TOM KAN PA ( snipped-for-privacy@aol.comic) wrote: : This is off topic, but I figure there must be some readers in this group that : can answer my question. : How do they do it? There's a furniture outlet (Levins') that is advertising a : sale with no money down, no interest, no payments until 2007. How do they do : this? : I've heard that on some of these deals that advertise "No Interest until 2007" : have you pay just the principle. The interest accumulates and is due in one : lump sum when the time comes. : But if the ad is correct for this furniture sale, no money exchanges hands for : three years. : What's in the fine print? What's the gimmick? : BTW, La-Z-Boy is offering the same sale. :
There is always someone willing to buy a future obligation at a discount. The gimmick is that you get no discount off the full retail price of the stuff you buy. So let's say it costs the store $1000 plus 10% average freight from the manufacturer. Full retail is what they call "number plus ten" which is double cost plus 10%. So the full retail price for $1000 cost is $2200. But most retailers are content to make what they call "40 percent landed" which is cost plus actual freight plus 40%. So the store is happy to sell $1000 at cost for $1540. What comes into play now is the time value of money. So, you could buy it for $1540 and finance it at current rates for 3 years or you can go in and take this "deal" -- when you take the deal you sign a note, just as you would if you were to finance it, and the store sells the note to a credit company.
It's just a game played using the time value of money. You're not getting anything for free.