Best Way to Pay for a Large Purchase?

SteveC said:
0% financing is a misnomer. Companies don't give away money interest free, they build that cost into the selling price.
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Someone has been listening to too much Dave Ramsey.

If you find a couch for $3,000 at Rooms to Go where they offer 0% interest, you find a substantially similar couch at their competitor for the exact same price (as is always the case), then there is no cost of interest priced into the couch.

Companies that offer 0% interest don't make money by building it into the cost of the item. They make their money because virtually no one pays off the loan in time, so all of that back interest (usually at an absurd rate) gets tacked on at the end of the interest free period. It's the same concept as the credit card companies who offer 1-3% cash back. They give the money to me at a loss because I always pay off my card and they aren't able to charge me interest, but it's worth it to them because I'm the tiny minority. Almost every customer they have is irresponsible with money and ends up paying 15% interest, but they're lured in by the 1% cash back on the front end. The bank, furniture company, electronics company, car manufacturer, etc. are willing to take that loss on the tiny percentage of customers in order to lure in everyone else. If you're the rare smart person in a sea full of idiots, you make out like a bandit.
 
By the way - you guys all rock. I'm an idiot, I admit it. I'm not quite insolvent, I've got a bit of help, but I'd prefer for the budget to be built SOLO.

Thanks everyone for your smart thoughtful responses. I promise, I'm not going bankrupt, I'm not going to cost the taxpayer money, I just made things tight during training and I'm paying now to avoid paying more later.

As much as you can never rely on a paycheck, you can't rely on a roommate either, right? So, my ideal budget works these same numbers but with more pay on the front end. No way I would consider taking out a loan from my 401(k)... and of course no way I'd charge a credit card with an interest rate without the ability to pay it off by the monthly due date.

I guess my tail end question to this conundrum... is it better to do the 401(k) loan or have a rainy-day savings account? Supposedly, you won't make any money in a savings account so it's in theory a terrible idea.

Adding another $10,000, even in a monthly payment, is a silly idea at this point, so it ain't happenin' unless I get a great deal (and of course, I have my $500/mo credit card payment done).

@ATN_Pilot if I can theoretically rent my condo out, at some point, would it be better to sell the asset or rent it (even if I break even to have a small "loss" per month for a renter).?
 
tonyw said:
I can think of one thing. And that one thing can be obtained with interest free financing for up to 24 months depending on where you get it and how much it costs.

If it is that thing, check with me first.
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I was gonna say breast implants but then I realized what you're talking about.

And if it's that thing, well, he shouldn't believe the hype around that anyway.
 
ATN_Pilot said:
Someone has been listening to too much Dave Ramsey.

If you find a couch for $3,000 at Rooms to Go where they offer 0% interest, you find a substantially similar couch at their competitor for the exact same price (as is always the case), then there is no cost of interest priced into the couch.

Companies that offer 0% interest don't make money by building it into the cost of the item. They make their money because virtually no one pays off the loan in time, so all of that back interest (usually at an absurd rate) gets tacked on at the end of the interest free period. It's the same concept as the credit card companies who offer 1-3% cash back. They give the money to me at a loss because I always pay off my card and they aren't able to charge me interest, but it's worth it to them because I'm the tiny minority. Almost every customer they have is irresponsible with money and ends up paying 15% interest, but they're lured in by the 1% cash back on the front end. The bank, furniture company, electronics company, car manufacturer, etc. are willing to take that loss on the tiny percentage of customers in order to lure in everyone else. If you're the rare smart person in a sea full of idiots, you make out like a bandit.
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Unless I can walk in the door and get a better price paying cash.
 
"I'm not interested in the financing package. What's the cash selling price today?"

I guess if you want to call it haggling I'm OK with that, but it's not BS. Works on cars, too.
 
Usually it doesn't work, at least on cars. When haggling on the price, it's best not to bring out the cash, but allow the salesman to think he'll make a mint on the financing. Most main dealers get a kickback from the brand for selling a finance package for exactly the reason ATN mentions. People end up paying money in penalties over the years of the loan allowing them to profit from the 'average' consumer.
 
It works on cars without paying cash. Cars are something that are traditionally haggled over. The guy at the dealership doesn't care whether you finance the car or pay cash. You didn't get a better price than sticker because you offered cash, you got a better price than sticker because everyone pays less than sticker.
 
I don't typically buy new cars though so maybe the guys I deal with are different. *shrugs*
 
As an aside, I can't even imagine a net monthly income of over $10,000 a month. Because if you're charging 10 grand, you have to make a lot more to pay off the purchase in one go.

I still don't clear $3,000 in a month net. Not close. About 25% less.
 
SpiceWeasel said:
As an aside, I can't even imagine a net monthly income of over $10,000 a month. Because if you're charging 10 grand, you have to make a lot more to pay off the purchase in one go.

I still don't clear $3,000 in a month net. Not close. About 25% less.
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I never got there as a pilot, either. After all of the deductions, and even with one of the highest rates in the industry, I still only take home about $7k from SWA. Granted, I've always been someone to only make guarantee, but you'd have to work your ass off to take home over $10k in the right seat.
 
ATN_Pilot said:
If you're telling me that you haggle with the sales guy at Rooms to Go, then I'm calling BS. That's as comical as the conservatives who claim that they haggle over hospital pricing.
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Is Rooms to Go anything like Ashley's furniture? Because there I haggled a $3,200 couch set down to $2,300. Most furniture stores mark up 100% or more from the factory.
 
ATN_Pilot said:
Having a few grand in a savings account makes sense. Having $20k in a savings account is straight up retarded.
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I hear cd's are doing great.

SteveC said:
Unless I can walk in the door and get a better price paying cash.
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I get a better cash price at my local gunshop, but that's about it. Chain stores don't care.

SteveC said:
"I'm not interested in the financing package. What's the cash selling price today?"

I guess if you want to call it haggling I'm OK with that, but it's not BS. Works on cars, too.
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Just bought a used car (I drive too much to lease) and was ready to pay cash, but got a better deal because the dealer got a kickback from the lender. I wasn't going to pay the cash price they were asking, but the fee they collected for loan lessened the pain. Buying on the last day of the year helped, too.
 
ATN_Pilot said:
If you're telling me that you haggle with the sales guy at Rooms to Go, then I'm calling BS. That's as comical as the conservatives who claim that they haggle over hospital pricing.
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Hey, I've done both and it worked. Saved myself almost a whole paycheck.
 
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