Come On! Buy it Now, You Can Pay Later – Sales Tactic #3

Think back to a shopping trip where you almost made a purchase but wisely walked away because you couldn’t afford it.  Bad news, the marketing gurus have found a way to stop that from happening!  When your better judgment screams NO, they use the “Buy Now, Pay Later” sales tactic to ease you into a big purchase. 

This tactic is a retailer’s dream come true.  They can sell to us whether we can afford it or not!  They get us to spend money we don’t even have on what they’re selling.  Instead of feeling uneasy about being able to pay for it, we feel satisfied, like we got something for nothing.

All About the Payment
Buy Now, Pay Later is dangerous for consumers because it puts our focus on the size of the payments, instead of whether we can afford the item.  The sellers love this approach; it breaks down our resistance to spending and makes their sale so much easier.

Using this tactic, the people selling to us delay our decision of whether we can afford something until AFTER we agree to buy it.  The financial implications of the sale sneaks up on us after the sellers already have our money and we’ve passed the return period.  The bad news is this isn’t even the worst thing about the tactic.

Guess What, There’s Interest!
First the retailers convince us to buy from them using their store brand credit card, whether we have the money or not.  Then they add in finance charges on the money we borrow to buy something from them.  So they fool us into feeling as though we can afford their item and then jack up the price by tacking on exorbitant interest!

This tactic works out pretty well for the seller, more sales and extra interest income.  Unfortunately, for every winner there is a loser.  While they make out, we consumers get hosed.

Warning Signs 
• Low Monthly Payment       • No Payments for 1 Year
• Only $40 a Month            • No Money Down!
• 90 Days Same As Cash     • Just 3 Easy Payments! 

Tactic In Action
“I’m paying in cash”, I said for what felt like the millionth time.  The blank stare made it obvious he didn’t encounter this situation frequently and wasn’t sure what to try next.

The Buy Now, Pay Later tactic began soon after the test drive, once we started talking dollars with the car salesman. “What kind of payments are you looking to make?”, the salesman asked. “It’s not size of the payment, it’s about the price of the car!”, I shot back.  “I’ll be paying in cash and am looking to get the lowest price I can.”  He furrowed his brow then launched into his pitch.  “I can put you into this one here for under $400 a month.”

After re-iterating I was paying cash, he came back with the same tactic again. “No point in paying it all up front, how low do you want your payments to be?”  The Buy Now, Pay Later tactic must usually be so successful that he didn’t have any other tricks up his sleeve!  After several more of his attempts, I finally made it clear I was interested in the final price and wouldn’t be distracted by talk of low payments.  After we negotiated a sales price it was on to the sales manager’s office.

“I’m paying in cash”, I responded to the manager’s spiel about a special financing offer. He scowled and asked, “Why pay for it all now?  Why not keep the money and finance through us?”  After several rounds of refusing financing he realized they weren’t to make any money off us via this tactic.

At that point, he mixed in the You’ll Be Sorry tactic.  He talked about the potential problems an extended warranty would cover and “strongly encouraged” us to buy it.  I told him of our plan to put money away every month to cover any future auto expenses, this way we’d only have to pay in the event something went wrong.  “If you buy the extended warranty you’ll be covered right away.  You don’t have to pay for it up front; we can roll it into your loan.”  Once again, I reminded him we were paying cash and firmly refused the extended warranty.

Upon realizing we weren’t going to fall for either the You’ll Be Sorry or Buy Now, Pay Later tactics, the manager quickly finished the paperwork and rushed us out of his office so he could focus on the next customer.

Protect Your Paycheck
The Buy Now, Pay Later tactic can eventually lead to mountains of debt if not overcome.  Here are some things to keep in mind as you try to beat this strategy.

Lifetime Payment Plan
You can pay for anything given enough time.  According to the US Census Bureau the annual household income for 2006 was around $48,000.  Based on those numbers, the average person earning this income each year would earn well over $1 million in their lifetime. So if you think about it, on a payment plan you can afford most things being sold to you, right?

Let’s stop and think about this for a minute.  Think about how much you hate making payments every month.  Why create more for yourself? Who wants to be on a payment plan their whole life?

You Really Will Pay Later
The majority of people who buy on a payment plan end up paying more than sticker price for an item.  Interest charges or late fees can add up to 35% onto the total price.  Sellers know if you fall for Buy Now, Pay Later, they can keep making money off you with late fees and interest charges far into the future.

Your Electronic Speeding Sign
Before easy credit, we only spent what we had.  Now companies are extending credit to practically everyone and we can spend on whatever someone wants to sell us.  Charge cards make it so easy to swipe and carry; we often don’t realize how much we’re spending until we get the bill at the end of the month. What we need is something to remind us of how much we’re spending day to day.

How many times have you cruised past one of these electronic speed signs on the side of the road and been surprised at how fast you were actually going?  Today’s powerful and comfortable cars and (relatively) smooth highway systems make it easy to be unaware of our driving speed.  Similar to the way charge cards allow us to obliviously spend over our budget. 

Some companies offer a feature that you can think of as an electronic speeding sign for your credit card.  You can setup telephone and email alerts to let you know if you have spent more on your card than you have budgeted.  Adding alerts for charges over a certain amount, a certain percentage change in your balance, or a certain balance exceeded can be your own electronic speeding sign to remind you that you’re falling for the Buy Now, Pay Later tactic.

Sales Tactics
That wraps up the third sales trick in the Sales Tactics Revealed series. If you haven’t already, be sure to read the first two, Don’t Miss Out and You’ll Be Sorry.  If you’ve gotten something out of this series, you can subscribe via feedreader or email for coverage of upcoming sales tactics.

Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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