What Would You Do? Pay Cash And Drain Savings, Or Use Interest Free Financing?
For the past year, my wife and I have contemplated doing some major home improvement/maintenance projects. New carpeting, painting, new furniture, and replacing our air conditioner have all been discussed and investigated. I recently painted our main living room (which turned out great!), but we haven’t pulled the trigger on any of the other items. We have been indecisive as to which one should be the highest priority, until yesterday.
We agreed that replacing our air conditioner before it fails should be the highest priority.
With several estimates in hand, we selected a dealer based upon price, customer service, and reputation. Talking to the representative to setup an installation date, he asked us if we would be interested in taking advantage of their financing option. The details of the offer are:
- Financing term is 24 months
- Advertised as, â€œsame as cashâ€, interest free financing
- $25 one time origination fee
We have the ability to pay for the air conditioner with cash, but it would drain our emergency fund. I thought it would be worth my wife and I discussing taking advantage of the offer.
- No interest
- Forced monthly payment (to ensure it IS paid off in 24 months)
- Affordable monthly payment (about $120 a month)
- Savings not drained, funds still available for unexpected expenses
- Could potentially use some of the funds for some new furniture
- $25 origination fee
- While the monthly payment is affordable, it still is $120 out of our budget each month
- If we use some funds to purchase furniture, are we overspending?
By taking advantage of the financing option, we retain our ability to handle unexpected expenses and all it really costs us is the $25 origination fee. The monthly payment does fit into our budget. However, I’m always concerned with financing things â€“ especially when we have the cash to pay for it outright. Will it cause us to overspend? Is it really considered overspending if we take advantage of interest free financing for our air conditioner, use some of our savings for furniture, and still be well equipped to handle unexpected expenses?
What do you think, Clever Friends, should I just pay cash for our new air conditioner, or should I take advantage of the interest free financing?
Brought to you courtesy of Brock
Brock is a software engineer by day and personal finance blogger at night. He is a fitness junkie and enjoys grilling and smoking meat. Married with two children, Brock strives to improve his skills as a husband and father, and is always on the lookout to stretch his family’s budget as far as he can.