There never is a guaranteed ROI not even with a savings account. If you are not acquainted with investment basics, then you should go find a good investment class - beyond the scope here (or my desire to expound on it). My main point was that 0% financing is something anyone with discipline who wants that particular product, should consider.
Originally Posted by
RollCNY
J.
Since you make it sound so simple, I will ask some questions:
1. How available is this guaranteed 10% ROI, with no risk of loss, to the every day consumer? Most guaranteed returns I have seen are on the order of 2%, and then are taxed as income and not dividends, so you will clear 1.2 or 1.3% after taxes.
No where do I say guarantee. Invest your money where you want like I do with mine.
In general, long term stock market runs 8%. Savings accounts are tiny. Money invested in inventory for my business runs multiples of that. That's the range of my reality, yours may be different. I guess I have found that pretty much every time someone let me use their money for free, it's been good for me. YMMV obviously.
2. If the 10% ROI is so easily found, why does a finance company bother ever giving a manufacturer cash to do this program? They should just invest in the 10% ROI, have zero risk, and skip all of the BS. For every customer who does pay off early in the 2 years, they have lost 10% for 2 years. Sounds like a bad business model, or they don't understand finance.
see above on returns and learning about investing. There is never zero risk, including if you keep it as cash in your wallet.
What finance companies do, and I would presume in this case, is to get a discount from the merchant on one end and then also make money on those who do not have the discipline to pay it off in the time frame and where (usually) they get to then attach the unpaid balance at higher interest plus high interest for the (in this case) 24 months. They have figured this out so that they come up with a very nice return on their money. They have figured out how to manage their risk to get the return they want. On the consumer side, if one has the discipline to manage one's money appropriately then this presents an opportunity for a nice discount.
3. If the guarantee is not a guarantee, and the investment loses value, then you are out more than simply paying cash up front.
If you are this risk averse, then you should probably not be buying an expense bike or riding any bike at all (i.e. stay in bed and sleep alone as my attorney would say).
What you choose to do with the money that you pay directly to the merchant or hold for a return should be based on your tolerance for risk. Note too, that you lose by holding it as cash money due to the effects of inflation. There is simply not a zero risk choice.
Overall, I am not saying that your point is wrong about using 0% offers intelligently, and understanding the risks and advantages of both before using. But to say someone doesn't know how to manage money, and call them ignorant, over one post, seems a tad brash.
A person who says one should "never" purchase a "toy" this way is certainly making an ignorant statement and does not know much about managing money. And this discussion is a reaction to that statement. Sorry to say, but it's hard to see that any other way (especially after the ensuing insults and discussion).
Kudos for Lynskey for doing this. Probably a good move and hard to see how it's bad for consumers who know what they are doing.
J.