What happens when the consumers can’t buy anymore?


Everyone has a deal. Harvey Norman is offering 12 months deferred payment and 12 months interest free, Noel Leeming has deals, Bond and Bond has deals, there is even a web site called Perweek that lets you search for products by the period of interest free terms they are offering.

The Scooter Bar has ads on Trade Me offering deferred payment and special deals on new motorcycles and on it goes.

There is always something essential that you need, like a new HD TV with Freeview, an iPhone, a new car, a stereo that you can plug your iPod into and on it goes.

A couple of years ago I bought a new Canon camera. I had the cash in my savings, but I decided to take the 18 months deferred payment and then pay it off straight away. I paid a week late and GE Money, the company that seems to be offering a large chunk of retail finance wanted to charge me a hefty fee for that, but no one sent me a slip or reminder to say it was due and I had diarised it a week out. I stood my ground and as Noel Leeming wanted to keep my business I didn’t have to pay the late fee.

6 months or so later I got a letter from GE Finance offering me a special deal with pre-approved finance for a sum, I can’t remember exactly, but it wasn’t interest free, they were offering me finance at 24% interest!

They have all sorts of great ideas and of course you could say that anyone silly enough to take that deal deserves to be taken to the cleaners, but the problem is that there are people who are struggling and will be thinking, these guys want to lend me money and I need money, so lets do it.

I wonder if there is recourse in the finance. If the person who is paying for their new HD TV defaults, does it become the finance company’s loss or the retailers problem. Finance companies are typically risk averse, so I’m guessing it’s the retailer. It would be great if someone can clarify that for me.

So here’s the thing. There are loads of people spending money they don’t have on things they can’t afford and chances are it’s not one item, it’s several over a period of time. So when the masses are broke and the retailers aren’t getting paid, what happens next?

We are already officially in a recession and things aren’t getting any better. Very soon a large number of people will owe much more on their homes than their value, especially the thousands who bought at 90 to 100% of the property value in a growth market and those who leveraged heavily for their retirement funds.

If retailers can’t recover their money, they can’t buy new product, they can’t afford their staff and the manufacturers can’t keep manufacturing. If houses aren’t being built because people can’t afford to buy them, all the trades will suffer, plumbers, electricians, builders, labourers, the list goes on.

Is this inevitable? Is there a solution?

Some people got hurt in 87′ but most people in New Zealand have not lived in a depression and have lived a life of instant gratification. Of course there will be some fortunes made as well. What could some of the consequences be?

Increased domestic violence is on the rise, violent crimes are on the rise including aggrevated robbery. Drug use is on the rise which increases crime and the worse of things are, the more displaced young folk will be heading into the welcoming arms of gangs.

How can we avert this?

While this blog is starting to get a good following, I would love to get more readers and encouraging me to keep writing. If you feel that my blog is interesting I would be very grateful if you would vote for me in the category of best blog at the NetGuide Web Awards. Note that the form starts each site with www whereas my blog doesn’t and is of course http://luigicappel.wordpress.com.

Thanks so much for your support:)

About these ads

3 thoughts on “What happens when the consumers can’t buy anymore?

  1. Work at GE Money.

    Can confirm that, because the loan is drawn up with GE Money, they assume the associated risk – not the retailer.

  2. I’m pretty sure the finance company takes on responsibility for the debt once you get the product, not the retailer. It’s still not that good for them, though; the retailer can end up giving all their profit to the finance company up front to make up for the interest free deals, and they have to get it back with extended warranties, and overpriced cables and accessories.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s