Furniture Buying Myths

Part 7

This is the seventh of a series of articles written by a furniture industry insider that will provide guidance on how to obtain the best value possible on the purchase of home furnishings.

There are a number of myths and incorrect assumptions made by consumers concerning the purchasing of furniture. Frequently these situations result in consumers paying much more than they should for their purchase of home furnishings. At the very least, some of these incorrect and widely held beliefs result in a great deal of wasted time and a substantial amount of aggravation.

The purpose of this article is to provide some insight on how to avoid some common furniture purchasing “pitfalls”.

Myth 7
“Special Financing Offers Are A Good Deal When Purchasing Furniture”

In many cases, using “Special Finance” plans add substantially to the cost of the purchase of furniture. There are various potential risks to using finance plans of these types that will be discussed in this article.

In most cases, there are two parties involved in the offering of a furniture store financing plan. The furniture store that sells the product and an outside finance company that provides the financing plan. Most furniture stores do not provide their own financing. They utilize other companies to provide this service. The furniture store makes money on the sale of the furniture and the finance company makes money on the financing plan. Therefore the finance company must generate a profit and that comes either directly from the consumer or from the purchase of the finance plan by the retailer. In the case of the retailer’s purchase of the finance plan, that cost must be passed onto the consumer in some way. Both of these situations will be discussed in this article. The “bottom line” is that the consumer pays for these plans in some way.

The first type of financing plan is the “90 Days Same As Cash” or “6 Months Same As Cash” or a similar type of offer that allows the consumer to take possession of the furniture and not make payments for a specified period of time. Some of these plans do require the consumer to make payments but there’s no interest during that period. The most substantial risk with a plan of this type is if the consumer does not pay off the plan in the specified amount of time, a very high interest rate is then put into effect. Frequently this rate is much higher than a typical credit card interest rate.
 
Obviously there is a cost to use the money for 90 days that either the furniture retailer or the finance company (that is providing the plan) is bearing. With most of the 90 day plans, a finance company provides this plan to the furniture retailer at no charge. The reason for this is two-fold. First off, the finance company can charge a very high rate of interest  once the consumer misses the 90 day payment date. An adequate number of  consumers miss the 90 day payment terms and get “flipped” into the high interest rate so that it pays for the ones that make the payment terms.

The second reason the finance company bears the cost (vs. the furniture retailer bearing the cost) is that it is a way to get new customers “on the books”. Their hope is that the customer will then use other services offered by their company which in general are going to be fairly high interest rate situations.

The other type of financing plan that is in wide-spread use is the long term type such as “No Payments Until Next Year” or “No Payments Until 2007” or the year after that. The furniture retailer purchases these types of plans from finance companies. Obviously there is a cost to use the money for this length of time. The furniture store pays a substantial fee to provide plans of this type. These costs must be built into the selling price of the furniture which means the consumer potentially is paying a substantial “hidden cost” in their purchase. Despite what furniture stores utilizing finance plans of this type would like the consumer to believe, money is not free and these plans are not free. The consumer is paying for it.

The key to any furniture purchase is careful consideration of not only the product itself but also the terms of any financing plan if cash is not being used as the method of payment. As painful as it is, all the “fine print” of the finance plan must be analyzed. If considering the use of a long term “No

Payments Until…” plan, the consumer should shop other furniture stores or Internet furniture retailers (without the plan) to comparison shop the same or similar furniture.