Interest Free

[Famous5]

How does the retailer and the finance company make money from an interest free credit deal

[stoo_pid]

By adding on the interest that they would have made to the initial sale price. Also sometimes these "interest-free" deals are only interest-free for the first few months.

[stevie21]

Some people don't pay in full by the end of the interest free term in which case the interest that they are charged can be painfully high. The companies probably have figures on how many people don't pay in full and that allows them to fine tune the length of the interest free period and the subsequent interest charged so that they always make a profit.

[Bangkok]

In addition to including the interest cost in the selling price, it normally requires you to use the brand storecard, thus tempting you back to use the card at some point

[WoWo]

The credit companys do a deal with the store, they get any interest on the money if the people go into the interest zone, or if they dont they get a small admin fee to cover the costs. While there are plenty of people who pay before the period is up there are plenty of others who don't (many don't realise how much this will cost them). For example I got a �700 computer this year on interest free for 6 months, if I had gone into the interest payment stage I would have had to pay �1350 nearly twice as much as the PC cost. Its worth the credit company taking on these debts due to the high rewards, simply money for nothing (well nothing other than lending the money). The shop on the other hand gets more custom.

[Oneeyedvic]

We (the finance company I work for) offer our dealers an interest free deal. Essentially they will discount the goods to us and invoice us for a lower amount than you see the price for.

 

As an example - if you were to buy something for �1000. they would invoice us for �900 and we would give you 10 x �100 payments. Thus you are getting it interest free, the finance company are geting their profit and the dealer is making a lower profit than normal.