Today's Rant - Five Years, No Interest

[vettex2]

Originally Posted by Z06PDQ

anytime they make a deal like that they mark the price of the item up to cover the $$ they lose on financing. car dealers are famous for it.

actually quite often it is an out side finance company

[Blue Demon]

I've used the no interest/no payment for two years on my three big screen HDTV purchases. Used their money for two years, paid the loans off and everyone was happy, well probably not the finance guy who was hoping I would not pay them off at the two year mark.

[Iron Chef]

Originally Posted by Y2Kvert4me

I doubt it.

1. There is is nothing inherently wrong with using someone else's money for 5 years, free of charge. The very smart people often take advantage of that even if they don't need to, that is, "all else equal" (to address Phil's point about retail price differences to cover it).

Of course not...IF you can afford it to begin with. That's a big "if" and I don't think the company offering the financing is targeting those people. I bought my GS using 0%, but I put 50% down and could have paid cash if I wanted to. I'm using GM's money as an investment tool, not as a means to buy something I otherwise couldn't afford. Unfortunately, terms like this are in many cases offered to those kind of people.

Originally Posted by Y2Kvert4me

2. You have to qualify for that loan.
As you might know, lenders have radically tightened up their approval requirements, so it could be said that if you can't afford it, you won't be realizing those terms, because you'll never qualify for that loan to begin with. Ad hype brings people into the store, that doesn't mean a guaranteed done-deal with the bank.

We'd all like to think that lenders have tightened up their rules for qualifying and indeed, some have (e.g. cars, home mortgage, etc.) but others have not. I know more than a few people who qualified for a loan simply by answering a verbal "do you make this much?"

Originally Posted by Y2Kvert4me

3. Everyone is trying to find a way to get consumers buying again. It IS what drives our economy. Most reading this may have never stopped buying goods, but that's not an accurate portrayal of the country as a whole either.

Agreed. But if a consumer makes a purchase that they really shouldn't be making, and then defaults on that purchase, who winds up paying the price? The whole mortgage scandal should have taught us all that someone always pays the piper, if not directly then indirectly (hence one of the reasons we're in such an economic mess). And defaulting on loans "en masse" doesn't help our economy.

Originally Posted by Y2Kvert4me

Not everyone has $1500 in cash to drop on a new mattress set, (and if they did, would it be their priority as to how to spend it?) but the vast majority could swing a $20 monthly payment. Sure, the tactic entices people (who otherwise wouldn't) to buy, but claiming affordability is a totally different thing. The lender will have to determine that to their satisfaction prior to financing them.

Since you didn't post all the tiny print details about this 5 year no interest deal, these are the conclusions I arrive at.

To the best of my knowledge, if you miss a payment or if you don't pay the balance in full at the end of 5 years, you pay ALL the interest due. I'm sure there's more to it than that, but that's what I heard.

All I can tell you is that my dad...who went through the Great Depression as a young adult...was very old school and he taught me the same way. If you can't afford to buy something, you do without until you can. And IMHO we'd be a lot better off financially if we ran a much more conservative economic ship.

[Y2Kvert4me]

Originally Posted by Iron Chef

I know more than a few people who qualified for a loan simply by answering a verbal "do you make this much?"

A 0% loan? (again, show me the offer and those terms...)

The whole mortgage scandal should have taught us all that someone always pays the piper, if not directly then indirectly (hence one of the reasons we're in such an economic mess). And defaulting on loans "en masse" doesn't help our economy.

Of course. The mortgage thing is radically different though.
People were banking on rapidly escalating RE values to effectively pay their mortgage.
There is no other commodity I can think of that would lead to this behavior. This was not all the consumer's fault IMO. It's banking on predictions and arbitrary valuation, with money that doesn't, and never did, exist.

It's a sweet system when values keep going up, it's a real beotch when the market corrects and values resume normalcy.

To the best of my knowledge, if you miss a payment or if you don't pay the balance in full at the end of 5 years, you pay ALL the interest due.

Yep, that's the typical hook. Long time ago, I took on some terms like that, and made DAMN sure it was paid off early. They are banking on the ones that won't.

All I can tell you is that my dad...who went through the Great Depression as a young adult...was very old school and he taught me the same way. If you can't afford to buy something, you do without until you can. And IMHO we'd be a lot better off financially if we ran a much more conservative economic ship.

I do agree with that, however, creative financing offers are not always the devil either. Just because an option exists doesn't mean you're buying something you can't afford. Your stated GS purchase illustrates exactly my point.

[Iron Chef]

Originally Posted by Y2Kvert4me

I do agree with that, however, creative financing offers are not always the devil either. Just because an option exists doesn't mean you're buying something you can't afford. Your stated GS purchase illustrates exactly my point.

Never said that they were, but as we all discovered, people WERE buying into homes they could not otherwise afford. I must have read 1/2 dozen articles about it in magazines like Time and Newsweek (and no, I can't produce the magazines). I lived next to a neighborhood in Fort Worth where a good 70% of the homes were sold at zero down. Wanna take a guess how many of those people were out of their homes in a year or two? And yes...they were helped along by unscrupulous mortgage bankers. Ultimately however, no one put a gun to their head to sign on the dotted line.

My GS purchase does illustrate your point. MY point, however, is that I do not believe that "I" am the type of buyer being targeted by these ads. Maybe I'm wrong...but I doubt it.

I just see a distrubing pattern here as though many people never learn.

[Y2Kvert4me]

Originally Posted by Iron Chef

And yes...they were helped along by unscrupulous mortgage bankers. Ultimately however, no one put a gun to their head to sign on the dotted line.

But before signing, it is ultimately the lender that had to approve the loan, and draft the documents to sign on.

They hold the cash. It is ALWAYS their decision as to who to loan it to, and at what terms. Just because 100 people hold their hand out, doesn't mean 100 people will get loans.

The mortgage thing is a topic all it's own, I can't even compare that to your original post here.