Computer Scam
April 30, 2004
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Posted by Aubrey Turner
I keep hearing ads on the radio where fly-by-night financing companies are promising to sell you a “brand-name” computer even if you have bad credit. It’ll only cost you $29.99 per week for one year.
My handy calculator tells me that this would come to $1557.40. If someone really wanted a computer and could afford $29.99 per week, they’d do a lot better saving that money and buying the computer outright. I’d bet that these scammers are making at least $500 in interest on top of selling the computer at an inflated price. As an example, eMachines has a 2.7GHz Celeron model (T2742) with just about all the features you’d reasonably need for $449.99 (and there’s a $50.00 mail-in-rebate as well). Figuring in tax (I used the typical Texas rate of 8.25%), it would only require about 17 weeks of savings and would save $1049.65 over the total cost of the one from the scammers (I left out shipping costs, since there are a couple of retail outlets that carry eMachines).
If you’re ethically lacking, I suppose this would be a good business to get into.
Categories: What the heck?
My BA II Plus says paying $1559.48 for something which costs $487.11 ($450+tax) would yield an annual interest rate of around 220%. That’d be some pretty horrible credit for a lender to require such an interest rate!
Sounds like they’re preying on the same type of mindset folks must have who fall for certain fat-burning pills (the “too strong for you” varieties which guarantee “UP TO” twenty pounds of weight loss in a month with no exercise or calorie restriction).
I don’t know exactly what models of machines that these financing companies are funding for people, so I don’t know for sure that they’re selling the $450 machine with this kind of markup. I was just taking the example of a servicible low-end model that would handle all the basic everyday tasks (word processing, spreadsheets, web browsing, email, etc) to show that this is a bad deal. Even so, I don’t doubt that they’re making a killing on this. Heck, even if they sold a $1000 this way they’d still be getting an APR of 95%*.
* I used ParensLite on my Palm Vx with the following values:
PV: 1000
FV: 0
PMT: 29.99
Payments/year: 52
N: 52
Solving for APR returned 95.290477766675
First time visitor. I’m enjoying your great insights and point of view. I think scam may be a bit harsh in this particular case. I don’t disagree with your numbers and would definitely advise people against this type of purchase… however, free enterprise should allow someone to make this kind of offer. Other’s could enter with better value offers. As long as the consumer is not forced to purchase (by some government interference or monopoly situation for instance) I don’t see anything wrong with this.
I hope this doesn’t mean I’m ethically challenged?