Same as cash, but as good as cash?
Question: Bud asked if there is anything wrong with buying big things on 12 months same as cash. Dave tells him all the reasons why it's stupid
Dave Ramsey's advice: It's a stupid idea, Bud. First off, if I buy the item with cash, I'll get a deal that is better than the $80 that you'll save. Plus, if you play with snakes, you'll get bitten. If they record your payment wrong and it's late, they'll backcharge you through the entire term of the deal at about 24 to 38% interest. You'll spend the next year and a half cleaning up this mess. It actually happened with one of our clients here. There's all kinds of problems with that!
When someone gives you a better price with cash (as in "5% off or 12 months same-as-cash financing," I agree. But if you have the cash to pay it off all at once, put it aside and don't get a cash discount in lieu of a 0% financing offer, why not, assuming you have the discipline to consider that money already spent?
Back in 2000, we spent $7,000 on a new central heating and air system for our house. There was a "no interest for 12 months" deal in place, which we took even though we had the cash to pay for it on the spot. There was no alternative discount or rebate offer to cash buyers. We took that $7,000 aside -- actually putting it into a separate savings account at our credit union which was not to be touched -- and earned over $300 in interest on it before paying it off in full after 11.5 months. That was a $300 discount that we would not have received if we paid cash.
I would be the first to agree that if someone hasn't demonstrated they can use credit responsibly -- as a tool in their financial "toolbelt" instead of a dangerous weapon to shoot their foot off -- yes, pay cash -- it's not worth the "float" in that case to play with fire. But as a blanket recommendation, I think it's financially suboptimal to suggest that people always, but ALWAYS, pay cash regardless of the situation.
Credit can be a dangerous thing, but that doesn't mean everyone should avoid it at all costs under all circumstances even if they have the cash.
My husband and I were doing well, we were one of the fortunate people whose ancestors had changed thier family tree and we married with a certain amount of financial freedom at the tender age of 21. We decided that we needed a bedframe and found a beautiful one. We have the $700 in the bank account that the frame cost but the salesman told us to put the money in a CD, take the interest, just as you said. We decided this was a good idea. And did it.
Murphy happened. My husband lost his job two months later. We had invested a good portion of our trust fund in my husband's company, which went belly-up shortly thereafter and also discovered that his boss had used my husband's credit to establish credit for the company that was unable to be paid off and we were held accountable. In a crashing economy in Michigan, we were both unable to find full-time employement. We did whatever we could (we have over 24 W-2 and 1099s and the end of the year) but some months we were playing "bill "roulette". The bedframe was WAY down on the list when we were living on Ramen noodles and had the house thrmostat set at fifty-five degrees in the dead of winter in order to pay the heating bills.
Fast forward two and a half years, seven lawsuits and a foreclosure later...We finally got a job (had to leave Michigan to do it) and in the meantime, the debt had grown to over $1900. We ended up settling for over $1300. AND WE HAD HAD THE $700 WHEN WE PURCHASED THE FRAME TO BEGIN WITH.
Don't monkey with "12 Months same as cash". You can't read the future. Don't risk it. We're now in the midst of Baby Step 2 and can't tell you how liberating it feels.
Thank you Dave Ramsey and Team, we'll see you in Indy!
My question is...At what price should I start asking for a discount for paying cash, and how much is reasonable? One would obviously not ask for a discount on a hamburger at Burger King, for example. When do you start getting into discountable territory? $50.00? $100.00? $1,000.00? And what is reasonable to ask for? 5%? 10% More? Less?
Debt free (except for the house) by June '08!!!!!!!!!!!
Hope this helps!
Also to the person talking about the 7,000 they had and did the 12 months same as cash cause they got 300 from intrest, well i am here to tell you that if your worried about 300 bucks then somthing is wrong. If you have the money pay for it. I could save 300 in a week and a half.
Just my 2 cents.
their purchase after all was said and done. You need to learn your math- then add your 2 cents.
I asked who was carrying the balance for that period. He named a finance company. I pointed out that being the case SOMEBODY was buying down the note with prepaid interest. He admitted that it did cost hime to prepay the first year's finance charges. I then said, "So this is costing you another 10% off your offer?" He agreed that was true. I said, "Fine! Here's a check for $1800... and NEITHER of us will pay finance3 charges!"
His jaw dropped! But he accepted my offer, took my check,, and delivered and installed the next day.
My point: 90-dyas, 1-year, whatever "same as cash" is Hooey! SOMEBODY is going to pay for the use of that money over the "interest free" period, and it's USUALLY the customer. G
we financed a couple things (lawn mower) on no
payments no interest for 1 year. We planned
to pay for it with income tax,and we did. but
I don't believe I would chance it now that we
have the cash to buy. as far ad discounts I would
also like to know more examples of discounts.
where can you get a discount at? surely you
can't get one at walmart, can you? what about
other big name stores? I know
jewlery and furniture have the biggist mark up
so that would be a good place to start I suppose.
I've gotten them at grocery stores in the past. You will need to buy a "case" of something (not a six-pack of cokes, but a case of soup or canned vegetables, for instance) -- but if you will buy a case that has not yet been "split" out and shelved, the grocer can and most of the time will give you a 10% discount. They're saving money by not having to pay a clerk to shelf an item, and you're saving 10% off something you want to eat. It's a win-win. They won't offer this -- you have to ask the store manager.
That's just one example. I, too, have also used the discount at other "service" type stores.
just don't be rude about it. You can bet the person you're buying from does the same
thing with their "suppliers". Don't be silly and ask for 50% (unless it's jewelry....haha)but know the
product/service and ask for a reasonable discount. As someone said, all they can say is "no", but in
all my experience I rarely get no. We bargain and come to a compromise and both parties win. I get my
deal, and the seller makes a sale. The alternative is walk away from it and find someone who will deal.
a 10-15% discount. It's the hospital. As long
as you offer to pay the full balance (debit
or even credit card) hospitals will give you
the discount. This works on any size bill
even if it's below $100. Just ask if they'll
give you a discount for paying the full
balance.
company. I could transfer balances to the credit card and pay no interest for 15 months. I borrowed the money from my credit union for a truck ($13,000) and transfered it to the card. The credit union pays my bills (recurring payments). I divided the amount into 15 equal parts and had the credit union send the checks. Voila, the money stayed in my money market account at 5%.
I used a credit card to purchase the items (no payts no interest for 12 months).
It was paid off in 8 months, but the anxiety over this was not worth it.
Pay cash and there's no stress!
I bought my wife a baby doll charm necklace and we asked what payment method he perfered. He told us cash
and confirmed what a previos poster said about credit
card companies chargeing him more. He then took about 15 dollars off. so we got 2 kid charms and a necklas
dor 50.00. more recently I was at the mechanic shop going
to get some work done on our paid for van. He told me a brake job would
be 115.00 a fuel filter would be 60.00 and a fuel injection cleaning
would be 89.00. I quickly called another shop and found out they charged 60.00
for the injection cleaning and about 100.00 for the brake job.
I told the guy what i found out and let him know i would be going down the road
if he didn't come off of his price. I ended up getting all 3 service's plus oil
change tire rotation and fluid check for 185 tax and all.
not Rebekah. Tim financed $7000 to save $300. That is roughly a 4.25% savings. I think I would have bargained taking the business
elsewhere. Anyhow, just thought I would reference you to the right posting.
However, a few months ago, we had to go into our emergency fund to pay for new brakes on our Suburban. We had received 2 $25 off coupons from our mechanic at Christmas time. We decided that we would take cash out and see if we could get a discount. At first, our mechanic said that he doesn't do that. Then, he ssaid that he is the boss so, he gave us the 3% that the credit card company would have charged him. We were so excited that we got a total of $68 off our repairs!!!
Never again will we do a "90 day same as cash."