0% finance: A no-catch, free-money offer for big names and freelancers alikeMonday, September 1, 2014 12:00 AM
WTS Broadcast's Sales Manager Duncan Payne has a wealth of experience when it comes to the subject of buying broadcast equipment on finance - and, he says, it's a perfect option for big companies and freelancers alike.
Having spent six years of my career selling finance with one of the leading specialist financers of broadcast equipment, the benefits of a ‘free money’ scheme - which is effectively hat a 0% interest deal is - are pretty clear to me, and I’d encourage all kit purchasers and prospective buyers to look in to it.
These 0% interest deals are a great way to squeeze every last penny of value from your purchase. If you were getting an extra 10% discount would it make you buy the kit now? I think I would. That’s pretty much what you are getting with any manufacturer’s 0% two-year deal.
So what’s in it for the manufacturer? A finance scheme needs to do at least one of three things to be deemed a success.
- It needs to bring a purchase forward in time.
- It needs to incentivise the customer to buy that product over another manufacturer’s.
- It needs to make a purchaser buy more of the thing they would have bought anyway.
If the finance offer is not doing at least one of these for the manufacturer, it’s just giving away extra discount.
Why can't I just buy it cheaper up-front?
But why can’t customers just get a cheaper invoice price and pay cash up front? A few reasons why not…
The manufacturer will be keen to maintain a high perceived value of the equipment that they are selling. Trashing the price will not help in building a positive brand image. This protects you, the buyer, too – you’re going to own the kit so you want it to maintain its value so you can sell it on when you want to upgrade to the next big thing.
On a more practical level, the manufacturers are often paying the finance costs from a ‘pot’ funded by a European HQ, so the UK division is not actually being given the extra margin it takes to fund the deal.
Finance is for everyone
Perhaps the single biggest obstacle for a client is their own misconception that these schemes must be highly complex and that no one will ever lend them any money. Freelance cameramen are often the most unaware of the opportunity to borrow – ironic since frequently they represent the lowest risk. An owner-operator will guard their equipment with their lives and never put the very thing that generates their livelihood at risk. Music to a lender’s ears.
A couple of things to bear in mind when taking on a finance deal. It’s actually easier to settle early when it’s a 0% deal. There is no interest to pay so the amount you’ll pay off is only ever the total of the remaining repayments. If the kit you’ve financed is being under-used after a year and you get an offer too good to turn down, you can, with the full knowledge and cooperation of the finance company, dispose of it and clear the finance.
A cautionary tale though… you don’t own the kit until you’ve repaid all the repayments and a small option-to-purchase fee. The finance is a loan secured on the goods, not an unsecured loan to the business. I remember visiting a client to audit the equipment on an agreement, as most finance companies will do on larger deals, only to find that the majority of the hardware had been sold for cash and the debt not cleared. The client argued that as he was still making the repayments what was the problem? Fraud is the problem, and any finance company – and the law come to that – will take a pretty dim view of that.
Setting up an agreement is straightforward. You will be asked for some basic accounting information and details of the kit. The type of equipment can occasionally cause some issues – software is always tricky as it is in almost perpetual update and likely to be superseded long before the end of the term, making the value, and therefore the risk, tricky to assess. But if you’re buying standard hardware from a major manufacturer then the chances are that you’ll get a quick thumbs-up from the lender. Particularly on the big manufacturers’ 0% deals, the finance companies have worked hard to win their trust, so will almost always find a way to agree any deal.
There are other nuances of finance, and your finance company of choice should let you know all the detail. But if you want some specific, impartial advice, I’m happy to help - you can give me a call on 020 7871 0700.