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Why Financing Your Computer is a Terrible Idea

By , May 20th, 2007 | 8 Comments »

financing your computer

In general, I don’t advocate buying things that you don’t have the money for, whether it’s an expensive item like a car or an inexpensive item like a pair of shoes. In the case of computers, however, those offers to get a new laptop from Apple or Dell for “as low as $26.00 a month” always look so enticing, so I decided to see what they’re about.

Apple’s offer is just flat-out false advertising, if you ask me. With each computer on their website they show you the real price and then the financed price. A basic MacBook laptop that costs $1099 can be had for $26.00 a month, they claim. But the real offer here is for a credit card, and a rather poor one, at that.

The card allows you to pay no interest for 90 days, meaning that if you made payments of $26 a month, after 90 days you would still owe $1021, which you would then have to start paying interest on at a rate of 13.74% or more (based on your credit history). Even if you weren’t saddled with all this interest, to pay for a $1099 product at only $26 a month means that you would be taking three and a half years to pay for the product, which is longer than a lot of people use their computers for. Since it’s a laptop, it has a higher risk of needing repairs, which are likely to run you $200-300 per repair. Put those on the credit card, too, and a single purchase can really get you into trouble. The only reward this card offers is a $25 iTunes card after $2500 in purchases — a mere 1% cash back.

Dell also offers a financing option. For their least expensive notebook, which costs $549, the monthly cost is listed as $17 a month. This program is called the Dell Preferred Account, but the only reason they prefer you is because you’re going to be paying them whopping amounts of interest. Furthermore, the account isn’t really through Dell, it’s through CIT bank. In other words, it’s a credit card. This program is even worse than the credit card Apple wants to hook you up with. After three months of no interest, at which point you’d still owe $498 if you were paying the $17 a month, the APR starts at 17.24% and goes all the way up to an obscene 29.99%.

Presumably, the $26 or $17 a month advertised is the minimum monthly payment you would owe if you put the computer purchase (and nothing else) on your new credit card. Paying the minimum monthly payment on your credit card is one of the easiest and fastest ways, aside from going to Vegas, to get suckered out of a ton of money. So when you’re shopping for a new computer, just ignore the monthly payment option. The best way to making purchasing a new computer affordable is to shop for deals online and purchase from a retailer who offers free shipping and won’t charge you sales tax.

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  • Kristine says:

    Yikes! I had no idea that the financing terms on computers were so poor. I was thinking about purchasing a new laptop and was planning on reviewing the financing options available – now I know I’ll be paying cash for my new laptop. Thanks for educating us!

  • poundwise says:

    Financing a computer is a terrible idea. The only reason to finance one is the ‘spoiled child’ syndrome of ‘I want it and I want it now!’

  • Watch out for companies like Blue Hippo as well. They have a pretty bad history of ripping off customers, just google them, and all the links after the first few are complaints against the company.

  • Brett Johnson says:

    I “financed” an Apple PowerMac several years ago. It was actually a decent deal – no interest, no payments for 6 months. 5 months and three weeks later, I paid it off in full. The only downside was the nonstop MBNA credit offers over the next 5 years.

    I have purchased computers on credit cards. Not just for the convenience, but for the additional purchase protection and warranty coverage. I also benefit from the card purchase rewards program.

    However, like my first example, I pay off the card fully within the billing period, avoiding any finance charges.

    Paying for a computer on a monthly installment plan, especially with double-digit interest rates, is a terrible idea.

  • Amy F. says:

    Stingy Student, I have never heard of Blue Hippo–I’ll be sure to look them up. Thanks for the tip.

  • Viola says:

    I do not like the idea of purchasing anything on finance. If you can’t afford it, you shouldn’t make debts.

    To me paying cash for everything works. However, I do buy certain things with my credit card, as for the additional warranty/insurance/protection (that is usually holidays/trips and of course the internet). BUT, when I get the statement, I always have the money ready to pay the whole amount (whatever that is) off within the asked period so there are no additional costs.

  • Michael says:

    There is a way to finance a computer without getting hit with the interest and the poor financing terms that most companies offer. My Computer Club actually offers no interest/no credit check financing without the requirements of payment that Blue Hippo uses to default on delivery.

    They do charge a membership fee though. It is $89 a year but you get your hardware delivered rightawway after your 20% deposit (i think its 20 but don’t quote me). Blue Hippo requires 3 months of payments without a default before they will send their customers the product. If the customer misses the 3rd month of payment the timeframe resets and they need another period of 3 months payments before they will send the product (again please don’t quote me). I would recommend at least taking a look at this as an option if you are in need of a computer but don’t want to wait.

  • Ivan says:

    i completely agree that buying a vanity peripheral that you don’t have the money for is a terrible idea (like financing that extra 10k for a Benz because “it’s just a couple hundred a month extra!”) however, I will say that I definitely take advantage of zero interest financing periods. For example, you finance a Mac with their barclaycard partnership, get 18 months to pay it off in full interest free, and then actually pay it off in 18 months because you had the 2300$ already set aside. This kind of short term installment loan can help give you a credit boost quickly (if you’re like me and have a very short credit history). However, the caveat here is that you should only buy something in this manner if you have the funds to comfortably pay it off in full from the outset of the purchase. Don’t think (well if I. Can make the payments then I can afford it”… Rather, think “I can afford it, so I’ll make interest free payments to boost my credit”


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