0% finance on something you could afford outright?

[caelite]

I know reckless debt & low interest PCP deals have a bad rep on here. But just wondering, is there a downside to taking out a 0% finance deal on an item of moderate value (~6% of yearly income) that you could afford to buy outright with liquid savings.

To my mind there doesn't seem to be a downside, money stays in my account earning 4% and there for a rainy day. Total purchase price is the same as it would have been if I bought outright, monthly payments are well within manageable. I imagine it looks good on my credit report too.

Is there something im not considering past financial stupidity, or is it a no brainer, I imagine their must be a catch.

For context, item is Halfords bike with finance through v12 finance. 12 month, 0% interest.

[bitchstewie]

Usually the biggest downside is the extortionate APR if it's a 0% option and you go past it into interest payable credit.

If it's just 12x whatever monthly payments the only downside I can see is any credit impact if you go and try and run your life off 0%.

[eyebeebe]

Depends if the same item is available cheaper elsewhere, if the 0% is offered by the seller, as the interest is often built into the sale price.

[Harpoon]

Is the model only available from Halfords? For a lot of bike shops, you can pay RRP and have 0% finance or get the price discounted by paying "cash"

I purchased a new bike this summer - I used a 0% credit card rather than take money out of savings. Negotiated an excellent price with the bike shop and have 18 months to pay for it. If needed, I could clear the balance immediately.

[rossub]

There isn’t really a downside - especially if it’s over a long period. Our Suite is being paid over 48 months and there’s a fair bit of inflation over 4 years.

The monthly payment is a bit of a pain in the butt, but it doesn’t make financial sense to pay it off early when it’s 0%.

[sunbeam alpine]

Where are you getting 4% at the moment?????

To answer your question, in that position I think I'd take the finance option.

[HOGEPH]

I always use 0% if available.

Had 2 bicycles, a kitchen, a laptop and numerous other items.

Figure the money is better sitting in my account earning paltry interest.

[Teddy Lop]

It entered my head when buying our sofas from furniture village that there's some insanity in paying cash instead of 0%. Although if I'd gone for paying over a few years then the payment plan would have lasted longer than the sofas themselves, I expect using the threat of witholding payment over substandard sofas is something they've got legally sewn up in their favour.

[Henners]

HOGEPH said:

I always use 0% if available.

Had 2 bicycles, a kitchen, a laptop and numerous other items.

Figure the money is better sitting in my account earning paltry interest.

We use 0% when it suits us, although try to only have one deal running at once.

[jimPH]

I bought my sofa at 0% and used the direct debits to open a Bank of Scotland account along with a balance transfer card (needed 2 DD on the account). Worked out quite well at 3% at the time.

[Mr Pointy]

sunbeam alpine said:

Where are you getting 4% at the moment?????

This. It's a bigger question than whether to take 0% finance.

[ninepoint2]

sunbeam alpine said:

Where are you getting 4% at the moment?????

To answer your question, in that position I think I'd take the finance option.

Yeah I wondered that too, please share that one

[caelite]

bhstewie said:

Usually the biggest downside is the extortionate APR if it's a 0% option and you go past it into interest payable credit.

If it's just 12x whatever monthly payments the only downside I can see is any credit impact if you go and try and run your life off 0%.

APR past 12 month 0% option appears to be 19.9%, I wouldn't intend to leave any of it outstanding after 12 months.


That's the offer as it looks on the site, I'm assuming the criteria for eligibility is fairly low on these things.

Harpoon said:

Is the model only available from Halfords? For a lot of bike shops, you can pay RRP and have 0% finance or get the price discounted by paying "cash"

I purchased a new bike this summer - I used a 0% credit card rather than take money out of savings. Negotiated an excellent price with the bike shop and have 18 months to pay for it. If needed, I could clear the balance immediately.

I think it is, Halfords and their sister company, I believe it is one of their in house comissioned models, that being said I don't exactly have my heart set on it, it just ticks the boxes for what I want in the price range I have (<£600 gravel bike), it's reduced by 20% off the RRP for black Friday (as per Halfords discounts, you NEVER pay RRP at Halfords). Not sure if a big store like that is really one that I can haggle in, just going to cause grief for some minimum wage-slave like myself.

Being in the deepest darkest Scotland the used market makes life difficult finding bargains nearby.

Cheers for the points of view lads, I'm not normally one to take out debt but with 0% it does just seem like a no brainer

sunbeam alpine said:

Where are you getting 4% at the moment?????

TSB Classic Plus account, 5% (not 4 actually) AER on balances up to £1500 with £500 monthly throughput. Only getting 2.58% on my ISA though, which is still fairly good (Barclays Help to Buy)

[ninepoint2]

caelite said:

TSB Classic Plus account, 5% (not 4 actually) AER on balances up to £1500

ah the catch!!

[caelite]

ninepoint2 said:

caelite said:

TSB Classic Plus account, 5% (not 4 actually) AER on balances up to £1500

ah the catch!!

Hehe, I believe nationwide is offering 5% on up to £2500, but only for a year. There are a few 3% accounts floating about with reasonable value caps. Not sure how long the TSB is going to last, they offered it to all customers on accounts of their massive IT balls up a few months ago.

The TSB one suites me to be honest, I am a student, my total liquidity floats around £2k, any extra money I have above living costs goes to saturating the £200/month pay in to my help to buy. If I have anything left of my paycheque at the end of the month after that comes out I go out and get pissed.

Edited by caelite on Sunday 11th November 01:09

[Itsallicanafford]

I know it’s off topic but eBay is your friend here, you have the cash and I bet you could find a lightly used year old model of the bike you want for £200, very few bikes hold there value for very long...

[GT03ROB]

Assuming it doesn't cost you more on the purchase price no reason not to!

[mike74]

I'd like to see examples of items available at ''0% finance'' that can't be purchased outright elsewhere for less.

Surely all ''0%finance'' offers simply have the profit margin added into an inflated purchase price?

[rossub]

Using my suite example, the price is exactly the same whether you take 0% or not and there are a limited number of suite suppliers.

Ours was getting on for £4K and there aren’t many folk that would splash that out up front. They’ll be taking a hit on profit by offering 0%, but also boosting sales significantly at the same time.

I do recall him encouraging a 10% deposit though, which I politely declined

[bitchstewie]

caelite said:

bhstewie said:

Usually the biggest downside is the extortionate APR if it's a 0% option and you go past it into interest payable credit.

If it's just 12x whatever monthly payments the only downside I can see is any credit impact if you go and try and run your life off 0%.

APR past 12 month 0% option appears to be 19.9%, I wouldn't intend to leave any of it outstanding after 12 months.

Everyone used to say that when I was in retail

If you know you won't do so, and you stick to it, and as others have said you can't buy the same bike for significantly less somewhere else, and all the obvious stuff like can you afford it then just do it IMO.