Local car dealerships have been running a blitz of advertisements here in my local town over the last several weeks in an effort to move inventory before the end of the year. One thing I detest about car advertisements is the notion of “affordable payments.” As if the final cost of the automobile is irrelevant. What matters is whether or not buyers can afford the monthly payment.
And this monthly payment mentality is not limited to the car-buying business. Blue Hippo computers has gotten in on the act, too. A fellow blogger recently posted about Blue Hippo computers, a company that “helps” people “afford” computers by offering a monthly payment plan. In fact, Blue Hippo is selling inferior, over-priced products through some sort of bastardized layaway or rent-to-own plan. Here’s an excerpt from his article; first a message from the Blue Hippo site, and then his comparison:
Unlike other financial companies, BlueHippo® doesn’t check your credit and measure you based on some score. Since we don’t check your credit, we do ask that you build a credit history with us by paying a $99.00 initial fee, followed by 52 weeks of consecutive layaway payments of $39.99. After 13 weeks we can then offer to finance the balance of your purchase price, order your computer, and have it shipped directly to your home via UPS or FedEx. It’s that simple!
After reading this, my first question was “So how much do you pay for the laptop?”. Based on the above, assuming you use their layaway program, you’ll pay $99 + (39.99 * 52 weeks) = $2178.48. I’ve read that the $39.99 is for the desktop and that the laptop is actually $49.99 for 52 weeks making the laptop $2599.48.
As he points out later in the article you can get “a faster processor and double the hard drive space” at a site like Dell. So why would anyone even consider doing business with Blue Hippo? Because they offer a monthly payment plan. That’s it. Forget the fact you will pay many times the cost of a comparable computer.
The only way to win at finances long term is to break this monthly payment mentality. With the exception of large expenditures such as a house, just about everything else in our life can be paid for in full, up front, at the time of the purchase. Doing so may change your ownership time line, but there is nothing wrong with delaying gratification for the satisfaction of avoiding a new debt.
Next time you are considering a large purchase and considering a monthly payment option, inspect the terms of the deal. Chances are you will be paying much more for the opportunity to make payments rather than paying in full on the day of the purchase. Trust me, stores, car dealerships and banks are not doing you any favors for offering monthly payments (plus interest) for many months, despite how nice their advertising sounds.