4 ms·

These companies are all terrible. Unless you're buying a car or a house which often (but not always) require financing, if you don't have the cash in your accou

These companies are all terrible. Unless you're buying a car or a house which often (but not always) require financing, if you don't have the cash in your account today to buy a product in full, you can't afford it. There are other concerns on what "afford" means (ie do I have the budget for this or is my cash for something else), but if the answer to the question is no, you can't buy that item yet.

ztratar 4y ago
The part missing from this concern: taking out 0% financing is often a prudent move. This pushes out your cost structure and allows you to keep more of your money to make use (investments, etc) where you can theoretically earn interest. It also allows people to build their credit without a credit card. But yes: people shouldn't be using it to buy things they can't afford.
- aaronchall 4y ago
  A 0% financing bakes the seller's profit into the price paid and just makes it less rewarding to pay it off early.
  - eoghann 4y ago
    Not always! I buy everything, including food shopping, on 0% credit cards and keep the money in savings accounts earning interest. I always have a matching amount in savings as the balance on credit.
    - bityard 4y ago
      What is the interest rate on your savings account?
  - dhosek 4y ago
    When I graduated college, I furnished my apartment with furniture paid for with 0% financing on the Stør¹ credit card. Reading the fine print, if I didn't pay off the card in full by the end of six months, I would be charged some outrageous interest rate (over 20% IIRC—but this was 31 years ago so I could be wrong), backdated over the life of the loan. A lot of 0% financing works on similar bait-and-switch terms. If you look at the fine print on auto financing deals, it often requires a high down payment and short loan term and it's there more to get people into the dealership than anything else. Those few who are able to actually use it are considered an advertising cost. ⸻ 1. Stør was similar to IKEA but Danish and a bit more downmarkt
    - lotsofpulp 4y ago
      I have bought at least 3 vehicles with 0% interest loans, and no down payment. The seller would not give me a lower price if I paid all or a portion in cash at the time of purchase. The only cost to me is the effect on my credit, but that is negligible unless if you are not excessively indebted.
  - KMnO4 4y ago
    By the do you mean you’re paying the “interest” cost of the loan as part of the sticker price? If so, that’s not always the case. I used to offer 0% and absorb the cost of the financing (which cost me approx 2% of the profit) because it meant purchases from people who otherwise wouldn’t buy it.
- wbsss4412 4y ago
  > It also allows people to build their credit without a credit card. I actually looked into this when I first saw these companies spring up, as I figured it couldn’t hurt to build up my credit some more, for free. Unfortunately, unless I was mistaken, what I determined was that these companies don’t report your positive activities to the credit bureaus. The net result is that there’s nothing but downside from a credit perspective.
josevalerio 4y ago
I typically budget a multiple of the item cost. “If I lost this item once or twice in the next week / month, could I afford buying it again to replace it”
namdnay 4y ago
You should only borrow for an investment. Houses sure. Cars, less so. You’d have to be very poor with a very strong need to have a car, and then I guess borrowing 3k to buy an old Toyota could make financial sense
- fknorangesite 4y ago
  > You’d have to be very poor with a very strong need to have a car This describes many, many people.
  - solveit 4y ago
    Yeah, cars are an investment in the sense that people need them to make money (hold down a job).
  - dvtrn 4y ago
    Yes but saying it out loud forces people to think about what goes on outside of their own cozy, financial situations.
- lotsofpulp 4y ago
  It is the opposite. If you have a high income or are otherwise wealthy, why would you pay cash for a car? Borrow the money for the car since it’s usually at or near 0% interest, and invest the cash you would have needed to pay for the car in an index fund. I cannot think of a time in the last 20 years where you would have not come out far ahead by investing the money for the car.
  - namdnay 4y ago
    0% finance just means you’re paying a bigger upfront cost. Buying a new car is never worth it
- quickthrowman 4y ago
  You pay for cars in cash? Why? My car loan is 2.5%..inflation is currently 8.x% (averaged 2-3% over the previous decade) and a typical annualized market return is 7-10%. Dropping $30,000 of cash on a car is silly, don’t sell assets that generate a return to buy a car, which is a depreciating asset… I understand not borrowing at 18-25% for consumer garbage, but financing at a low rate for a car is definitely a good idea.
tshaddox 4y ago
If you're informed and disciplined about it, I absolutely think it's possible to use these services responsibly. I don't really see a problem if I have given myself a reasonable monthly allowance for discretionary spending and sometimes I decide I'd rather spend a higher amount over several months to get a toy now, rather than save up my allowance over several months to get the toy later for a lower total amount. As long as I've set my monthly allowance responsibly and I stick to it, I just see this as a preference for how I spend my play budget, no different than deciding to use my play budget on movie tickets vs. concerts vs. stereo equipment vs. anything else. The bigger concern, of course, is to what extent these service providers deliberately influence people to spend irresponsibly, particularly if they make it difficult to understand at a glance the financial repercussions of the loan policies.

ztratar 4y ago

The part missing from this concern: taking out 0% financing is often a prudent move. This pushes out your cost structure and allows you to keep more of your money to make use (investments, etc) where you can theoretically earn interest. It also allows people to build their credit without a credit card. But yes: people shouldn't be using it to buy things they can't afford.

aaronchall 4y ago
A 0% financing bakes the seller's profit into the price paid and just makes it less rewarding to pay it off early.
- eoghann 4y ago
  Not always! I buy everything, including food shopping, on 0% credit cards and keep the money in savings accounts earning interest. I always have a matching amount in savings as the balance on credit.
  - bityard 4y ago
    What is the interest rate on your savings account?
- dhosek 4y ago
  When I graduated college, I furnished my apartment with furniture paid for with 0% financing on the Stør¹ credit card. Reading the fine print, if I didn't pay off the card in full by the end of six months, I would be charged some outrageous interest rate (over 20% IIRC—but this was 31 years ago so I could be wrong), backdated over the life of the loan. A lot of 0% financing works on similar bait-and-switch terms. If you look at the fine print on auto financing deals, it often requires a high down payment and short loan term and it's there more to get people into the dealership than anything else. Those few who are able to actually use it are considered an advertising cost. ⸻ 1. Stør was similar to IKEA but Danish and a bit more downmarkt
  - lotsofpulp 4y ago
    I have bought at least 3 vehicles with 0% interest loans, and no down payment. The seller would not give me a lower price if I paid all or a portion in cash at the time of purchase. The only cost to me is the effect on my credit, but that is negligible unless if you are not excessively indebted.
- KMnO4 4y ago
  By the do you mean you’re paying the “interest” cost of the loan as part of the sticker price? If so, that’s not always the case. I used to offer 0% and absorb the cost of the financing (which cost me approx 2% of the profit) because it meant purchases from people who otherwise wouldn’t buy it.
wbsss4412 4y ago
> It also allows people to build their credit without a credit card. I actually looked into this when I first saw these companies spring up, as I figured it couldn’t hurt to build up my credit some more, for free. Unfortunately, unless I was mistaken, what I determined was that these companies don’t report your positive activities to the credit bureaus. The net result is that there’s nothing but downside from a credit perspective.

josevalerio 4y ago

I typically budget a multiple of the item cost. “If I lost this item once or twice in the next week / month, could I afford buying it again to replace it”

namdnay 4y ago

You should only borrow for an investment. Houses sure. Cars, less so. You’d have to be very poor with a very strong need to have a car, and then I guess borrowing 3k to buy an old Toyota could make financial sense

fknorangesite 4y ago
> You’d have to be very poor with a very strong need to have a car This describes many, many people.
- solveit 4y ago
  Yeah, cars are an investment in the sense that people need them to make money (hold down a job).
- dvtrn 4y ago
  Yes but saying it out loud forces people to think about what goes on outside of their own cozy, financial situations.
lotsofpulp 4y ago
It is the opposite. If you have a high income or are otherwise wealthy, why would you pay cash for a car? Borrow the money for the car since it’s usually at or near 0% interest, and invest the cash you would have needed to pay for the car in an index fund. I cannot think of a time in the last 20 years where you would have not come out far ahead by investing the money for the car.
- namdnay 4y ago
  0% finance just means you’re paying a bigger upfront cost. Buying a new car is never worth it
quickthrowman 4y ago
You pay for cars in cash? Why? My car loan is 2.5%..inflation is currently 8.x% (averaged 2-3% over the previous decade) and a typical annualized market return is 7-10%. Dropping $30,000 of cash on a car is silly, don’t sell assets that generate a return to buy a car, which is a depreciating asset… I understand not borrowing at 18-25% for consumer garbage, but financing at a low rate for a car is definitely a good idea.

tshaddox 4y ago

If you're informed and disciplined about it, I absolutely think it's possible to use these services responsibly. I don't really see a problem if I have given myself a reasonable monthly allowance for discretionary spending and sometimes I decide I'd rather spend a higher amount over several months to get a toy now, rather than save up my allowance over several months to get the toy later for a lower total amount. As long as I've set my monthly allowance responsibly and I stick to it, I just see this as a preference for how I spend my play budget, no different than deciding to use my play budget on movie tickets vs. concerts vs. stereo equipment vs. anything else. The bigger concern, of course, is to what extent these service providers deliberately influence people to spend irresponsibly, particularly if they make it difficult to understand at a glance the financial repercussions of the loan policies.