0% Financing: Too Good to Be True?

SpotMe takes a deeper look into the marketing strategy to see if 0% credits and financing really benefit you.

Look deeper into the marketing strategy and see if 0% installments really benefit you.

The 0% installment signs seem to be everywhere today – phone store, computer store, car dealer. And they all tempt us to buy luxurious things by credit. Little do we know that no business owner nor bank would give you something for free, without anything up their sleeves that benefits them.

So, before rushing to the next 0% sign you see, let’s see what is behind 0% financing, credit, and installment. Then, you can have a better perspective before deciding whether or not it’s a good payment option for you.

Check out the item’s cash price
It’s not uncommon for a store to sell its products at a lower price if you pay in cash. The storekeeper will definitely tell you about it if you ask them. For instance, a phone costs $1,500 on 0% installment, but the cash price can drop down to $1,200. It’s quite a lot, no?

This brings us to what our parents always taught us: save your money to buy the things you want. By paying in cash, the seller considers you as a good potential buyer – because you have the money, obviously! – so they are more open to price negotiation. In the end, you can save hundreds to thousands of dollars.

Beware of hidden costs and fees
As you know, not all installments give transparent costs and fees upfront. Application fees, administration fees, monthly fees, late payment penalties – ask around about what exactly you will have to pay each month if you take the 0% installment option.

Compare with low-interest credits
Okay, so paying cash will most likely benefit you. But what if you don’t have enough cash for, say, buying a car? Here are two options you can consider:

1. Check other installment options
Stores and dealers usually have various programs offered. Ask the marketing or sales people about their programs, then calculate and compare them carefully. Sometimes 0% installment with its various fees can be more expensive than 5% interest without any hidden fees. Don’t rush into making decisions. Take your time to think and compare so you can spot the best option.

2. Borrow from elsewhere
Let’s say the car you want to buy costs $28,000 with a 0% installment. You negotiate with them and you can get the car for $25,000 in cash. You can consider applying for a personal loan and use the money to pay for the car in cash. For comparison, check SpotMe’s short-term loans with low interest and flexible repayment options.

There’s no doubt that 0% installment makes buying goods easier, especially if they’re on the more expensive side. If you prefer simplicity, go ahead and enjoy the ease that 0% installment brings you. But if you’re living a frugal life and want to pinch every penny, then do your research and calculations to make the most efficient decision. What do you think?

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