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?
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.”
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.
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.
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.
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).
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.