Sofa interest free credit

motorguy

Robin66 wrote: »

Hi, I bought a sofa today and although I could afford to pay for it upfront I decided to go for 4 years interest free finance because there seems to be no downside. Interest free finance seems to be offered by all the big sofa players on everything in the shop equally. Can anyone explain to me how this business model works? There are some pretty old posts where people claim that the real finance cost (APR 30%) is built into the headline cost. Therefore they claim that if you take finance the store only gets ~50% of the sale price, the other 50% is taken by the finance provider (barclays in this case). However I find this hard to believe because the store manager seemed indifferent to whether I paid upfront or took finance. If taking finance meant that he was only getting half of the sale price then I'd expect his heart to sink when I went for finance and I'd expect him to quickly offer a discount to persuade me to pay him the full whack.

Any ideas?

Chances are the salesman got extra commission for selling you finance so you probably made him happier.

He wont give a monkeys about the profit margin.

The big players like DFS work their finance in to their prices - £4,000 for this leather 3 piece sofa and interest free for 4 years! - when in reality its something you'd pay £1500 for at an indy, £1000 for the cost of those big stores, £500 advertising and £1,000 interest.

Smaller stores use third parties and they "buy" finance agreements off them, so the 10% or so it costs them are built in to their selling model.

They'll know that the advantages of getting a lot more customers because of the finance offer outweigh the cost.

Robin66

motorguy wrote: »

£4,000 for this leather 3 piece sofa...

It's quite difficult to pay that much for a sofa in DFS unless you go there the 1 day of the year when they don't have a sale on

motorguy

Robin66 wrote: »

It's quite difficult to pay that much for a sofa in DFS unless you go there the 1 day of the year when they don't have a sale on

And you need to get there right now before its too late as their sale ends on Sunday. It always ends "on Sunday" but they never seem to have in mind a particular Sunday!

Ganga

We bought two new sofas from DFS and offered cash,asked for a discount,salesman was not interested,the price paid was the ticket price.

AnotherJoe

I think it's as simple as that, as motorguy says, finance is effectively built into their business model , its not that they seell you a sofa and also have a finance offer, the finance offer is built into the price of the product and there's no way to remove that cost if you don't want it.

Hence the store manager and sales person not caring about cash offers.

Car sales are heading this way also.

chanz4

I offer finance where we work, we sell to the finance company at a lower price

Fireflyaway

My feeling is as the others say - its built into the retail price so effectively those paying cash are probably paying more than they should be to carry those paying on a free credit deal. Plus there will be people who don't pay it off within the interest free period and then get hit with a very high interest rate. If I had the cash to pay for it I'd get it out the way. Why put it off and then have to pay for a 4 year old sofa, that's just annoying and things could change for the buyer financially in the meantime. Its just putting off the inevitable.

noh

SeanG79 wrote: »

Essentially the retailer pays the finance costs on the 0% offers, but nowhere near the 30%APR mark, usually it is nearer to 9.9% APR.

The finance option is built into their business model. You will find you might be able to negotiate a lower cash price from the retailer.

That is exactly what we did when we bought our current sofas from SCS saved around 5% if I remember rightly.

Dekiany

We tried to haggle before for about 10 minutes and in the end the salesman said they can't offer discount for cash payment as it wouldn't be 0% interest if you did it through finance, which would result them to getting done for falsely advertising 0%

Robin66

Fireflyaway wrote: »

If I had the cash to pay for it I'd get it out the way. Why put it off and then have to pay for a 4 year old sofa, that's just annoying and things could change for the buyer financially in the meantime. Its just putting off the inevitable.

Because a pound today is worth more than a pound tomorrow. I can get 0%APR on finance and put the cash in a 123 account and make 1.5% APR. With a 4 year pay off period I'll effectively get a discount ~3%