Interest Free deals

[BayView]

Just had a thought about all the Interest Free deals always being offered by places like "Hardly Normal" etc.

We did it once - when we moved into PPoR no.2 and needed furniture, and wanted to conserve some cash.

We did it over 2 years, and paid the whole amount off on time. No interest paid.

Now, I make the assumption that we would be not the normal pattern with this type of spend.

I'm sure the under-writers of "Hardly's" deals would not be doing it if they didn't make any money from it. I'm tipping they make huge amounts of interest out of it from late payers, and people who do what we did are in the minority (sadly).

My guess is that most people who take on these "nothing to pay for 3 years" deals do it because they have no money and have no control.

We will definitely do it again in the new PPoR next year, but pay it out on time.

So, just wondering; who has ever done this, and how was your experience?

Was it a worthwhile strategy, or was it an expensive process in the end?

 

[moyjos]

My ex was HOPELESS at saving money but GREAT at paying bills (frustrating)
So my easy answer was to "keep him in debt"

Certainly worked for us. There was no way we would have had any furniture at all if I relied on him to save it.

so, YES....Used properly the interest free schemes can work really well.

 

[super_sam]

Used it many times and never paid a cent in interest

Note that the providers of the interest free finance also make a fee from the retailer. I'm taking a guess here, but given how much the person in the store is willing to negotiate in price before finding out how the purchase is being paid for, and how little they will move after finding out, I would say up to 5%-10% of financed amount

 

[our obsession]

BayView:

Interest Free deals

Just had a thought about all the Interest Free deals always being offered by places like "Hardly Normal" etc.

We did it once - when we moved into PPoR no.2 and needed furniture, and wanted to conserve some cash.

We did it over 2 years, and paid the whole amount off on time. No interest paid.

I wondered about this, never looked into it, but I was wondering how it all worked.

So I understand from this, if you are disciplined, you can, (in your case), partly furnish your house, and as long as you make the installments and it's paid out on time, you get furniture (or whatever), for that period, without chewing into cashflow and just like paying off a car, but no interest??

That is incredible. As long as the payments are met. But how does HN make their money? Because they offer this up, people lapse or lack discipline and get hit with high interest, covers the ones that work the deal to their favor?

You know some really good stuff. For some reason I think I thought it was all high interest and funny buggars.

 

[weg]

BayView:That is incredible. As long as the payments are met. But how does HN make their money? Because they offer this up, people lapse or lack discipline and get hit with high interest, covers the ones that work the deal to their favor?

You know some really good stuff. For some reason I think I thought it was all high interest and funny buggars.

I could be completely wrong in assuming this but I've never bought this way because I thought you'd have no success in knocking down the price as you would when paying in cash.

I've rarely had a problem getting at least 10% knocked of the price of goods that way.

If I'm right then they've probably factored what they don't make in interest into the price.

Btw aren't there deals like this but 'with nothing to pay till ???'?

 

[andrew_de_a]

The finance provider buys the debt from Harvey Norman. There is no risk at all with Harveys as they have been paid out and GE assumes the debt and the risk associated.

So if I buy a TV for $1000 on finance, GE will pay Harvey Norman the $1000 less their cut (Ranges from 1-10% based on term and ticket price). GE also makes money on establishment fee and monthly fees.

Due to the massive mark up on most of Harveys products this works quite well for them, they also factor finance cost into their ticket price and is the reason why you can get great discounts if paying cash

 

[keithj]

So, just wondering; who has ever done this, and how was your experience?

I've never done one.

Does this sort of thing appear on your credit file ? If so, then I'd say in the current environment it would be a bit of a -ve when applying for mortgages.

 

[AlmostBob]

Ladylove has it down to art,
interest free at the store
paid off before the due date - transfered to a credit card that gives interest free on transfers
paid off on the due date

double dip interst free
double dip reward miles

X-fingers free holiday

 

[investor888]

Never have done it, and never would. If you don't have the cash for furniture, then you really can't afford it.
It's the old argument between good debt and bad debt.

If your financial circumstances change, then you have already committed yourself to the debt (for furniture, etc). If my financial circumstances change, then I can buy something cheaper, or delay the cash purchase until my cashflow improves again.

But each to his own.

 

[Belu]

I remember talking to someone at a MIG that did this. Bought a 6 unit apartment block, went to harvey and got all whitegoods and electricals on 2 year interest free. Bought 6 fridges, 6 TV's, etc.

Turned all 6 apartments into fully furnished lets. Added cost of furniture and added the cost to the let. Used this additional income to pay the instalment payments over 2 years so at the end had no debt and 6 units of depreciable assets all with a good return.

A good way to use the interest free period I think...

 

[BayView]

I've never done one.

Does this sort of thing appear on your credit file ? If so, then I'd say in the current environment it would be a bit of a -ve when applying for mortgages.

I wouldn't know.

I guess it would, because it is a form of credit in a way.

From memory (it was back in '94) we signed contracts with the finance company - GE I think.

All the more reason to use it wisely.

 

[bam*bam]

interest free

This is how it works. GE actually charge the store a percentage of the sale. For a conventional small scale retail outlet fees are roughly 10% for 12 months interest free, 15% for 24 months and about 17% for 36 months. Larger stores like Harvey's do get better deals, the exact amount I do not know. On a normal furniture transaction the average is about $3000 - $8000 a sale, which equates to good money. On top of this they charge a $25 establishment fee. Now if the customer doesn't pay off the purchase by the set allocated time, they are charged roughly 27% interest on the WHOLE purchase amount, even if they have paid most of it off and only have a small amount to go.

Using where I work for example (in furniture retail) we do not give any discount to a interest free customer, but do so to one's that pay by cash or credit card.

 

[mja]

I asked this question a little while ago, but never followed through.

Super A-Mart (in Brisbane) was offering *5* years interest free.

So, you buy an inner-city apartment, fully furnish it from Super A-Mart and let it fully furnished, then start depreciating the contents over the 5 years. Surely you'd be able to pay off the contents before 5 years is up...

Then again, life can get in the way of a great idea.

 

[HiEquity]

Never done it.

Always got better discounts by paying cash/CC.

 

[sparky23]

These deals offer excellent opportunities if they are used correctly.

If the washing machine or the fridge go on the blink at the wrong time it can certainly get you out of a hole. We bought a lounge suite on 5 years interest fee which was paid off last year but it was something ridiculous like $10 per week so its unlikely that someone would find themselves unable to manage to keep up those sorts of payments.

 

[silversands]

I am disciplined and diligent when it comes to paying debt - just not good at saving, thats why we invested in slightly neg geared property instead of saving! So when we wanted new furniture, and didn't know if we could refrain from dipping into a savings fund for it, we took on four years interest free and paid it off on time. No cost.

A few years later, hubby wanted a huge exy tv. Not much change from $10k .
I pleaded with him to save the money for it instead of using interest free. I really was just hoping he'd change his mind by the time he saved the money or couldn't commit to saving for it thus sensibly finding something better to spend the money on...

Fast forward two years and he had saved the cash. Guess he really wanted it! Only Radio Rentals stocked the one he wanted. It had come down $1k in the meantime - good. But they wouldn't take off more than $200 for cash sale!
Apparently he had selected the one model that there was very little margin on. (they would have knocked off almost $600 off one that was less than half the price and already on a good special!)

So, hubby dug his heels in and said if the best they'd shave off of something so expensive was $200 then he may as well put it on the four years interest free they were offering; his lump sum could be better spent elsewhere and we would be disciplined debt payers instead...

He put the money into stock for our business and the sales and profit reflected the cash injection very nicely.

I definitely do not recommend this as a smart choice for everyone else, but obviously with the right mindset it can work.

Jo

 

[travelbug]

I voted 2. I used it once when I wasn't very financial.
I'd use it again if the deal was as good as I could get for cash otherwise I'd just pay cash.
My son was offered this at JB hifi. I was against it as he couldn't save but he was 18 so his choice. Problem was they offered more than the flat screen TV he wanted so he added a few more things. $2,000 later he had debt. It said pay $40 a month and he was happy UNTIL I explained how much interest he would have to pay.
He paid $200 a month until it was paid off (no interest). It actually worked out well as 18 months later he was saying "am I still paying that off?" I doubt he'll do it again. It came with a credit card so he could top up to $2,500.
I cut it up and threw it in the bin. SSSHHHH. Am I a bad mother?

 

[jaycee]

He will thank you when he's older travelbug !

That's just baiting, an 18 yr old $2.5k instore credit.. every time they pay something down, they top it back up with te next new gizmo that comes out... good business plan I guess

I bought my w/machine on it.. same price as offered to a cash paying couple, told the guy wanted the same one, then said to the sales guy you can do that price for interest free right ? yes/no/yes/no.. yeah ok with a deposit - how do much you want ? 25% deposit.. think it was about $500 owing for six months...d/debit @ $100/mth... no interest.

Probably prefer to pay cash now, I'm sick of bloody bills..

 

[letiha]

I LOVE interest free, i actually got a new computer on the weekend that was already reduced, 3 years interest free, the cash is in my offset.


The only piece of major furniture I haven't bought interest free lately is my new bed, ended up being almost half price paying cash, so ended up being $2200 instead of just over $4000 .

 

[Spectre]

lots of them - interest free still doesnt mean payment free. Then they charge you for a statement printout. gotta love it