Downside of borrowing to buy a computer.

[Mdcastle]

I need a new laptop. I can afford to go out and just pay for one, but it seems everyplace is offering 0% financing for a year. Why? Are they hoping you don't pay it off so they can charge interest? Hoping you might buy something you wouldn't or couldn't otherwise, or spend more than you would otherwise?

I'm thinking about taking it so I can get a nicer one than what I'd buy otherwise, and so I don't have that much money tied up at once. Aside from having to remember to make payments, are there any downsides, like will this poison my credit rating?

[KneadToKnow]

Originally Posted by Mdcastleman

Are they hoping you don't pay it off so they can charge interest? Hoping you might buy something you wouldn't or couldn't otherwise, or spend more than you would otherwise?

Yes, yes, and yes.

I'm thinking about taking it so I can get a nicer one than what I'd buy otherwise, and so I don't have that much money tied up at once.

Sounds like it's working.

[Dewey Finn]

The downside is that you will owe interest from the purchase date if you don't pay it off within twelve months. I went to Dell's website and looked at the special finance offer. It says, "12 months special financing on new computer purchases $1299 or more is a no interest if paid in full by June, 2013 financing promotion. It is a feature of the Dell Preferred Account and is available to all new and existing qualified customers. Interest will be charged to your account from the purchase date if your purchase balance is not paid in full within 12 months, or if you make a late payment."

[leahcim]

Originally Posted by Mdcastleman

Are they hoping you don't pay it off so they can charge interest? Hoping you might buy something you wouldn't or couldn't otherwise, or spend more than you would otherwise?

Probably mostly hoping that you'll either buy when you wouldn't before, or buy more than you would without the financing. Even if the potential interest charge went straight to the laptop manufacturer, the value of that is not large compared to the value of the additional sales.

It is essentially a discount by the amount of one year's interest, and offered for the same reason as any discount is offered -- because the seller expects enough additional sales to compensate for the decreased value of each sale.

I'm thinking about taking it so I can get a nicer one than what I'd buy otherwise,...

Seems like they're hoping correctly in this case.

[TriPolar]

Seems perfectly reasonable if you can afford to pay it off in a year, and the machine is worth the price. Otherwise, it's just like charging anything else you can't afford on a credit card.

[Anne Neville]

Originally Posted by Mdcastleman

Aside from having to remember to make payments, are there any downsides, like will this poison my credit rating?

Maybe if you forget to pay, it will. That's why I never take them up on offers like this. I have a hard enough time remembering to pay the bills I've already got, without adding new ones.

[glee]

It's a sort of inertia selling -as others have said they hope you'll forget to pay on time (or spend more...)

[Thudlow Boink]

Originally Posted by Mdcastleman

I'm thinking about taking it so I can get a nicer one than what I'd buy otherwise, and so I don't have that much money tied up at once. Aside from having to remember to make payments, are there any downsides, like will this poison my credit rating?

There is, of course, the standard downside to all borrowing: Money you earn in the future will be already spent. Whereas, if you hadn't borrowed, then any money you earn in the future will be yours to spend on the things you need or want.

I suspect that something like laptops, where the amount/value you can get for a given amount of money keeps increasing over time, are a particularly bad thing to go into debt for (as opposed to buying what you can afford now and saving up for a snazzier model in a year or two).

[Duckster]

As others have already said, don't settle for the offer, unless you know you will never have a late payment and will pay it off within 12 months.

Try the outlet sites for the big name laptop manufacturers. Often you can find brand new (meaning never used, packaged never opened) laptops at really, really good prices. I bought my home Lenovos that way a couple of years ago. Now I'm on their mailing list so I regularly receive emails for new laptops at 30-50% off the price everyone else is paying.

[dracoi]

Since I don't see the credit rating issue specifically addressed: The computer loan by itself won't poison your rating. It will show up as an access on your credit, since they'll pull a report before lending to you. It will also show up as part of your consumer debt and will increase the utilization ratio. These are both short-term negatives. Of course, a year of timely payments and the eventual payoff will be a plus to your credit in the long run.

If you want to build credit, then financing the laptop based only on the extra money you can afford to spend right now wouldn't be so bad. If you already have good credit, you might do more harm than good. Either way, don't let borrowing encourage you to spend more.

[Mdcastle]

FWIW I don't remember my specific credit score but was told it was "very good" when I applied for a car loan. I got an excellent interest rate (and paid it off on time).

Actually if I could throw out a technical question. I want a laptop for web browsing and light office tasks only. I play around with Google Earth and read large PDF files a lot but I'll never, ever play games on it. I have my eyes on the Sony VIAO C series specifically. For around $100 each I could 1)Go from a Core i3 to a Core i5, 2) Go from the integrated HD3000 graphics to a discrete Radeon 6630M, 3) Go from 4 GB ram to 8GB. Any of these upgrade worthwhile? I'm kind of torn between getting a base model and just paying for it, or financing a deluxe model that will take longer to become obsolete.

[Emtar KronJonDerSohn]

Originally Posted by leahcim

Even if the potential interest charge went straight to the laptop manufacturer, the value of that is not large compared to the value of the additional sales.

I'll bet the default rate is close to 30%. if you make 11 equal payments and come in a day late on the 12th on a $1299 purchase they'll get you for over $200 when you factor in the late fee. Then they get the increased sale AND interest.

[Anaamika]

I see nothing wrong with it at all if it just means you can space your payments out over the next 12 months instead of paying a lump sum down. Credit can be used wisely as well as poorly.

[dracoi]

Originally Posted by Mdcastleman

Actually if I could throw out a technical question. I want a laptop for web browsing and light office tasks only. I play around with Google Earth and read large PDF files a lot but I'll never, ever play games on it. I have my eyes on the Sony VIAO C series specifically. For around $100 each I could 1)Go from a Core i3 to a Core i5, 2) Go from the integrated HD3000 graphics to a discrete Radeon 6630M, 3) Go from 4 GB ram to 8GB. Any of these upgrade worthwhile? I'm kind of torn between getting a base model and just paying for it, or financing a deluxe model that will take longer to become obsolete.

For similar tasks, I bought a $400 laptop this winter that is more powerful than needed. (My main requirements: a 15" screen and 10-key pad. Everything else was negotiable.) Maybe I'll get three years of use instead of four, but I find that laptops break from the stress of being carried around faster than they become obsolete. YMMV, but my laptop comes home every day and then back to work every morning.

[filmore]

Originally Posted by Mdcastleman

FWIW I don't remember my specific credit score but was told it was "very good" when I applied for a car loan. I got an excellent interest rate (and paid it off on time).

Actually if I could throw out a technical question. I want a laptop for web browsing and light office tasks only. I play around with Google Earth and read large PDF files a lot but I'll never, ever play games on it. I have my eyes on the Sony VIAO C series specifically. For around $100 each I could 1)Go from a Core i3 to a Core i5, 2) Go from the integrated HD3000 graphics to a discrete Radeon 6630M, 3) Go from 4 GB ram to 8GB. Any of these upgrade worthwhile? I'm kind of torn between getting a base model and just paying for it, or financing a deluxe model that will take longer to become obsolete.

In order of priority I would rank them as this:

- CPU upgrade -- I've never regretted having a faster processor. Makes everything you're doing go quicker and will add the most to the lifespan of your laptop.

- GPU upgrade -- If you're not playing games, you might not notice a big difference.

- RAM upgrade -- 4 gb is a lot. 8 gb is a whole lot. You probably don't need 8 unless you're doing a lot of memory intensive programs. I don't know that you would really notice the difference in your use between 4 and 8.

[Mdcastle]

I kind of realize what I'm looking at is overkill for web browsing, but higher end laptops come with other features I like, such as backlit and numeric keyboards and apparently better build quality. I think you're right about priorities. I'm stuck with the CPU and GPU, but the GPU won't make a difference, and I can always add RAM later. Sony wants $120 to go from 4 to 8 which seems extremely expensive. My new desktop right now (until I get my videocard) is a core i5 with the integrated graphics and 8 GBs, and I'm more than happy at how fast it does on basic tasks. Playing games it stutters even at medium settings, but I'm not going to do that on the laptop; It's mainly a second computer for the sun porch or my bedroom or to take on trips, I've had my old laptop since 2008 and I've only used the battery once or twice.

[Chronos]

I'd put RAM on a fairly high priority, actually, since the amount of RAM needed to make a significant difference is usually a lot cheaper than the amount of processor needed to make a significant difference. Then again, though, it's also a case where enough is enough: Once you have enough, no amount added on top of that will matter at all.

[Dewey Finn]

If, as you said Sony wants $120 to double the memory to eight gigabytes, you might check the prices for aftermarket memory. I bought a Macbook several years ago and Apple's memory prices were so high that I just got the minimal amount of memory with the computer and replaced it with aftermarket Crucial or Kingston memory for a lot less.

[Voyager]

Originally Posted by Mdcastleman

FWIW I don't remember my specific credit score but was told it was "very good" when I applied for a car loan. I got an excellent interest rate (and paid it off on time).

Actually if I could throw out a technical question. I want a laptop for web browsing and light office tasks only. I play around with Google Earth and read large PDF files a lot but I'll never, ever play games on it. I have my eyes on the Sony VIAO C series specifically. For around $100 each I could 1)Go from a Core i3 to a Core i5, 2) Go from the integrated HD3000 graphics to a discrete Radeon 6630M, 3) Go from 4 GB ram to 8GB. Any of these upgrade worthwhile? I'm kind of torn between getting a base model and just paying for it, or financing a deluxe model that will take longer to become obsolete.

In my experience, Sony stuff is overpriced and not better than many other brands.
For what you want to do, 4 GB RAM is plenty (hell, it was plenty of disk not that long ago.) What do you need integrated graphics for if you are not playing games? As for PDFs, you don't need a lot of speed.

CPU speeds are not increasing a lot these days, because of power issues. More cores are good, but if you are doing a few simple tasks you are just going to have idle cores. So, my advice is to save your money.

As for your original question, 0% interest is just a discount. If you can get the same machine cheaper normally, compute how much having the money now is worth to you, and decide accordingly.
A few years ago we bought a TV 0% interest, though we could easily afford to pay it off immediately. The credit card bill comes just as before. As everyone said, if you know you can afford the payments, go for it, so long as you don't mind having to make a payment every month (and you can pay off the entire balance any time you want to.) I'm pretty sure credit rating algorithms are sophisticated enough that a 0% interest loan is not going to hurt, assuming it gets paid. It is more a promotion than a nefarious attempt to rip you off. But it should not affect the type or price of computer you select.

[Voyager]

Originally Posted by Mdcastleman

I kind of realize what I'm looking at is overkill for web browsing, but higher end laptops come with other features I like, such as backlit and numeric keyboards and apparently better build quality.

Sony is in trouble these days. I'd check about whether their quality is actually better. High prices does not equal quality.

[JustinC]

I've had my Sony - i3-350M, 4Gb, a graphics card (probably) - for 2 years and (with the risk of jinxing myself) so far have had no problems that CCleaner and a can of pressurized air haven't fixed.

I think having 64bit Windows 7 (& Essentials Security) and keeping bloatware to a minimum has benefited much more than it being a Sony, but it looks pretty .

I'm under the impression most parts are made in the same place regardless of which brand they're put in, so I'd go for a local store that would have no quibbles fixing under warranty. Also I'd pay cash because the interest saved in a year is tiny, compared to the bother of having to remember to pay them back in 11.5 months.

[VOW]

Financing through the manufacturer (such as Dell) is a "store" credit card-type deal. The interest rate is nasty.

When buying a car, interest rates are much lower than store cards, and negotiable.

The "one year free interest" has all the drawbacks as mentioned above. PLUS, the statement you get will be just like a store credit card statement, with "minimum payment" shown.

It is the nature of the human animal to want to pay the minimum payment.

That is NOT the payment you need to make if you want to pay it off in a year's time. They aren't gonna show you THAT. They want you to make the minimum payment, so it takes you fifteen years to pay it off, at 29.99% interest.

If you bank online, you can set it up so that payments are made automatically, for the amount YOU designate. That way, you can take the amount of the laptop (plus any other charges like shipping, handling, tax--and don't mess with the maintenance agreement!) divided by 12, and make sure you pay the thing off in twelve months.

Good luck.


~VOW

[jtgain]

All of these credit "offers" are for similar reasons. Discover "gave" me $150 for charging a thousand dollars per month in February, March, and April. At first blush, you would wonder how they could afford such a thing.

But think of how many people would buy things (and not pay the balance in full) that they wouldn't otherwise buy because, "Hey, it's free money." So, they lose $150 from me, but they make it up many times over in interest fees and late charges from others.

And yeah, even with everyone paying off the computer within the 12 month period, you will still be buying a more expensive computer than you could otherwise pay cash for.

[Mdcastle]

It's true I've had some bad luck with Sony's, including my present laptop that has an interminent problem with the display going dark and touchpad wonkiness, but I've heard bad things about Toshiba too and their designs are boring. What I want is a 15" laptop with a backlit numeric keyboard that hopefully doesn't look like some office drone brought it home from work.

[Dewey Finn]

I'd recommend looking at an Ultrabook, which are thin and light notebook computers that look a lot like an Apple Macbook Air system. They are available from several manufacturers. (The name is a trademark of Intel.) However, I don't think you're going to find separate numeric keypads in them. (I'm not sure why you want one, as they mean that the system has to be really wide. Plus you can always get a separate USB or wireless numeric keypad.)

Edited to add, here is a review of several of them from the New York Times.

[Xema]

Originally Posted by Mdcastleman

...and so I don't have that much money tied up at once.

If you've made a commitment to repay a certain amount, the money IS effectively tied up. The only big difference is that if you fail to pay on time you get whacked with severe finance charges.

[Voyager]

Originally Posted by Xema

If you've made a commitment to repay a certain amount, the money IS effectively tied up. The only big difference is that if you fail to pay on time you get whacked with severe finance charges.

No, that is not the only difference.
Assuming he has some sort of money market account, putting the money he would have paid to the store in it now would earn a little bit of interest, and still be available.

Second, though we have low inflation, we still have inflation. Money spent today is relatively more valuable than the money he will be spending in a year.
Assuming one will pay the money back on time - not that hard to do - getting a 0% loan is a win - assuming of course we are not in a deflationary period. That some people are not responsible enough to take proper advantage of it does not mean it is a bad deal for those who are responsible enough.

[Voyager]

Originally Posted by jtgain

All of these credit "offers" are for similar reasons. Discover "gave" me $150 for charging a thousand dollars per month in February, March, and April. At first blush, you would wonder how they could afford such a thing.

But think of how many people would buy things (and not pay the balance in full) that they wouldn't otherwise buy because, "Hey, it's free money." So, they lose $150 from me, but they make it up many times over in interest fees and late charges from others.

Sure - but that doesn't make Discover a bad deal for those of us who never pay interest. Though we had money in the bank to write a check, we charged whatever we could of our massive home improvements on Discover, paid it all back immediately, and had enough cash back to go to New Orleans for Christmas. I assure you that how we paid for it had nothing to do with how much we spent.

[Voyager]

Originally Posted by Mdcastleman

It's true I've had some bad luck with Sony's, including my present laptop that has an interminent problem with the display going dark and touchpad wonkiness, but I've heard bad things about Toshiba too and their designs are boring. What I want is a 15" laptop with a backlit numeric keyboard that hopefully doesn't look like some office drone brought it home from work.

I've pretty much settled on Toshibas and have had good luck, but I can't deny that they are boring.
I don't think I've ever seen a laptop with a numeric keypad. There must be some programs out there to map a portion of your normal keypad to a numeric one. My wife has hers in a docking station with a normal USB keyboard, but she mostly uses it in her office at home. Are you really going to use a numeric keypad enough to make it necessary?

[lazybratsche]

For that matter, if you want a numpad but won't actually use it every day, you can get a USB numpad. I've got one myself, and for a time I'd use it maybe once a week for some spreadsheet data entry.

[Fear Itself]

Originally Posted by jtgain

And yeah, even with everyone paying off the computer within the 12 month period, you will still be buying a more expensive computer than you could otherwise pay cash for.

That was not my experience. I shopped around, and bought a Toshiba laptop from Newegg on 0% plan that was very competetive.

[Xema]

Originally Posted by Voyager

... that is not the only difference.

Right. But it is the only big difference - as I indicated (and your comments seem to agree).

[Xema]

Originally Posted by lazybratsche

if you want a numpad but won't actually use it every day, you can get a USB numpad.

Or a full USB keyboard with numeric keypad (widely available and cheap).

[Enigma42]

Originally Posted by Mdcastleman

For around $100 each I could 1)Go from a Core i3 to a Core i5, 2) Go from the integrated HD3000 graphics to a discrete Radeon 6630M, 3) Go from 4 GB ram to 8GB. Any of these upgrade worthwhile? I'm kind of torn between getting a base model and just paying for it, or financing a deluxe model that will take longer to become obsolete.

The CPU upgrade might make sense, but the other two don't in your situation. The GPU won't do much for you if you don't play games, although it can accelerate Google Earth a little bit. Still, not worth the expense.

RAM in particular is almost always a rip-off when you buy it as an upgrade with a new computer. I recently bought Sony VAIO S series laptop and similarly it was a little over $100 to upgrade from 4 to 8 GB of RAM through Sony. Instead, I bought a new module of the appropriate type for $19 and installed it myself in about 5 minutes. Just make sure that the laptop you buy had an open slot for an additional RAM module and you're all set.