You always see ads for 0% financing on cars, furniture, medical bills, or other big ticket items. Often times it is dependent on your credit score or being approved for a store credit card. Yet is it worth it? Do you really save money? Should you do it?
I say it depends. Mostly it depends on where you are getting the 0% financing from. I’ve read suggestions about asking for a cash discount. That people are able to get 5-10% just by asking. In my experience that hasn’t happened.
First off I asked my dentist for a discount if I paid cash for my share of my crown replacement. His office manager said if I didn’t have insurance we could work out a deal. But since I had a pre-negotiated rate with my insurance it would not be ethical to get a discount after the insurance company paid 60% of the cost. So I understood. But I was offered 0% financing for 1 year. I turned it down because it was $475 and not worth the effort. But I believe that if I had needed to get a lot of work done, say $2k, the 0% financing might have been worth it. And in this case there was no discount for paying in cash.
Second, I bought a washer/dryer set from Best Buy. We knew we were moving 6 months beforehand, so I began watching the price of the set I wanted. I kept a price book to track the cycle. Eventually right before we moved in the lowest price hit and an offer of 2 years @ 0% interest financing. We took the deal. I did ask for a cash discount, and was told by the assistant manager, Best Buy does not negotiate as a national chain. They might negotiate on a damaged appliance but there were none for me to buy. So we went with the 0% financing for 2 years.
In both cases the 0% financing might have been worth it. I’m still looking for a place that will give me a cash discount. I always ask because we always have the cash. But maybe because we live in a HCOLA they don’t do deals. Maybe because we shop at mostly chain stores like Best Buy, Costco, IKEA, Macys. We haven’t hit the mom and pops for items like a tv, sofa, etc. I don’t know.
Have you ever done 0% financing? If so from where? And have you ever gotten a cash discount? If so from where? Have you ever gotten a cash discount specifically from a national chain store? I’d really love to know.
10 responses so far ↓
1 tom // Jun 30, 2009 at 11:19 am
Yes… it’s worth it. I did the 0% financing for 3 years from Best Buy for our washer, dryer and TV. I did take advantage of the 90 price guarantee on the TV. It was discounted somewhere else after I bought it and I got $200 back. Funny thing was that BB was surprised I came back, they said most people buy stuff and never take advantage of the 90 day guarantee.
I did ask for a discount at Best Buy once last year. My father-in-law was buying a LCD TV and I knew that Best Buy had 10% off coupons they send to Reward Zone customers so I asked for one and they were happy to give it to us.
As a personal rule, I only do 0% financing if I have the cash available and can pay off the debt at anytime. I use the cash on hand to pay the minimum charge and the rest collects interest until I have to settle the remaining debt at the end of the 0% term.
2 JoeP // Jun 30, 2009 at 12:03 pm
The only danger with those deals is not paying them off before the term is up. Lots of those have retroactive interest in the 20% range. The only benefit I can see of this kind of deal for financially responsible folks is eking out a little interest during the term, or for the reason cited by Tom.
Even if you have money in hand and put it in a lock box or interest bearing account, I would absolutely make sure I had an adequate EF. Imagine the situation you’d be in if you had to finance an unplanned car repair or roofing job, and ended up defaulting on this “deal.”
3 Angie // Jun 30, 2009 at 12:05 pm
I got a $2800 discount from my dentist in April/May. I was having $5800 of work done that my insurance wouldn’t cover (not cosmetic, just not covered!) and they agreed to take 3k if I paid up front. Much better deal for me than 0% financing for one year!
Another girlfriend of mine received a 25% discount from her dentist for her daughter’s work, and her insurance had covered a big chunk of it. My sister and her husband had almost 1k knocked off of their daughter’s hospital bill for paying up front. I think it all depends on how much the bill comes to after insurance. My theory is, hospitals and dentists are worrying about people not paying, so on big bills, they are willing to make deals because it is cheaper than paying someone to keep billing you before they sell it to a collections agency.
4 Petunia // Jun 30, 2009 at 1:08 pm
I think that if you plan on buying item x anyway, then why not buy it with 0% financing? I think there is an inherent danger though, it may entice you to buy something you weren’t planning on buying. Or you pay more for the item instead of shopping around.
I have used 0% financing deals several times, I set the cash aside, pay the minimum payments, then pay in full one month before the deal expires. I don’t milk it for that last month, I don’t want some sort of processing delay to make that deferred interest kick in!
5 R. May // Jun 30, 2009 at 3:35 pm
It’s worth it if you are a super disciplined person.
The longer that money sits in the bank the more money you make on it.
The whole reason they offer that thought is because most people just aren’t that disciplined – they forget or such and then get stuck paying a crapload of fees and interest.
6 MLR // Jun 30, 2009 at 7:20 pm
0% is definitely worth it, ceteris paribus.
However, people often times upsell themselves from the $500 laptop to the $1200 laptop because its an interest free loan for 12 months (or w/e the item is).
As far as cash discounts are concerned, I don’t have much luck with that. If the item is clearance or open box, though, then I can usually get them to knock it down a little more.
7 Meg from FruWiki // Jun 30, 2009 at 9:57 pm
No, it’s not worth it — at least not for my husband and I. I used to think that it was because it mean that we could put more cash towards other things and save/make interest. However, the little bit of interest difference just doesn’t seem worth keeping up with the account(s), having that much more to work with on the budget, dealing with the companies when they try to screw you over, and just being in debt — which isn’t a feeling I like. Not to mention the temptation of spending more than you should!
I know it doesn’t make 100% financial sense, but we have decided to pay off our couch several months early even though we’re still paying (moderate) interest on other debts. Why? Because we want it off of the spreadsheet where we see it every time we budget. We want to stop worrying about forgetting to pay it off — or forgetting to have enough extra cash available when it’s due, or having the company say that we paid late when we didn’t, etc. We want to sit on it and know that it is really and truly OURS. It might not be the same as having our home paid off, or even being out of credit card debt, but I think it’ll be good motivation for us.
And my husband and I have already agreed, we don’t want to buy more stuff with 0% financing because if we don’t have cash then that’s our sign that we can’t afford it. We know we’ve used it as an excuse before and we will again if we don’t draw a line. We tried before to get out of debt but we didn’t because we didn’t change our habits enough — we kept using credit.
8 LAL // Jul 1, 2009 at 12:00 am
Angie why wasn’t it covered? I believe I would have shopped around if my dental wasn’t taken. I also would have asked for a discount and pushed harder. As it was I was covered 60% so negotiating a lower price wasn’t going to happen.
9 Angie // Jul 1, 2009 at 6:30 pm
My insurance wanted me to have a different surgery that would have been covered, but would only have lasted 2-3 years (I know, I’ve had it before). 3 different dentists and a periodontist all told me what I really needed. I decided to go with what would work long term, even though my insurance didn’t cover it. They knocked off almost 50%, so I was happy.
10 LAL // Jul 2, 2009 at 10:36 am
Ouch on wanting a procedure done you know doesn’t work. I noticed it’s a lot cheaper to pay cash to have a baby naturally uncovered than what insurance pays. But you don’t get to have the cash price if you have insurance paying for the birth. Same thing right?
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