"The only reason every American doesn't own an elephant is because they haven't been offered one for no money down and easy monthly payments"
The horrible truth behind that statement is reflected in the purchasing decisions many people have been making for much of the past few years. Everything from vacations, furniture, and elctronics has been sold using the sales gimmick of "no payments until....". I have a friend who sells vacuums for prices in excess of $2,000 and while I am pretty sure they are nice vacuums, unless you can drive them to church on Sunday the price seems a little steep to me. What the change in marketing strategies of recent years has meant for the consumer has been a total shift in the way they think.
I remember in the early 1980's my parents saved up money to go to the furniture store and buy a new sofa set. We loaded up the station wagon and drove to town and they picked one out. It was a beauty, rusty orange with wishing wells or waterwheels or some other browny orange pattern with wood accents on the arms. I believe 'the good couch', as it would forever be known in our household, cost about $1200 for the entire set and was paid for with cash money that my parents had saved up and earmarked for this purchase. Compare this to the modern furniture shopper experience. According to my friend who manages a large box furniture retailer, the majority of their purchasers have $0 when they walk in the front door. The furniture is sold primarily on a 'do not pay for xx months' basis, and on a less common basis charged onto a purchasers credit card. It is an absolute rarity for a customer to actually pay for their furniture.
The customer mindset has changed from shopping for 'how much can i afford' to 'how much can i afford to finance'.
A recent automobile sale that I visited made this extremely evident. It wasnt held at a car lot, but rather in a rented hall and was staffed by travelling hired-gun car salesmen who help lots clear used inventory all across the country. As none of the vehicles had prices displayed in the window, I was forced to communicate with an aggressive little guy who when I asked what the price was of a certain van was told it was $199/month. I told the salesman that I did not need to finance and just wanted to know what the price was, again he told me the price could be as low as $49/week. After much prodding and reiterating that I would simply be writing a check for the vehicle, he divulged that the salesmen at the event did not know the actual prices of any of the vehicles only financing numbers, and to find out any more specific information the financing manager would need to be asked. At first I thought the guy was joking, but he was not. Their entire sales technique was based upon selling a vehicle based upon the payment amount and not the actual price, interest rate, etc. Amazing to me.
I have always held the theory that any item which you are being sold that requires that you make a decision within 5 minutes, that you have to attend a presentation with your spouse, that they offer you a free gift over the phone, that they wont tell you the purchase price until the end of the demonstration, or that sounds too good to be true..... IS. So when you get offered that elephant, and inevitably the day is coming, just make sure you get your spouses consent and sleep on the decision, otherwise you may need a big shovel to clean up the mess you will be getting yourself into.
Here are a few of my favorite past articles from my Lethbridge real estate and mortgage blog you might have missed or wish to recommend them to a friend.
Common Financial Problems - Avoid these financial mistakes
Get Your Credit Score UP - Invaluable insight into your credit score
Mortgage Guidelines Get Tighter - Harder and harder to borrow money
Is Your Mortgage Company Out of Business in 2009? - What to do when your bank goes broke
What is wrong with MLS - Is your info being abused?
Survivor - Real Estate Edition - Let's vote a few more off the island
Robert May is a Realtor, as well as the broker and owner of Rainbow Realty of Lethbridge Alberta. He is also a licensed mortgage associate and financing expert with Canada First Mortgage of Calgary Alberta. He has been in the real estate industry since 1993 and offers full MLS real estate services to Lethbridge and surrounding area, as well as mortgage financing, refinancing/renewals, preapprovals, and home equity financing to Lethbridge and Southern Alberta. He can be found online at www.LethbridgeLoans.com
Let me share my 15 years experience in the local Lethbridge real estate and financing market with you! It is the first step towards making a profitable real estate decision.