Luxury/discretionary spend is generally not wise to use up debt capacity for this.
Of course, if you don’t need to why bother as there will be a cost.
A prudent banker (a dying breed).
This was not aimed at anyone but seems to pick on Dave Marshall sorry.
Some broad assumptions that may or may not apply in any particular case
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I wouldn’t. I simply don’t like having debt, so I’m happy to “pay” not to have it.
The only debt I have is a mortgage, and if tomorrow I won the lottery I would simply pay it off despite the bank charging me a fine and possible tax downsides.
In general (might not apply to your case as you had the money to pay cash), who knows what happens next? Recession, you lose your job, and then what?
Yes, I had the cash set aside, so a no-risk, interest free loan, in order to receive a complimentary annual service, was far too good an offer to turn down.
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If it’s still under the mattress i might pop over😉
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Not assumption just some common sense principles.
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It’s an assumption that it uses up debt capacity and that there is a cost.
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There are roots to the provision of consumer finance in that:
1- Atypically, car finance was and remains ‘secured’ on the underlying vehicle and, as such, offered capital benefits to the lenders (primarily leasing companies), such that in comparison to unsecured consumer debt (for things like hi-fi), the costs to the consumer were more attractive.
2- Unsecured consumer debt can be sought from a wide variety lenders, be this in the form of expensive credit card debt and/or unsecured personal loans (even secured via mortgage drawdowns in some cases). But these lines of credit (ex mortgages) are more expensive than dedicated asset finance – and are nowadays subject to credit scoring/status checks et al.
One thing which lenders used to be particular about is whether the underlying asset could be disposed of without an obligation to clear any connected debt but this went out the window years ago.
The annoying part in many ways nowadays is that a 0%/interest-free deal is anything but, in that someone is earning a commission/coin from this and the %'s are being played around people keeping credit fac’s going when they don’t really need/want them. The Audi car finance line is akin to the Ford one, the latter (when I did it) involved a reduction in price of £1k, yet the finance could be cleared after 1m without penalty. The garage wouldn’t entertain a Day1 cash deal. Mad.
It seems ‘cash’ no longer speaks at many retailers.
There are times in life, perhaps like now, where using debt is preferable to realising market assets but this needs to be thought out – and, as with everything in life, there’s no right or wrong. Just be mindful of the T&C’s though, especially of any fixed rate deals, as sometimes these can be very expensive to break if early repayment is requested.
Perhaps curiously, within many credit scoring mechanisms, it’s beneficial for an applicant to have previous satisfactory borrowing experience and/or experience of handling credit e.g. via cards.
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I only start enquiries and demos for hifi when i have the cash available to pay for the intended purchase at the time of order. I like to have various options in mind at a few price points to see what catches my ear but always have the money for the most expensive choice.
My local BMW dealer advised me to do just that. I said I wanted to pay cash and they just told me to take the finance deal and immediately cash it in. It attracted a £2.5k saving over the cash price.
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Okay you know better 
.
If you take on debt you normally have to repay it.
Of course, offering 0% finance has no benefit to those offering it they do it because they are nice people.
Same here with BMW. Salesman got his commission, I got the 2.5k dealer contribution and then I paid it all off.
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I wonder if there’s a deeper financing angle here e.g. whereby the loan + assets sits on the b/sheet of the finance house for a few weeks, which may drive some ‘savings’ behind the scenes?
Or, it could be a way of formalising discount paths, and removing the public battering dealers with requests for cash deals?
It’s a good job Naim kit doesn’t come with log books 
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It appears I know better about my own finances. The loan for the hifi is far from using up my credit capacities, I can judge my worst-case money needs over its lifetime of a few years, and I pay far less interest on the loan than I make from investments by keeping the same amount invested.
I agree that one should not max out one’s capacities to pay for luxury items, or take out more loan than one can easily afford. But if you are a prudent banker, you should take your clients’ individual realities into account, and it seemed that you were making a very absolute statement
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My comments were general principles.
Your personal circumstances make perfect commercial sense and are well thought through.
Without wishing to rile you more with another “assumption”, my view, is this level of reasoning is not “normally” undertaken.
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Ok apologies, I must have misread it as a generic statement that you applied to everyone. On rereading it’s clear, I don’t know what happened.
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My first hifi was bought on my first credit card. I used a bank loan for a second hand turntable some years later and then the period of free balance transfers arrived so I was able to get several years of free credit by switching cards every 6 month until they introduced charges to dissuade people like me. This paid for my Nait 5 and subsequent switch to Rega amps but there it stopped and everything since has been bought with money in hand.
I don’t drive but I’ve bought motorcycles on HP and bank loans and just about covered what was still owed when I traded in or in one case claimed the insurance when it was stolen. I also bought one with a home improvement loan after I changed my mind about having the work done. I reckon having a Moto Guzzi in the garage improved my home more than spraying a coating on the render would have done. I still have the Guzzi 25 years later.
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When we bought our current house, I just completed my studies and my wife was still on a temporary contract and I was self-employed (a good assignment though). Not the best position to buy a too large house.
I had create a huge financial report listing my personal revenue, and even copies of my wife high school results. I stack of 500 pages in total.
The banker said: Mr. Ardbeg, we trust your financial analysis since we know organists as very conservative people (a copy of my diploma was included in the stack of paper).
We got the mortgage.
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Today computer says no unfortunately.
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