We had a customer looking at the option of purchasing and financing with a
Local Big Box National Retailer, using their store card. Their offer was a
3.99% introductory rate for the first 48 months on their store card at the same discount price as paying in full on day one, which was
$7,099 +Tax.
B T South had the same machine with a special finance offer of
0% for 60 months at a price of
$7649+Tax. B T South also had an option making the machine
$6,999+Tax when paid in a single payment. Looking at the financed price, the big box store appeared to be the better option at $550 less. But let’s dig into the details. The big box store card’s minimum payment was the greater of $30 -or- fees & interest charged in the prior month + 1% of the balance. At month 49 the interest rate would rise from 3.99% to 33.24%.
With this offer from the Big Box store, by month 2 the minimum payment would be $100.47 and would slowly decline through month 48 to reach $63.88. But then on month 49 with the introductory interest rate expiring, the minimum payment would jump to $180.95 and would slowly decline until paid off in month 271. The total amount paid would be
$20,232.33 which would be
$12,654.15 more than buying the mower in a single payment.
OK, but what if a minimum of $100/month was paid throughout the loan? In that case $100 per month could be paid through month 48. Then on Month 49 the minimum would jump to $146.90 and would slowly decline to below $100 by month 86. If $100 continued to be paid after month 86 then the loan would be complete on month 134. The total amount paid would be
$14,149.77 which would be
$6,571.59 more than buying the mower in a single payment.
Using the TD Card at B T South, the same purchase would have been $136.09 per month for 60 months plus $150 on the first month’s statement. The total amount paid would be
$8,315.31 which would be
$737.13 more than having bought the mower in a single payment at the big box store, or 843.88 more than buying it in a single payment at B T South.
OK, but what if the same 136.09/month was paid to the big box store finance option? In that case the same $136.09 paid monthly using the big box store finance option would result in a total paid of
$8995.78 over 67 months which would be
$1,417.60 more than buying the mower in a single payment.
What initially appeared to be $550 less expensive actually worked out to be $680 more expensive if the same monthly payment amount was paid on both options, and if only the minimum payment was paid would have worked out to be $11,917 more expensive.
This example is based on what was being offered on February 21st 2025. Offers will vary from time to time, but the point of sharing this is to illustrate that the devil can be in the details, and it almost always works out best to get a clean loan where you can clearly see what you are paying and for how many months, than to have open-ended uncalculated costs that are assumed to be minimal or insignificant.
LINK to the B T South Finance Page
