As discussed in the last Board Brief, more retailers are offering Buy Now, Pay Later (BNBL) no-interest options. These products are a form of financing. They are like limited time, zero interest credit cards. The terms may differ, but these are financial products, and they are offered because they increase retail sales and they make someone money, sometimes a lot of money, that can be at the consumer’s expense. So, BEWARE!

When should I consider taking a BNBL offer? The simple answer is you shouldn’t. But there are some limited situations when considering a BNPL financing option is worth considering.

In general, you might consider a BNPL offer if what you are buying meet the following criteria:

• The item to be purchased is a need.
• The item is necessary for your ability to generate income or is a capital purchase (appliance, roof for your house, etc.).
• The term of the BNPL is within the useful life of the item being financed.
• You can pay for the item, monthly, within your current budget.

The best example is buying a new or used vehicle. It’s important for work and functional for your lifestyle. Of course, by taking the BNPL zero-interest loan, you may be foregoing potential price incentives offered by the dealer and you may not be able to negotiate. This example also assumes you are staying within your budget. While you may want the fully loaded Porche SUV, your budget may tell you it’s not an option.

You need to consider if this BNPL no-interest loan is the only option. If you have a better financing option, you need to consider it first.

Another practical BNPL scenario is the purchase of a long-life item. A roof is an important need and if it is leaky, it can harm your investment-your home. Roofs typically last twenty to thirty years, so as long as your term is a reasonable timeframe (five or ten years), a BNPL financing plan can be an option.

Other items to consider are appliances like a refrigerator, washing machine or dryer. However, today’s appliances are designed to last eight years or less. If you are considering a ten-year BNPL financing option, it is not a good idea because the financing could extend beyond the useful life of the item you are buying.

WHAT TO DO?
Think about it.
Do I really need this purchase?
If so, is there is a better way to pay for this purchase?
Does my budget allow for this additional monthly expense?

Don’t just sign on the dotted line. Read what you are about to sign to fully understand what you are committing yourself to.

Next month, we’ll look at purchases you should not consider that are poor choices for BNPL financing option.

OUR ADVICE
BNPL no-interest offers can be financially a wolf in sheep’s clothing. Be purposeful and thoughtful about your purchases. Make sure you are correctly looking at a purchase for what it really is; a need verses a want.

Whatever your financial need, we’re here to help