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Thread: Guitar Center...financing 0% for 48 months?

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    Guitar Center...financing 0% for 48 months?

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    Ok, so why the 48 months 0% financing?
    Isnt that abnormally long?

    Any business minds have a comment on the "angle" of 48 months 0%?

    Last year it was Guitar Center is going bankrupt, now they seem to be ok, like Gibson guitars...but offering 48 month loans at 0% seems desperate to me.

    first it was 6 months, then 12, then 24...... how about 360 months?

    if it's not happening in the room, it ain't gonna happen on tape.-H.Gerst

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    It is to sell more high priced stuff by making the price look lower.

    Same thing with mattresses and other higher priced items.
    Make the payments low enough and more people will buy.
    The interest on that loan is built into the price.
    TANSTAFFL

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    Quote Originally Posted by CoolCat View Post
    Ok, so why the 48 months 0% financing?
    Isnt that abnormally long?

    Any business minds have a comment on the "angle" of 48 months 0%?

    Last year it was Guitar Center is going bankrupt, now they seem to be ok, like Gibson guitars...but offering 48 month loans at 0% seems desperate to me.

    first it was 6 months, then 12, then 24...... how about 360 months?
    Sweetwater does this constantly...like right now they have a bunch of gear that you can buy with 0% for 48 months...sometimes they do 24 or 36.
    I've used it a couple of times, not because I couldn't pay the whole amount, but because you get the gear without having to tie up a large amount of cash, and you pay no interest on the charge.
    This is a nice option if you want to buy some bigger ticket items...but it's kinda dumb to use for stuff that's only a few hundred or less.

    You kinda have to ask yourself...why do I want to drop thousands on something when I don't have to, and at no extra cost to me...?
    I would rather leave the thousands in my bank, where it's earning a little interest...and where I can have it for a rainy day...and the monthly payment on the 0% interest purchases are not a big dig in the regular cash flow.
    What's really dumb is spending thousands on gear with a credit card that charges interest.

    Heck...I've done the same thing with my car purchases more than once. Taken a 3-4-5 year loan...with 0% interest.

    It's like layway...but you get the item right away.

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    So they can cut out the credit card companies, that makes sense. 0% vs 29%....
    The store makes the same profit selling the piece/item I guess.

    24....48...... 4yrs is a long time to loan someone something with 0%?

    if it's not happening in the room, it ain't gonna happen on tape.-H.Gerst

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    Quote Originally Posted by CoolCat View Post
    So they can cut out the credit card companies, that makes sense. 0% vs 29%....
    The store makes the same profit selling the piece/item I guess.

    24....48...... 4yrs is a long time to loan someone something with 0%?

    They are making monthly payments not paying it all at the end.

    Interest rates had been very very low. As inflation forces rates higher then these special deals should become shorter.

    And most of them have some gotchas. Don't pay it all off by the 48 months and then you owe a big bunch of interest retroactively.

    READ THE FINE PRINT IN THE CONTRACT BEFORE YOU SIGN.

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    Quote Originally Posted by CoolCat View Post
    24....48...... 4yrs is a long time to loan someone something with 0%?
    Mmm...only if you have a reason to count the months.

    Bottom line, with or without interest or paying it all up front or over a few years...it's really about what you can afford.
    So yeah, if you're already squeezed...looking at 48 months of payments may feel like a burden, but even more so if you're paying interest on top....and even more so if you drop all the cash at once and buy it outright.

    I'll use the 0% option only when I can also buy it outright, but simply don't want to...because again, I don't have to shell out a big chunk of cash all at once, and it's no extra cost to me.

    I do similar stuff with my regular credit cards....charge shit on them all month long, and then pay off the entire balances at the end of the month. I know how much money I can spend without ever getting stuck with a rolling balance (with interest).
    It's a convenience thing, and I haven't paid any interest on credit cards in 20 years now...and I even avoided it on a few 0% interest car purchases.

    Quote Originally Posted by mr average View Post

    And most of them have some gotchas. Don't pay it all off by the 48 months and then you owe a big bunch of interest retroactively.

    READ THE FINE PRINT IN THE CONTRACT BEFORE YOU SIGN.
    Well...I wouldn't call them "gotchas"...they're just the rules of the purchase agreement...but yeah, be aware of them, and again...regardless of 0% interest, don't buy shit you can't really afford.

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    1) They don't have to pay the credit card company's merchant fees - which can depend on the total $$ 'deposited' annually, so could be 1/2 to 1%.
    2) I bet at least half the people who take out this deal are late on one payment - which then invokes the full interest otherwise accrued (at a credit card-like rate). I've got 0% financing on my Subaru, same thing applies if I miss a payment. The big furniture company in these parts (Jordan's) does it all the time.
    3) They rope in the people who have bad credit - or credit card debt already - who normally would not buy something.
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    Quote Originally Posted by mjbphotos View Post
    I bet at least half the people who take out this deal are late on one payment - which then invokes the full interest otherwise accrued (at a credit card-like rate).
    The simple solution is to set up auto-pay on those kinds of purchases...and just make sure you have enough in your bank account to cover the withdrawals.
    That way you're never late.

    Really...the "trick" is not to buy beyond your means...and then there's no concern about making the payments. I personally don't accept the argument that they "rope" people in. I mean, people know if they can afford something. If they don't know, or know they can't afford it, and they still go ahead with the purchase...don't blame the merchants or credit card companies. I really hate it when people blame someone else for the debts they get themselves into.

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    Quote Originally Posted by CoolCat View Post
    So they can cut out the credit card companies, that makes sense. 0% vs 29%....
    The store makes the same profit selling the piece/item I guess.

    24....48...... 4yrs is a long time to loan someone something with 0%?
    GC among many others, uses what was once called GMAC now known as Synchrony as the bank for their credit cards. None of these companies actually have their own credit/finance so you aren't really escaping the banks(who issue most all credit cards). The longer finance terms are usually capped at a minimum dollar amount and some have a sliding scale:re the larger the purchase the longer the available term. Considering GC and Sweetwater offer gear that goes for the same price as a used car, long term financing makes sense and no interest is good for the consumer,though as has been noted, the cost is built into the selling price. I was looking into a couple of big ticket items from GC and found that some were things that they would be direct shipping from the MFG thus not having to pay for inventory and space to keep it. It wouldn't surprise me to find this as the norm for the very high dollar item and/or anything that will need to be heavy freighted.
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    Quote Originally Posted by mjbphotos View Post
    1) They don't have to pay the credit card company's merchant fees - which can depend on the total $$ 'deposited' annually, so could be 1/2 to 1%.
    2) I bet at least half the people who take out this deal are late on one payment - which then invokes the full interest otherwise accrued (at a credit card-like rate). I've got 0% financing on my Subaru, same thing applies if I miss a payment. The big furniture company in these parts (Jordan's) does it all the time.
    3) They rope in the people who have bad credit - or credit card debt already - who normally would not buy something.
    You hit it with #2. If youíre late, or donít pay it off fully in the 48 months, you owe ALL the accrued interest. And itís not even the normal 18% credit card rates, itís worse! Somethng like 25-26%.

    Iím guessing enough people end up defaulting that theyíre fine with the few who actually get it interest free.

    I just bought appliances on a similar deal. You have to make the minimum payment each month - which btw wonít payoff the loan within the time frame, so you need to pay attention to that. At this point Iíve paid off about $600, and there is already about $700 in deferred interest. In other words the interest is exceeding the minimum payment. All of which Iíll owe if the loan isnít fully paid within the interest free period.

    The takeaway is NO business is in business to lose money. That doesnít make these programs a bad deal. If you follow the rules, you get a 48 month interest free loan.

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