If I take up an interest free option at my LBS they apparently pay the interest so in fact it’s interest free for the buyer but expensive for the LBS.

Can any LBS owners confirm this?

Don’t want to empty the savings account hence wanting to get an interest free deal but equally don’t want to leave the LBS with no profit.

If you had cash the lbs would give you a percentage off. Probably not the nationals mind. Do you care if the likes of evans o? crc lose a little bit of profit if you but 0 percent?

Think you’ll find that the LBS builds the cost of the interest free into the price.
I just ordered a frame/fork/headset/reverb bundle from an LBS. The price they quoted for interest free was nearly £500 more than the price they could do it for me if I paid cash.

Don’t want to empty the savings account hence wanting to get an interest free deal but equally don’t want to leave the LBS with no profit.

This place boggles the mind sometimes.

OP if it wasn’t in LBS’s interest (pun) they wouldn’t offer it.

Generally the shop funds the interest from their margin. It’s instead of any kind of negotiation that you might do with them ie 10% off, free pedals or discounts on other stuff.

If you want to haggle and get interest free look at a discount period CC. If the price is right using a 0% finance option over savings makes no difference as you can keep your savings as a buffer/emergency and locked into term deposits returning some interest if you want.

Many complex questions can be answered by simplifying the terms of the question for example ” I am going to buy something from a shop who will pay for it ? Me or the shopkeeper.” As said the answer is the customer pays. IFC is built into the pricing structure in one way or another. Try ” combian pour cash? ”

Was thinking about this at the moment. A local shop plus another that would give a discount on a bike I’m thinking about also offer 0%. Both will either do the discount or the 0%. One shop 10% off, the other 12%.

IF you have the cash and it would otherwise be sitting in a savings account, and IF it was in the best isa out there at the moment you would be marginally better off using the 0% but there is not a lot in it. If it’s sat anywhere else the discount is best financially. If the flexibility of having the cash sitting in your bank is useful to you, 0% makes sense if the money is somewhere sensible in the meantime as the margin is pretty minimal. Obviously if saving rates go up the gap widens making 0% even more attractive. Probably the best thing you could do financially would be to take the 0%, use the money you would have used to buy it to overpay on your mortgage (provided no penalty) and pay the 0% loan repayments off monthly with future savings.

edit – that was 0% over 3 years. If the 0% is over a shorter term (esp. 12months), but the discount remains constant, the discount wins every time.

£2000 bike. £500 margin. £200 to cover finance interest. £300 profit. £300 is better than not selling bike. Chances are you would get more than the £200 off the price for straight cash.

Figures for illustration purposes to show op the shop is not doing them some kind of favour

You pay in my experience. I always ask if there is a discount if I pay now. Bought the wife an omega watch for her 40th.
£1175 @ 6 mth int free or £980 pay now.

Shop pays between 6-14% to the finance company depending on the amount and length of term.We got a visit from trading standards threatening to fine us for having bikes marked with RRP with finance and a discounted price for cash/card (after someone complaining why they could’nt have a bike at 30% discount and pay the £500 over 3 years interest free-£5 a week).Now we just tell customers straight away instead.

The higher the interest rate the less the store pays in charges etc until at some point the finance company pay the store to sell their products which is why some places are keen to push credit deals.

@Jamie Not sure why you posted this, I’m just trying to understand how the LBS makes it’s money and if I’m better off to pay in cash with a discounted price or split it over an interest free period.

I known it’s an old fashioned concept to many but I don’t want to leave my LBS with bugger all profit when they are helping me get the spec/detail of a custom build right. More importantly I don’t want to give money to a finance company that screws my LBS into the ground and then the LBS ends up closing up shop because they can’t make a decent living.

Obviously someone pays the difference somewhere it’s just a question of what’s (in order of importance) best for me, the LBS and lastly (very low priority from my perspective) the finance company.

@letyboy just ask the LBS which they prefer, zero interest or cash with a discount. Typically zero/low interest deals “hide” a high list price. SOmetimes manufacturers won’t let retailers discount their products so the shop offers zero interest instead. Finally, I total get where you are coming from, I always try and support my LBS, without them I’d be screwed as I need their advice/mechanical support plus they know all the best hidden local trails.

@jambalaya My LBS are doing exactly that so we can find a mutual ‘sweet spot’ 🙂

Look after yourself. Nobody else will.

When I worked for the YHA eons ago i asked the credit company who did their interest free credit loans.

Basically interest free is offered to everyone, those who pay it off are interest free those who dont get a fee, on that fee the margin is made by the credit company (the shop generallyare not charged for the credidt but dont make more if the customer goes over the interest free period)

Taffy, that’s a different sort if interest free deal I think.

The sort you get (in my experience) on bikes, are fixed payments over a fixed period paying off the full amount, with no interest.

No chance to roll over into an extended period and get charged interest.

Plenty of places offer that type of deal – for example PedalOn use Hitachi finance (or did until recently, dunno if they’ve changed). Pay off within 12 months (with a £35 settlement fee) then no interest. Go a day over the 12 months and you’re tied into a high interest loan which you pay through the nose for over a 3 yr period (or settled early for the same final value as the full loan term).

I tried to get a discount from dfs and scs for cash rather than take the 4 yr interest free option. Apparently they are not allowed to offer a discount for those paying cash as it effectively means the interest free option is not interest free. Made sense to take the interest free option although I did worry about their profit 🙂

Nealglover

that was my experience. .. but 14 years ago I guess at the start of the old credit boom! I did genuinely ask and it was basically they shaft dry anyone who doesnt paynin the interests free period. (Hefty hefty re payments)

I guess the Interest free will depend on the shop and the company supplying the credit weather its a paercentage or fee from the shop or no cost to the shop but charge anyone who slips out if the interest free period.

I know a lot of times anyone who had credit going was encouraged to roll over and add onto it with new purchases and overrun the interest free period, as we all know the aprs can be a bit steep (thouhh still less than tbe old payday loan 2000 -4000 percent aprs)