There is no such thing as "Interest Free" - but here is how to make it work FOR you rather than you SUBSIDISING it.

roderigo on 28/08/2014 - 13:36

We all know there is no such thing as a "Free Lunch" under these "Zero Interest Ever" Deals this is what happens in the background:

You See something you want to buy

  1. Your Finance is approved by the Finance Company.
  2. The Retailer lets you take your purchases home.
  3. The Finance Company then pays the Retailer A SIGNIFICANTLY DISCOUNTED AMOUNT sometimes the next day, sometimes at the end of the month!
  4. For 3 Years interest free the retailer will typically receive payment of 20% to 40% LESS than the total cost of the goods. So on a $4000 engagement ring the store will have to take around $3000 or less.
  5. The Retailer then has to make up the lost profits by charging EVERYONE who shops there more.
  6. Yes that's right! All other ordinary shoppers cross SUBSIDISE those who enjoy this so-called “Interest Free Deal.

You can however turn this to your advantage like so:

  1. When you start the purchase, enquire about the so-called “Interest-Free Deal”. Immediately in the Retailers mind he's thinking. “shucks Another reduced settlement at the end of the month.
  2. Then
  3. Simply offer the retailer 20% - 40% less and pay immediately with cash or a clear credit card. = WIN + WIN for you.
General Discussion

Comments

  • jdf on 28/08/2014 - 13:47

    Nice one roderigo, can't wait to try it out :)

  • rack on 28/08/2014 - 14:38
    +3

    I have tried this a couple of times and they only reduce price by about 10% or so. Haven't had luck with 20-40%. Where you getting these numbers from?

  • skinner on 28/08/2014 - 16:03
    +1

    I never knew the retailers didn't receive the full amount. I assumed the finance companies either hope you don't pay off the balance by the end of the interest free period or continue to use the line of credit (as they usually come as a credit card). Good advice thanks!

  • Shadow54 on 28/08/2014 - 17:33
    +1

    For years HN has been been growing bigger on the buy now, pay later arrangement. Mainly because a very substantial number of buyers do not pay off the deal within the interest free period. then get hammered with big interest charges.
    And, of course, prices are loaded up at the front end to compensate for the cut taken by the finance company.
    9 times out of 10 it's the mug punter (buyer) who is stung - either by an inflated price at the outset or by criminally high interest rates down the track……..

  • roderigo on 28/08/2014 - 18:59
    +2

    Rack

    I used to do the numbers and pay the settlements for one of these companies 20 - 40% discount is what I paid. Most floor staff dont know how it works but if you find yourself talking to the owner offer them 25% less and thell take it.

    • Nutrino on 28/08/2014 - 23:08

      Far out man, that great stuff, 20% off my next purchase at jb hifi. Keep up the good work.

  • gadgetguy on 28/08/2014 - 20:25

    Most of the 'interest free' deals I looked into stung you for ongoing "fees" for maintaining the associated card or account which could be several hundred dollars a year. That's how I thought these deals were financed.

    If you need the interest free then buy on your card and balance transfer to an interest free card (ANZ are pretty good). Make sure its not one that has an "establishment fee" (typically 1 to 3% of the total. As I said ANZ have no fees.

  • Euphemistic on 29/08/2014 - 10:31

    "Simply offer the retailer 20% - 40% less and pay immediately with cash or a clear credit card. = WIN + WIN for you"

    But the floor staff still have to accept the reduced offer. I can imagine them accepting a that much reduced amount "immediately" wouldn't happen very often. Yes, cash talks, but seriously who is going to let you get out the door paying 40% off easily, they'll just wait for the next punter to come along and slug them full price.

  • ilostnemo on 30/08/2014 - 23:24

    What a load of baloney, Markups aren't that high on electrical goods.

    • Shadow54 on 01/09/2014 - 14:25

      ?? Actual example of mark up………
      Large size digital photo frame at Aussie retailer (Retravision) - Price $250
      Same large digital photo frame from Hong Hong - $99 including postage
      They are buying from the same Chinese manufacturer. The guy in HK is making a profit, so let's say his mark-up is 30 percent and that he loses 10 percent to pay the postage, loses another 10 percent to pay eBay commission & PayPal fee, so he ends up with 10 percent net profit. So the guy in HK is paying no more than $70. Aussie shop sells for $250, loses 10 percent for GST, so makes around $225. Mark-up, even after allowing for GST, is more than 200 percent. In my experience this seems to be a fairly typical mark-up on an electrical item in Australia……….
      Or, ever seen the $8 kettles at KMart, that other retailers sell for $20 to $30? If KMart makes a profit at $8, then they must be paying no more than $5, which means other retailers marking up 300 to 500 percent………

      • roderigo on 02/09/2014 - 16:39

        correct - wherever there is margin in big dollar products "interest free" will raise its ugly head…. infact this is integral to the finance firms sales plan.

  • musrag on 03/01/2015 - 00:11

    1) The finance company provides a business with a payment facility. The retailer is provided a range of interest free promotions they can offer to their customers. The longer the term the higher the % of the amount financed. They can either wear this cost or build it into their price. EG: 24 Months is usually around 17% for a dealer who does little finance volume. A major retailer will be charged less because they will be introducing more customers to the finance company. (Cards to market)

    2) The retailer does not have to promote finance but does it as a way to generate extra leads and convert sales. Finance is usually always on the total price or the RRP. They cannot increase the cost at point of sale to cover finance and cannot surcharge like a credit card. Can't call it interest free then highlight it will cost you more And of course if you pay by cash you can pay less. ANd by cash I mean cash. Credit cards can cost them up to 3% depending on the card provider. Visa & MC are cheaper than Amex and Diners to the retailer.

    3) The RRP is not only to cover finance but all other operating costs. If they don't make money they are not in business and we lose choice locally. They can also choose to offer you 5, 10 or 50% discount but it all comes down to what their magic line is to make some money.

    4) Retailers can offer this or other ways to pay for their product. (Cash, Cheque, Credit Card) Customers can also pay how they want. Too many in these blogs are quick to pass judgement.

    5) Longer promotions such as 50 Months are usually done with furniture as more meat to work with in the price.

    6)The hold back/facility fee/merchant fee that the finance company charges can be high but it is nowhere near 40%. As per point 1 the retailer can get everyday terms from 3 months to 36 months. They only go longer terms as this is what the punters want.

    7) Finance companies make more money in the interchange which is the everyday spending on a card. They charge a retailer and fees to the customer but the billions of transactions that happen every day on normal living purchases is where these companies make the coin.

    8) Most retail finance companies settle direct to the retail in the 24 hours which is quicker than the banks.

    9) The overall answer is quite simple:

    • IF YOU ARE NOT SPENDING YOUR OWN CASH YOU ARE BORROWING MONEY. A CREDIT CARD IS NOT YOUR MONEY!
    • IF YOU BORROW MONEY IN AN INTEREST FREE PERIOD PAY IT BACK BY THE END AND YOU GET CHARGED NO INTEREST. (No one to blame here but the punter)
    • IF YOU DON'T LIKE THE PRICE FOR INTEREST FREE WHIP OUT YOUR CASH OR CARD AND ASK FOR A DISCOUNT. BUT ALAS, IF YOU HAVE NO MONEY YOU PAY THE TOTAL PRICE.

    Or get a Once AGile Card, Lombard 180 Card or GEM Visa and get 6 months Interest Free on all purchases over $250. SO get a cash discount and 6 months interest free!

    Thank you!

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