Why Financing Your Computer is a Terrible Idea

In general, I don't advocate buying things that you don't have the money for, whether it's an expensive item like a car or an inexpensive item like a pair of shoes. In the case of computers, however, those offers to get a new laptop from Apple or Dell for "as low as $26.00 a month" always look so enticing, so I decided to see what they're about.

Apple's offer is just flat-out false advertising, if you ask me. With each computer on their website they show you the real price and then the financed price. A basic MacBook laptop that costs $1099 can be had for $26.00 a month, they claim. But the real offer here is for a credit card, and a rather poor one, at that. The card allows you to pay no interest for 90 days on purchases over $999 (though right now they have a promotion allowing you to go 180 days without paying), meaning that if you made payments of $26 a month on the aforementioned computer, after 90 days you would still owe $1021, which you would then have to start paying interest on at a rate of 13.74% or more (based on your credit history) per year. Even if you weren't saddled with all this interest, to pay for a $1099 product at only $26 a month means that you would be taking three and a half years to pay for the product, which is longer than a lot of people use their computers for. Since it's a laptop, it has a higher risk of needing repairs, which are likely to run you $200-300 per repair. Put those on the credit card, too, and a single purchase can really get you into trouble. The only reward this card offers is a $25 iTunes card after $2500 in purchases -- a mere 1% cash back.

Dell also offers a financing option. For their least expensive notebook, which costs $549 last time I checked, the monthly cost is listed as $17 a month. This program is called the Dell Preferred Account, but the only reason they prefer you is because you're going to be paying them whopping amounts of interest. Furthermore, the account isn't really through Dell, it's through CIT bank. In other words, it's a credit card. This program is even worse than the credit card Apple wants to hook you up with. After three months of no interest, at which point you'd still owe $498 if you were paying the $17 a month, the APR starts at 17.24% and goes all the way up to an obscene 29.99%.

Presumably, the $26 or $17 a month advertised is the minimum monthly payment you would owe if you put the computer purchase (and nothing else) on your new credit card. Paying the minimum monthly payment on your credit card is one of the easiest and fastest ways, aside from going to Vegas, to get suckered out of a ton of money. So when you're shopping for a new computer, just ignore the monthly payment option. The best way to making purchasing a new computer affordable is to shop for deals online and purchase from a retailer who offers free shipping and won't charge you sales tax.

Photo by erikf