Selling of Financing

The selling of financing is a major profit center for many large and small chain jewelers. Most offers of interest free financing for limited time periods such as 6 or 12 months are straightforward. Be aware that should you extend beyond the credit term, the full accrued interest will be retroactively added to the balance. Be sure to read the fine print.

Offers of interest free financing for extended time periods, such as 60 months, may have hidden charges. The loan may have no official interest, but a monthly service charge is often added. Financing proposals that we have seen usually place the service charge between $8.00 and $13.00. These charges can add up significantly over the life of a loan.

Another practice is to sell jewelry for a "low monthly payment" while glossing over the actual price of the item and the interest rate charged. The interest rates are typically well over 21%.

A technique in the use of financing that borders on bait and switch can occur when a seller advertises both extreme discounts and extended term interest free financing. One of our clients recounted this tale:

During a transaction, the seller offered a sizable "discount' on a ring and a purchase price was agreed upon. When the conversation then turned to the extended interest free financing, the seller returned to the buyer with a monthly payment amount. Fortunately, the buyer calculated the monthly payment amount over the life of the loan and realized that he was being charged (less the monthly service fee) the full original undiscounted price. When the buyer pointed out to the seller that the amount charged for the ring was not what he had agree to, he was told that the discounted price was only valid if the purchase was paid in full immediately and that the price to purchase the ring over 60 months was the undiscounted price.

The morale of this story is, do the math and check the figures.

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