Personal Finance

Lump Sum vs Financing

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  • Jun 6th, 2021 12:08 pm
[OP]
Member
User avatar
Sep 12, 2006
259 posts
183 upvotes
London

Lump Sum vs Financing

Hi All:

Unfortunately the time has come where I need to replace my Furnace and AC. I've gotten a few quotes that are all over the board and have decided to go with something in the middle.

They are offering 10% off if I pay by cash, cheque or credit card OR 0% interest for 24 months.

The cost difference is just over $1k.

Should I pick door #1 and put all the money down now or door #2 and spread it over a 24 month period?

Thanks,
MH
11 replies
Deal Addict
Oct 4, 2009
2716 posts
1581 upvotes
Montreal
Assuming you have the cash available, take the 10% off and pay by CC getting some type of cashback or loyalty points.

It’s not a close decision.
Deal Expert
User avatar
Jan 27, 2004
45954 posts
8949 upvotes
T.O. Lotto Captain
For a relatively small/medium’ish purchase like a furnace. I would just pay with my own means to save 10% off cost.


Whats a furnace these days? $2500?

10% of that is $250.

Yah i’ll dip into the piggy bank for that.
However if you don’t have a piggy bank… so yah the 0% financing really cost $250

https://www.calculator.net/apr-calculat ... generalapr

So if you do a calculation… that $2500 for 24 months “cost” you $250….
Thats 10% per year apr!

Even my unsecured LOC is @ 6%…
[OP]
Member
User avatar
Sep 12, 2006
259 posts
183 upvotes
London
UrbanPoet wrote: For a relatively small/medium’ish purchase like a furnace. I would just pay with my own means to save 10% off cost.


Whats a furnace these days? $2500?

10% of that is $250.

Yah i’ll dip into the piggy bank for that.
However if you don’t have a piggy bank… so yah the 0% financing really cost $250

https://www.calculator.net/apr-calculat ... generalapr

So if you do a calculation… that $2500 for 24 months “cost” you $250….
Thats 10% per year apr!

Even my unsecured LOC is @ 6%…
If it were only that cheap 12k for both. I have diamond hands and having a hard time letting go of it!
Deal Addict
Jun 26, 2019
1204 posts
915 upvotes
montyhall wrote: If it were only that cheap 12k for both. I have diamond hands and having a hard time letting go of it!
Is this just a standard AC and Nat gas furnace?

If so $12k seems out of line. Seems like some enercare high rates. I feel as though you should be able to do better on the price point.

Also, as others have said I would probably take the 10% plus cc points. Probably at worst break even if you have cash on hand and you can likely finance it elsewhere for cheaper.
Deal Addict
Sep 14, 2012
1610 posts
1135 upvotes
Montreal, QC
montyhall wrote: Hi All:

Unfortunately the time has come where I need to replace my Furnace and AC. I've gotten a few quotes that are all over the board and have decided to go with something in the middle.

They are offering 10% off if I pay by cash, cheque or credit card OR 0% interest for 24 months.

The cost difference is just over $1k.

Should I pick door #1 and put all the money down now or door #2 and spread it over a 24 month period?

Thanks,
MH
If I'm understanding your post, if the cost difference between the 2 options is over $1k, I would take option #1 if I had the funds available and pay with my credit card to get a minimum of 1% points with a premium credit card (or maybe 0.5% with a regular credit card card). However, if paying by credit card, you should have the funds available since unless the credit card is offering interest free period for purchases, at a typical ~22% interest rate per year, your 10% savings won't be much of a savings.

The only way I would consider option #2 is if the monthly installments would be charged to my credit card and/or I didn't have the money available immediately.
[OP]
Member
User avatar
Sep 12, 2006
259 posts
183 upvotes
London
SubjectivelyObjective wrote: Is this just a standard AC and Nat gas furnace?

If so $12k seems out of line. Seems like some enercare high rates. I feel as though you should be able to do better on the price point.

Also, as others have said I would probably take the 10% plus cc points. Probably at worst break even if you have cash on hand and you can likely finance it elsewhere for cheaper.
Agreed, this is what I thought, but like everything I'm being told there is a "shortage" of supply - like chip shortages for cars/trucks. The most frustrating part is that 4/5 of the quotes I got they didn't do a heat loss calculation. Cheapest quote I got is $8500, but this is for a guy doing the job on the side.
Deal Addict
Jun 12, 2008
1215 posts
680 upvotes
Ripley
Who says it has to be replaced? If you can wait, I would wait. Supply is an issue these days. If you are in London look outside of London - Lambeth, Strathroy, St Thomas and see if you can get a quote from them.
Deal Addict
Dec 27, 2013
3497 posts
1262 upvotes
Woodbridge
What's the opportunity cost of spending the cash now? I'd use cash unless you have some reason to believe that you can generate better than an 11% real return over the next two years or you anticipate needing that money for something else that you won't be able to finance for free. Another option is to save the $1200 and see if you can finance the $10,800 at such a rate that whatever you do with the cash would be outperforming the cost of that debt.

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