Every time I drive by a furniture store I see signage that says something like “THIS WEEK ONLY – 48 Months 0% Financing!!!” I’m always amazed how these deals are for a limited time only because the stores always seem to be running them. Maybe they just change the length of the financing so that the current sale is actually a limited time offer.
The fact of the matter is, it doesn’t really matter how long the furniture stores are offering 0% financing for. Why? You should never, ever finance furniture. Especially if you couldn’t pay for it in cash today.
Why You Shouldn’t Finance Furniture
Furniture is a consumer good and, as you know, I am completely against consumer debt! Of course, if you had cash to pay for it and decided to finance your furniture to use arbitrage and make some money by keeping that cash in the bank, I’d normally say that’s OK. After all, that’s what I did when I bought my first ever new car.
However, in this particular situation I don’t think financing to use arbitrage is a great idea.
Why Using Financing Arbitrage On Furniture Is A Bad Idea
First off, if you miss a payment on your furniture loan, you’re likely going to pay a very pretty penny. Your interest rate will spike from 0% to 20% or more and that interest will be applied retroactively to when you purchased the furniture. It’s a very expensive mistake to make. That isn’t the only reason though.
If that isn’t bad enough, buying furniture on a 0% promo can destroy your credit. Chances are that your credit line will be the same exact amount as your purchase which will result in your credit utilization rate spiking. This will be a big hit on your credit score because credit utilization makes up 30% of your credit score. I’d hate for a 0% furniture loan to end up causing you to have a higher interest rate on a future mortgage. That’d cost you thousands, if not tens of thousands of dollars.
Furniture can be expensive and furniture stores know that. By dragging out the price of the furniture into monthly payments with no interest, it makes the furniture seem cheaper and might cause you to end up spending more than you had planned.
Furniture stores also know that if you finance over a long period of time, any discount they give would only be a few dollars a month at most. Due to that fact, they’re not going to offer discounts to try to get you to buy. Instead, they’ll waive the monthly payment in front of your face as a better way to afford the furniture.
So How Should You Buy Furniture?
There is a way to get a discounts on your furniture at these stores, they just don’t advertise it. Instead of financing your furniture or putting it on a credit card to get 1% cash back, try offering to pay in cash. Many furniture retailers will offer discounts if you simply pay with the green stuff from the ATM. You might be shocked by how much you could save!
Want to save even more money on your furniture? Don’t buy from furniture stores! New furniture is marked up by huge percentages. As soon as you take it home it will lose a ton of value. Much like a new car when you drive it off the lot. So how else can you get furniture?
Easy – Craiglist!
Take a look on craigslist to try to find a piece of furniture that fits your style. If you do a bit of research to make sure you’re buying quality furniture you could easily save hundreds or thousands off what the original owner paid at the furniture store.
Yes, it might have some scratches, but that’s just fine! You would have ended up scratching it anyway and now you don’t have to worry about it because someone else already scratched it for you and it ended up saving you money!
I want to know about your furniture adventures! Have you ever gotten a cash discount at the furniture store? Have you ever scored an amazing deal on craiglist or a yard sale? I’d love to hear about it in the comments below!