '0%' credit instead. Why? Because the price on '0%' credit was $45,000 He fell of his chair when he realised that I was buying it outright. 'People' don't do that in Canada apparently....he actually said that!


Canadians like to have all the shiny new stuff - truck, sports car, boat, skidoo, snowmobile, RV, quad, iPhone, Single Family Home, cottage, 80" TV, MacBook, iPad, winter sun holiday, summer holiday etc, etc but never pay for any of it completely....

Pulaski

Hire-purchase businesses in the US are operating a racket. Typically you're signing up for three years of payments when 10-12 months of payments aggregate to the "fair retail price", which is exactly consistent with BristolUK's observation.

BristolUK

I advocated for a homeless benefit claimant once who wasn't getting anywhere when he clearly had a case. Succeeded with a back payment of several thousand quid but he didn't have a bank account nor the ID to open one and the DWP wouldn't split it into smaller payments to allow cashing at a post office.

I could have arranged the necessary ID and he could have accessed it all in about a week.

He wouldn't wait, took the giro to one of those money places who charged him something like 8% so he could get it straight away.

MillieF

Me in John Lewis in Oxford Street:

Cashier: "would you like a John Lewis credit card"
Me: "No, thank you"
Cashier: "Why"?
Me: " I save for things I want to buy"
Man Behind Me: "Will you marry me"?

I now listen to colleagues on a daily basis attempt to negotiate for Pay Day loans. I am being paid $11 an hour, and come to work with a gourmet lunch (from my kitchen)...those same people then drive to Wendy's and buy a salad and pop for $11.50...amazing They also have tiny children and absolutely no idea about home economy..who is to blame? Us, surely?

nldfc

Being up to your complete eyeballs in debt seems to be the done think around here , I cant really understand it myself .


I know several families well that live in 500,000 houses , all new vehicles , skidoos , seadoos , motorbikes and quads none of them actually paid for - All of them live payday to payday while racking up their credit cards and credit lines - Every couple of years when the credit is racked they go to the bank re-do their mortgages taking another chunk out of the equity - I cant understand what they think is going to happen when they hit retirement and still have all these payments to make on the pension

scilly

We've never bought anything on that kind of credit. It's just plain stupid, although people get themselves into that kind of mess.

We either saved up until we had the exact amount, or knew we would have it by the time the credit card statement arrived, or we took a loan form the bank that we could pay off as fast as we wanted.

The last time we bought a car, we used our Line of Credit for about half the amount and paid it off at $1500 a month.

Like Withabix, the dealers can't quite believe what they're seeing when we whip out the cheque book and write a cheque

dave_j

You can't protect people from themselves.. 'The force can have a strong influence on the weak minded'

It's difficult to see what will happen in the future so it pays to think about it. Our thrift, (apart from our mortgage) never going into debt, never paying into pensions (other than defined benefits) but saving the cash equivalent instead, driving older cars, cooking for yourself etc etc.. All of these have enabled us to do what we do now we are retired.. still debt free, home owners and useful bank of mum and dad, and most importantly stress free.

Pulaski

Thrift can keep you safe and comfortable. ... ish. Greater wealth comes from taking a few risks - paying for a college degree, and an advanced degree, or professional certification, or investing in a business. Often such investment takes time too.

I respect those who take the "safe" route, my father did, and maintained a pretty average existance in the UK, with an average semi, one average car, and a meal out once in a while. ..... I bought an nine year old Alfa 164 when I was in my late 20's, mostly with money I borrowed from my mother. When I first gave her a ride in it she openly wondered my father had only ever bought 1.3 Astras, and prior to that a rather nasty Vauxhall Viva estate.

My Alfa was so nice, unknown to me, she assumed she had leant me a little top-up loan, but while chatting a couple of years later she was genuinely shocked to discover that she had paid for three quarters of it! .... And she again wondered why my father bought such small cars when a large "nice", albeit used (all the cars my father ever owned were used, apart from a '73 Chrysler Avenger), one was so cheap.

dave_j

It's a state of mind that you evolve into I think. As a student, part of my sandwich course was as a Praktikant a sort of trainee, in Germany. I was relatively well paid and lived like a monk saving to buy an MGA. I had a miserable time there but duly returned and bought one. Two years later I'd had two accidents and sold it for scrap.

There followed a new car, a luxury car and a sports saloon before it dawned on me that the only cars worth having were those that didn't cost me money and got me from a to b reliably.

The new car, cost me 4000. I worked out when I sold it many years later that had I invested the money it would have been worth 20000.. the real cost of the car. I never bought another new one after that.

My latter series of cars were very high mileage french diesels bought from ebay and they were all excellent and never let me down.

Pulaski

A fair point, but does it make more sense to pay £10,000 for a used Astra or £2,600 for a used Alfa? I think I was applying your principle more closely than my father, who's explicit obsession was small engines not necessarily cheap cars.

I think I may have rebelled against his ideas on engines, and I am sure he thought I did. My second car was a 1.6 Sierra, the next was the Alfa with a 3.0. Then I moved to America and my fourth car was a 4.6 Mustang, .... and my fifth was a 5.4 F250!

BristolUK

I remember buying my first washing machine from Rumbelows on monthly payments but it was barely more than the cash price would have been.

I went from renting my TV/Video to buying them (Radio Rentals) for only £2 more a month and owning after 20 months.

Then, many years later, I bought a couple of sofas from DFS, interest free (genuinely so) over two years.

Can it be that we've just been lucky to have had monthly payment options that only cost a little more than up front while Canadians haven't? How about the USA?

While this might account for the lack of aversion to spending 3 or more times as much as you need to, none of this explains why these companies will charge (and possibly get?) an up front price that's double that of a more reputable supplier.

Pulaski

The difference is that those are genuine retail businesses offering finance deals, as opposed to the Canadian and US businesses whose business model is providing household goods on insanely expensive finance to those with poor credit records.

I have bought kitchen appliances from Lowes in the US on 0% credit, but that is 0% on the regular cash "sticker" price. The only cost of the 0% finance is that I could have got a 5% discount if I had used my Lowes credit card (and immediately paid it off).

In fact I have even bought clearance/ scratch & dent appliances on 0% credit, and the last time I needed new laundry appliances I held Lowes to a price-match with a competitor, qualified for $300 of manufacturer rebates, .... and used a personal (not offered to the general public) 18 month 0% finance offer! I got almost $2,000 of appliances for $1,400, most of which I didn't have to pay until 18 months later.

dbd33

Our furnace came from the Home Depot, bill deferred for 18 months at 0%. The statements are interesting as they show the interest due if you pay after 18 months and one day - pretty much the price of another furnace.