Is it a good idea to buy a fridge with 50 month interest free option?

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Harvey Norman

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  bajillionaire on 26/06/2014 - 13:07

  +4

  The good thing about interest free purchases over such long periods of time is that it means you don't pull that $2000 out of your account all in one go, and so you have more capital available for other things.

  There is usually a monthly account administration fee for these financing deals, so check that out, and of course make sure you don't get carried away with over spending because your bank account looks bigger than if you had spent the $2k up front.

  So it's all about cashflow and resource management. The more capital you have in your account, the more options you have for other investments, costs, spending and rainy days. As long as you are aware of and can keep on top of your outgoing repayments, delaying your costs as much as possible without incurring penalities is generally the way to go.

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  donbot on 26/06/2014 - 13:18

  +1

  Haggled yet? You'll get further with paying cash than you will using one of their interest free offers.

  • 

    Austin 316 on 26/06/2014 - 13:55

    I have tried. The lowest they go is $1900 including delivery. The problem is that the model I am after is exclusive to HN only so they don't have much competition and are not keen to lower the price. Hence I was looking at other ways to get the price down.

    Do you think I would benefit more by paying $1900 cash upfront?

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  Nutrino on 26/06/2014 - 14:37

  +1

  So its $2000 extra for 50 months. Eg $5 per month fee. Plus any annual fee or one off fee.

  Note you can pay ot off early if you wish.

  Now weigh it against 1900 upfront.

  Now, you make a choice. Easy.

  • 

    Austin 316 on 26/06/2014 - 14:52

    Thanks. After more information, I have found out that after 5 years it will cost me ~$2250 if I go with the interest free option with set up fee and monthly fees.

    Now, how do I workout my savings based on a 5% interest rate on a $325,000 loan? Sorry if this is a really silly question but I need some help.

    • 

      readannie on 26/06/2014 - 15:18

      +2

      If you pay your fridge by cash, interest on $325000 based on 5% is $16250 per yr.

      If you put $2000 in your mortgage instead, the interest on $323000 is $ 16150 per yr

      Thats a diff of $100 a year. Which in 5 years, would be $500.

      Mind you 50 months isnt exactly 5 years. Its 4 yrs and 2 mnth.

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  Amaris on 26/06/2014 - 16:15

  Usually other retailers have models which are similar. Try appliancesonline. Their prices are pretty competitive and they offer free delivery and free removal of your existing fridge if you want that.

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  anthony t on 27/06/2014 - 12:26

  +5

  The reason retailers offer these 'interest free' deals when interest rates are low, is because the terms state that if you miss all or part of ONE payment by ONE day, you pay interest back to the date of purchase at a rate that will make you cry. Unbelievably, the 'lenders' make more money from interest free deals than they do by charging interest because so many people over a 3, 4 or 5 year term somehow miss a payment. It may be something as innocent as a change of bank account, such that your direct debit doesn't happen - so not even your fault. I understand that these deals are with a 3rd party, so you aren't actually dealing directly with the retailer which just makes it worse. If you can be sure to make every payment on time, and the numbers work for you, it's ok.

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  cloudy on 27/06/2014 - 14:32

  i think the simple math is, whatever the fee is, make sure it is less than the interest of $2000.

  Simply stated, if you can save 5% (either from mortgage or having money in savings account) of $2000 per year (=$100) and the fee is less than this $100. I say why not. Assuming you are responsible and make all payments as required as you should.

  So in short. Fee of this option has to be smaller than Interest x $2000 ($100 is the reasonable example.)

  • 

    Austin 316 on 27/06/2014 - 22:53

    Thanks for simplifying this for me. The fees are $5 per month and $25 set up fee, so if I continue for 4 years then I can save (100-60)$40 * 4 = $160.

    And I can still try and haggle a bit further. Thanks again for the advice all.