Rob Stock compares the finance deals on offer at the "big stores" and gives credit where credit's due. GOOD CREDIT records mean little when buying on hire purchase in shops.
Consumer lenders often claim to be unable to publish finance rates because they judge each and every case on its own merits, but a visit to electronics, mobile phone and furniture stores in Auckland found only two shops where finance rates were not the same for all customers.
In one shop, the salesman said a lower rate could only be offered if he pushed the finance company to offer better terms.
There was also a wide range of finance costs, and in the nine big- brand stores visited we found finance rates ranged from 0% at Telecom and The Warehouse (and Harvey Norman for the first 18 months), to 23.9% at Bond & Bond.
On top of that, premiums for repayment insurance (which repays the loan in the case of death, illness or redundancy) and extended warranties could increase the real price charged for the goods by between 30% and 60%.
And there was no room to haggle, we were told in all stores, because there was no room to negotiate on price when buying on finance.
And in one store, a Vodafone stand in the Westfield shopping mall in St Lukes, we were told we had to pay for payment protection insurance even though the law states it can only be sold as optional.
The stores we visited source their finance from some of the big boys of the consumer finance industry: GE Money, Finance Now, and Fisher & Paykel Finance (which operates the Farmers and Q-card systems). The Warehouse gets its finance from Gilrose Finance.
Here is our rundown of the nine stores we visited:
Dick Smith, St Lukes: We expressed interest in an Acer 32-inch widescreen TV with 24-month no- deposit finance provided by Finance Now (catch-phrase: "Want it NOW? Get it NOW!") priced at $1798. The interest rate quoted was a flat 19.75% with no reduction for a good credit history, and a booking fee of $50. Loan repayment insurance, which would have cost $134.85, was sold as optional, though not pushed by helpful, knowledgeable staff. We were also offered an extra two years on our 12-month warranty, at a single premium of $392.99. Total repayments without warranty or insurance would have added up to $2241. Add in insurance and warranty and we would have paid $2884 in total, 60% on top of purchase price.
Hill & Stewart, St Lukes: Slickest of the salesmen, and the only one who knew the finance terms off by heart. We looked at a Sony 32-inch LCD TV priced at $2294.95, with finance offered at 14.75% from Consumer Finance Ltd's Q-Card (catch-phrase: "The Lifestyle Card"). The card is like hire purchase on a card, but like a credit card, consumers get a credit limit, so once they have paid off an item, they simply swipe the card again. Unlike a credit card, the finance rate for hire purchase depends on the stores you buy at. We were told there would be a $63 booking fee, and each time we used the card afterwards, there would be a new booking fee of $43. To increase the warranty to five years would cost a further $350. On the 36-month contract, we'd have paid $3365 in total, including the warranty, increasing the purchase price by 46%.
Bond & Bond, St Lukes: Worst sales assistant. When asked to answer questions on the TVs on display, he chewed noisily on gum and started to read the tags on each of the TVs, so we asked to speak to someone who knew their trade. GE Finance provide the finance (catch- phrases include: "Make it possible"), and the salesman said if he pushed our case on a $1999.99 Philips 26-inch widescreen TV, it might move on the interest rate. Just as well, because the 23.9% we were quoted was steep. We were told that as low as 14.9% might be possible, but was unusual. The small print on the application form set out the additional fees, such as $15 for repaying early, $25 late payment fees and 5% additional interest (28.9%) charged on money owed in arrears. There was an establishment fee of $50 and loan repayment insurance would add another $66. Another $249.99 would extend the warranty from 12 months to three years, and $399 would extend it to five years. Taking all the extras would have resulted in paying $3060 over 24 months, increasing the purchase price by 53%.
Bedpost, St Lukes: Helpful, low-key salesman and finance from Q Card again. On a $2880 Rimu king-size bed, the finance rate would have been 18.9% for periods of between 12 and 36 months. There was an establishment fee of $60. Once repayment insurance was added at a cost of $180, we would have paid $3771 in total, increasing the price by 31%.
Vodafone, St Lukes: For a $999 Palm Treo 750v smartphone we were told repayment insurance was compulsory. We were also accidentally shown the password for getting into the Finance Now secure website, which was written on a piece of paper taped to the inside of a cabinet. There was a $50 booking fee, and initially we were given the staggering finance rate of 27.9%. That turned out to be a mistake, and the rate we were finally offered was 23%. The insurance added $75 to the bill, though the Finance Now website clearly had it as an optional item. There was no extended warranty available. The monthly repayments would have been $138.58, though they would have been much higher for customers who did not take out a 24-month calling plan. We would have also needed a data plan to send emails. In all we would have paid $1663 for the Palm Treo (excluding calling and data plans), an increase on the shelf price of around 60%.
Telecom, St Lukes: The Palm Treo would have cost us $999 at Telecom, too, and again the finance terms depended on taking out a monthly plan. The finance rate for the loan would have been 0% over 12 months, with no booking fee. Mobile phone insurance would have cost $9 a month ($85 excess), and we could have extended our 12-month warranty to 24 months at a cost of $79.95. Without the warranty and calling plans, we would have paid shelf price.
Harvey Norman, Albany: Shopping for a $719 Xbox360, we were offered 18 months' interest-free credit, with payment deferred, meaning we would not have to pay anything until the second half of 2008. Anything not paid off after that would have attracted interest at 24.2%.
Danske Mobler, Albany: Buying a rimu dining set of table and six chairs for $4290 would have got us six months' interest free and deferred payment, followed by 19.95% interest on the balance until paid off. Finance offered by GE Money.
The Warehouse, New Lynn: Finance provided by Gilrose Finance. The only store that would not quote a finance rate until they ran a credit check. The result was a 0% rate for 12 months' finance on a Transonic 32-inch TV, when the sales woman had guessed I'd be paying about 22%, close to the 23% interest used by the calculator on the Gilrose Finance website. The booking fee would have been $35 and there was no mention of insurance.
CARD GAME HIRE PURCHASE sometimes comes disguised as store cards, on which the interest sometimes even beats the 19.95% charged on standard credit cards.
The highest interest on storebranded cards are those backed by GE Money's Credit Line. They charge nearly 24%, according to figures from www. interest.co.nz.
Farmers Card, backed by Fisher & Paykel Finance, isn't far behind, though it does not charge a $25 annual fee and there is an attractive package of additional benefits like exclusive shopping days and offers for diehard Famers enthusiasts.
The Red Card from The Warehouse shows not everything in the Red Sheds is a bargain, with interest of 22.45%. The bestrated card is issued by Smith & Caughey, which charges 15% and has no annual account fee.
Unlike the Q Card, all purchasers with store cards pay the same interest rates, regardless of their credit histories.