Financing a Rolex

[rr-nyc]

Originally Posted by MoBe

Thanks for spelling it out Rookhawk.

I have not been able to independantly confirm that,in the case of a 0% credit issuer,there is a fee to the retailer when there is no default by the debtor,in other words,a transaction fee.

Can you comment?

Apparently there are still people that want to believe that a bank or credit company will lend a consumer money simply for the asking without asking for anything in return.When it comes to buying a used watch we are constantly reminded by other members of the forum,"if it sounds too good to be true then it is",yet when it comes to finance we should believe that free money is a reality,you must be joking!

Oh my, here we go again. I'll tell you a REAL world example compared to your fantasyland nonsense

I went to Brookstone and bought a massage chair for $2499 plus tax ($2708.29) and financed it using their 12 month 0% financing Brookstone credit card. I make my last payment in June and will only end up paying $2708.29. If you walk into the same brookstone and paid cash for the same massage chair, do you know how much you're gonna pay? $2499 plus tax or $2708.29

Explain to me how you got the better deal. Explain to me how I'm paying for the bank to lend me the money. Or you can keep ignoring the issue and instead, telling fantastic lies

If Brookstone pays the finance company, I don't care. It comes out of their margin NOT out of my pocket

Get it yet?

[ChristianN]

Originally Posted by rr-nyc

Hey genius-

I went to Brookstone and bought a massage chair for $2499 plus tax and financed it using their 12 month 0% financing Brookstone credit card. I make my last payment in June and will only end up paying $2499 plus tax. If you walk into the same brookstone and paid cash for the same massage chair, do you know how much you're gonna pay? $2499 plus tax.

Explain to me how you got the better deal. Explain to me how I'm paying for the bank to lend me the money. Or you can keep ignoring the issue and instead, telling fantastic lies

I'm sorry but did you actually bother to read the first post ?

The amount of money the financing companies do make when someone does miss a payment far, far outweighs what they may or may not lose on you not missing a payment.

Also, you don't know who paid for this - in many retail outlets, like say the ones selling massage chairs, the markup is probably closer to the 3x then the 1,8x or whatever we see on the Rolexes. This means they'll make a pretty penny if they buy the 0% finance, cut it out of their profits (which are still huge) and give it to you.

So to spell it out:

You pay for the finance indirectly by buying a highly marked up product.

Buying the same product with cash simply means they make even more.

[Rookhawk]

Brookstone is in business based upon great locations, convenient impulse purchases and easy financing.

Your massage chair is at Abt electronics for $1500 cash.

As usual, all fees are passed to the consumer including Brookstones multimillion dollar port-o-potty sized space at O'Hare terminal 2. When a massage chair takes up 8 square feet at $300 a square foot, you have to sell a lot of them at 150% markup to make your nut after expenses.

No need to get surly with me. Glad you like your chair and your Rolex.

[rr-nyc]

Originally Posted by ChristianN

I'm sorry but did you actually bother to read the first post ?

The amount of money the financing companies do make when someone does miss a payment far, far outweighs what they may or may not lose on you not missing a payment.

Also, you don't know who paid for this - in many retail outlets, like say the ones selling massage chairs, the markup is probably closer to the 3x then the 1,8x or whatever we see on the Rolexes. This means they'll make a pretty penny if they buy the 0% finance, cut it out of their profits (which are still huge) and give it to you.

So to spell it out:

You pay for the finance indirectly by buying a highly marked up product.

Buying the same product with cash simply means they make even more.

I agree. It comes out of the retailers margin. MoBe seems to think they tack it on to my purchase by not discounting compared to offering cash or better yet, seems to think the bank charges me. Apparently, they don't have deferred interest in Canada or he can't read the cardholders agreement

[rr-nyc]

Originally Posted by Rookhawk

Brookstone is in business based upon great locations, convenient impulse purchases and easy financing.

Your massage chair is at Abt electronics for $1500 cash.

As usual, all fees are passed to the consumer including Brookstones multimillion dollar port-o-potty sized space at O'Hare terminal 2. When a massage chair takes up 8 square feet at $300 a square foot, you have to sell a lot of them at 150% markup to make your nut after expenses.

No need to get surly with me. Glad you like your chair and your Rolex.

Not getting surly with you. I'm responding to MoBe. I am merely stating a fact that the consumer pays the same price in the example regardless of tender which is contrary to why MoBe is saying

Margin is another topic all together.

[rr-nyc]

Originally Posted by ChristianN

I'm sorry but did you actually bother to read the first post ?

The amount of money the financing companies do make when someone does miss a payment far, far outweighs what they may or may not lose on you not missing a payment.

Also, you don't know who paid for this - in many retail outlets, like say the ones selling massage chairs, the markup is probably closer to the 3x then the 1,8x or whatever we see on the Rolexes. This means they'll make a pretty penny if they buy the 0% finance, cut it out of their profits (which are still huge) and give it to you.

So to spell it out:

You pay for the finance indirectly by buying a highly marked up product.

Buying the same product with cash simply means they make even more.

Yes I did. If you have followed many other 0% financing threads, some members like MoBe insist that it's a myth. I'm saying it's not. I don't care if the cost of financing comes out of the margin. I don't care I'd the margin is 1,000,000%. The cost of the credit is zero for me and that's the point

[dysondiver]

great read ,,, wish i understood most of it ... but the bit thats clear .
cash is still king.

[kmleffler]

I'm not sure that I care what the retailer has to do to give me an 18 month loan at 0% interest. I do know that if I pay it off in 18 months or less I do not pay any interest charges. That is all that matters to me.

[03cobraa]

Cash is King! Do you really need a Rolex if you have to finance it?

[ChristianN]

Originally Posted by rr-nyc

Yes I did. If you have followed many other 0% financing threads, some members like MoBe insist that it's a myth. I'm saying it's not. I don't care if the cost of financing comes out of the margin. I don't care I'd the margin is 1,000,000%. The cost of the credit is zero for me and that's the point

It's not a myth per se, but it's, at best, naive to think it's really "free" for you buying the item.

The only question you need to ask is the following:

Can I get the exact same product, possibly with another brand but with the same warranty for a lower price paying cash ?

If yes, then the 0% is not "free".

As I (and others) have said, there is also a very large monitary bonus for the providers of the finance if the loaners default - a certain percentage does.

What one needs to realize at that point is that 100% of the loaners have, at some point, had the intention to not default and pay everything on time. A given percentage does. The trick is to avoid being a part of that percentage.

Anyway, I'll go along with that 0% can be 0%, but I'm not going to go along with it being "free". Someone pays for it at some point and I'm the one handing over money, soooo..... guess who's paying? :)

Originally Posted by kmleffler

I'm not sure that I care what the retailer has to do to give me an 18 month loan at 0% interest. I do know that if I pay it off in 18 months or less I do not pay any interest charges. That is all that matters to me.

See the above, at some point you do pay for it. In many cases simply by accepting a higher pricepoint.

Nothing is free in this world, nothing. Especially not loans.

[masterserg]

Originally Posted by ChristianN

Anyway, I'll go along with that 0% can be 0%, but I'm not going to go along with it being "free". Someone pays for it at some point and I'm the one handing over money, soooo..... guess who's paying? :)

Going in circles here but ... he who defaults, pays for it. Zero is indeed zero. You are not accepting a higher price point (as it happened to me ... zero discount and repeated offers for 0% financing).

It is the same with credit card companies ... you know how they call those of us who pay the full balance each statement? "Freeloaders" .... Do you think for a second it is not their goal to charge you the double digit interest rate for financing charges?

If you stick to the rules, zero IS zero. If you skip a beat, you will pay dearly. Renato is correct and there is no two ways about it.

[rr-nyc]

Originally Posted by ChristianN

It's not a myth per se, but it's, at best, naive to think it's really "free" for you buying the item.

The only question you need to ask is the following:

Can I get the exact same product, possibly with another brand but with the same warranty for a lower price paying cash ?

If yes, then the 0% is not "free".

As I (and others) have said, there is also a very large monitary bonus for the providers of the finance if the loaners default - a certain percentage does.

What one needs to realize at that point is that 100% of the loaners have, at some point, had the intention to not default and pay everything on time. A given percentage does. The trick is to avoid being a part of that percentage.

Anyway, I'll go along with that 0% can be 0%, but I'm not going to go along with it being "free". Someone pays for it at some point and I'm the one handing over money, soooo..... guess who's paying? :)



See the above, at some point you do pay for it. In many cases simply by accepting a higher pricepoint.

Nothing is free in this world, nothing. Especially not loans.

We are getting into the weeds on this topic unnecessarily.

Again, as long as I pay off the purchase in interest free period, that loan is free to me. I don't care if its taken off the AD's margin. Thats a loss for the AD, not me

Offering cash for a discount is a non-negotiators idea of negotiating. I guarantee that I can negotiate the same deal as anyone who offered cash with my credit card in hand. If an AD is willing to negotiate, they aren't walking away from business over a couple percentage points in credit card fees. The idea that cash will get you a discount isn't universal. Do you haggle with cash at the grocery store? Go into the Gap and offer cash for a discount. Do you know what answer you will get? "Open a GAP card today and you can get 15% off your entire purchase". My wife works for a high end designer where evening gowns sell for as much as $240k. People try to negotiate cash deals every day. Do you know how many offers they accept? None. That 1-3% credit card fee is worth the cost of doing business and they don't cheapen the brand by giving discounts to people that aren't willing to pay for it.

Have you negotiated anything in the US? I can negotiate the price of a car before telling them how I'm paying. I can do the same in a jewelry store so if you think I'm paying a higher retail price by financing, you have no idea what you're talking about

[robk215k]

Originally Posted by masterserg

Going in circles here but ... he who defaults, pays for it. Zero is indeed zero. You are not accepting a higher price point (as it happened to me ... zero discount and repeated offers for 0% financing).


It is the same with credit card companies ... you know how they call those of us who pay the full balance each statement? "Freeloaders" .... Do you think for a second it is not their goal to charge you the double digit interest rate for financing charges?

If you stick to the rules, zero IS zero. If you skip a beat, you will pay dearly. Renato is correct and there is no two ways about it.

X2! Why is this so hard for some people to see??? I am a freeloader and the credit card companies don't like me. The consistently raise my limit hoping I'll go over the edge or something.

For all the zero% I use them, pay the minimum, make the finally payment one month before the end to eliminate any possibility of timing issues and then I close it.

[Rookhawk]

Robk215k,

I do not disagree with your premise but keep this in mind, assuming a 5% opportunity cost on capital, if you do $10,000 0% financing transactions once a year for a few decades, ALL your 0% "Beat the house" savings will have been lost in just one "woops" if a payment doesn't post in time once.

Put simply: I hope you never get stung by 0% interest because the only reason they offer it is in the absolute hopes you do make an error eventually.

Incidentally, the act of opening up credit accounts and closing them actually is harmful to your credit score. By how much varies upon personal circumstances but the negative hit is measurable.

[Rookhawk]

Have you negotiated anything in the US? I can negotiate the price of a car before telling them how I'm paying. I can do the same in a jewelry store so if you think I'm paying a higher retail price by financing, you have no idea what you're talking about

While you weren't asking me (I think you were poking at a Norwegian at the moment?), I certainly have negotiated in the USA. I also happen to negotiate professionally and have negotiated over $100m USD in contracts and capital over my career. I happen to have an advanced degree with special concentration in the art of negotiation. I make it a habit of studying the art of the deal and I've ready every text I can on the subject from "Getting to Yes!" to "Negotiating Rationally" and all the NYT best sellers in between.

Having said that, I'm a student of negotiations, not a master. Negotiation is a science and it is 100% learned behavior. I'm still learning and that comes from avoiding huberus in my belief that I got "the best deal anyone could have gotten on this XYZ".

Some real world example from 10 days ago. Bought a 116610LV for $7182 CASH. They wanted another 2% for credit card. (their costs) Had they not wanted the 2% upcharge, I would have demanded another 2% discount for cash because that is exactly what they would pay the merchant bank for processing.

If you are getting the same price cash or credit it isn't a testament to your negotiating cunning, it is diagnostic feedback of the shortcomings of your negotiating skills because you left at least 2% on the table when you completed the deal.

[Linzjnr]

Originally Posted by superdog

Impressive post. Thanks for taking the time to put it together. Sadly, most people won't actually read it because it takes to much work.

X2 thanks for making the effort!

[z0mghenry]

Hi Rookhawk, thank you for taking the time to put that together. Having previously financed (but don't now), I still found some pretty useful information in your post.

[robk215k]

Originally Posted by Rookhawk

Robk215k,

I do not disagree with your premise but keep this in mind, assuming a 5% opportunity cost on capital, if you do $10,000 0% financing transactions once a year for a few decades, ALL your 0% "Beat the house" savings will have been lost in just one "woops" if a payment doesn't post in time once.

Put simply: I hope you never get stung by 0% interest because the only reason they offer it is in the absolute hopes you do make an error eventually.

Incidentally, the act of opening up credit accounts and closing them actually is harmful to your credit score. By how much varies upon personal circumstances but the negative hit is measurable.

Rook,

One...missed payment doesn't happen with auto pay. I've done it at least 10 times in the last 6 years and it hasn't happened.

Two...Opening up an account and paying off within less than one year does NOT hurt your credit. It helps. I had very bad credit until about 9 years ago and work with a credit advisor to keep it in top shape now. Opening, paying off, and closing HELPS! Ask a banker or someone involved with a FICO score.

[rr-nyc]

Originally Posted by Rookhawk

If you are getting the same price cash or credit it isn't a testament to your negotiating cunning, it is diagnostic feedback of the shortcomings of your negotiating skills because you left at least 2% on the table when you completed the deal.

I too negotiate contracts for a living...For a $4B medical device company, of which, $3.5B comes through me or my counterparts.

The point I was making about getting the same price as a cash deal is that cash is not the motivator to close the deal... Unlike what is thought to be the case. You asked if cash will get the better deal vs a credit card sale. I said I could get that same deal with a credit card as any cash payer can get... Not just shaving off the credit card processing fee

[Rookhawk]

I said I could get that same deal with a credit card as any cash payer can get... Not just shaving off the credit card processing fee

Here's why your ego is getting ahead of your reason.

A $10,000 Rolex has a wholesale cost of $6000 at zero profit to the dealer. Therefore, the target is to hit $6001 and to convince the dealer something is better than nothing. Naturally their BATNA is a better customer coming in after you but this is the construct for your negotiating framework.

If you are the world's best negotiator you'd be able to get them to $6180 at 3% CC fee baked in, they'd make a dollar on a $10,000 MSRP watch and you'd win the grand poohbah award.

The cash sale guy could negotiate a deal at $6090 paying less than you while giving the dealer a 1.5% profit margin instead of the zero you offered them. This would be a more mutually beneficial transaction than your best possible case scenario.

In conclusion: your negotiating assumption that you can always get the best deal cash or credit is flawed at its inception.

[robk215k]

Originally Posted by Rookhawk

Here's why your ego is getting ahead of your reason.

A $10,000 Rolex has a wholesale cost of $6000 at zero profit to the dealer. Therefore, the target is to hit $6001 and to convince the dealer something is better than nothing. Naturally their BATNA is a better customer coming in after you but this is the construct for your negotiating framework.

If you are the world's best negotiator you'd be able to get them to $6180 at 3% CC fee baked in, they'd make a dollar on a $10,000 MSRP watch and you'd win the grand poohbah award.

The cash sale guy could negotiate a deal at $6090 paying less than you while giving the dealer a 1.5% profit margin instead of the zero you offered them. This would be a more mutually beneficial transaction than your best possible case scenario.

In conclusion: your negotiating assumption that you can always get the best deal cash or credit is flawed at its inception.

Dude...you're STILLLLL Missing the point that the AD has ZERO to do with the financing. They net the SAME EXACT amount whether you finance or plunk down cash. If they use GE and you finance 10,000 at zero %, GE is giving them $10,000 and hoping you default.

[Rookhawk]

Rob,

Renato has shifted the conversation to CREDIT CARDS and still says it doesn't matter. He's the best and knows he can get the same deal cash or charge because of his sheer force of will. To which I gave my factual analysis above.

[robk215k]

Ahhh. I do agree that the AD does take a hit with a CC.

[rr-nyc]

Originally Posted by Rookhawk

Here's why your ego is getting ahead of your reason.

A $10,000 Rolex has a wholesale cost of $6000 at zero profit to the dealer. Therefore, the target is to hit $6001 and to convince the dealer something is better than nothing. Naturally their BATNA is a better customer coming in after you but this is the construct for your negotiating framework.

If you are the world's best negotiator you'd be able to get them to $6180 at 3% CC fee baked in, they'd make a dollar on a $10,000 MSRP watch and you'd win the grand poohbah award.

The cash sale guy could negotiate a deal at $6090 paying less than you while giving the dealer a 1.5% profit margin instead of the zero you offered them. This would be a more mutually beneficial transaction than your best possible case scenario.

In conclusion: your negotiating assumption that you can always get the best deal cash or credit is flawed at its inception.

You are dragging this into the weeds and taking this thread, YOUR thread, so far off topic, its become hilarious!

As a consumer, my goal isn't trying to rip off a dealer...its getting the best deal that I see as being mutually agreeable. Its the same in any negotiation.

You should stop reading your books on becoming a negotiator because it makes you sound like a business professor that only preaches because they couldn't hack it in the real world. Your $100M deals seem to have gotten to your head. I never implied that I am the best negotiator. I said people think they get the best deals by paying cash. In my business and personal life, cash and terms are the same. In fact, my business prefers terms because we do make money on the back end since we hold the note. But since you feel the need to throw out your career highlights, I just closed a deal with the Veteran Health Administration worth $167M... Just another day at the office

Your original post was flawed and I pointed it out. Now you're on a rampage to prove me wrong which has yet to happen. So since you're hell bent on showing us all how free credit isn't free, please show us because I'm getting bored.

[LightOnAHill]

From a certain point of view, they don't take a hit with the CC, but instead, make more with cash.

It depends on where you draw the initial line. economics and finance don't mix, mostly because nobody has ever figured economics, ever... ok, maybe a little, but we still live in a world with paper money, so they didn't figure out much!

[rr-nyc]

Originally Posted by Rookhawk

Rob,

Renato has shifted the conversation to CREDIT CARDS and still says it doesn't matter. He's the best and knows he can get the same deal cash or charge because of his sheer force of will. To which I gave my factual analysis above.

Oh my god, you really are splitting hairs.

I'm still on the 0% issue.

As a side discussion, I pointed out how cash isn't king and I merely stated cash doesn't do anything to help a deal. I had a hard enough time staying awake to read your first post. I can't imagine where this is going next. You want to argue net 15 vs net 30? NPV? IRR?

Good grief, chill out

[tictocChuck]

I've dealt with only two AD's. The first offered 15% off and no payments or interest for 5 months, but full amount due (had to sign up for their card though, no big deal). The other AD had me at full retail price, 20% down and 12 equal & no interest payments for 12 months (again, had to get a store credit card). I had the money up front in either case, but the arrangments did ease cash flow issues. Interesting & in-depth thread though, but since Rolex is an emotional purchase, as most luxury goods are, people will generally not go to the depths of thought presented. But thanks to all for your input. Cheers!

[F&Iguy]

0% is 0% ! When you buy a car at 36,48,60 month terms and don't make the payments they repo your car and the bank sends you a bill for there loss. Credit card fees we eat to make the deal but limit it to 5k.

Renato, I think your spot on Sir cash is not always king of the deal.

[tdegroot]

Originally Posted by kmleffler

I'm not sure that I care what the retailer has to do to give me an 18 month loan at 0% interest. I do know that if I pay it off in 18 months or less I do not pay any interest charges. That is all that matters to me.

I agree 100%.

[tdegroot]

Originally Posted by 03cobraa

Cash is King! Do you really need a Rolex if you have to finance it?

I don't understand. You don't need a Rolex one way or the other. You can "waste" money by financing anything. In that respect, you're probably wasting money by just buying a Rolex whether you financed it or not.