THRIFT OR DEBT?

Evening Star, Issue 19298, 10 July 1926, Page 3

THRIFT OR DEBT?

THOSE “EAST LITTLE PAYMENTS.” GROWTH OF HIRE PURCHASING the future of modern trading ECHOES OF OFT-SOUNDED WARNING Selling on the easy-paymont system lias its advocates and opponents. Its tremendous growth in recent years Inis been discussed in financial and commercial circles. Although the modern purchase plan has not reached the endemic stages, as in America, where an economist said ho knew of no commodity of any importance which a man could not buy on the instalment plan, the extent of tho system is so large that warnings have been issued from various sources. “That tho chamber issues a warning against tho growing practice of purchasing articles of luxury on tho hire-purchase system,” was a motion passed by the Dunedin Chamber of Commerce last week. That warning has been received with approval and dissent in Dunedin, whore retailers in all lines affected by tho purchasing on easy , payments were willing to express their views when requested. On the one hand, it is said that tho people are being led into a morass of debt and extravagance through “mortgaging” their future earnings for the gratification of present pleasures, without thinking what the morrow will bring iu the way of unemployment, sickness, or unexpected demands on revenue. On tho other hand, the supporters say that tho advantages arc:—lt makes paying easy, encourages thrift by saving to make payments, tho people can enjoy a product while paying for it, and it permits of the benefit of greater luxury. “Without tho time-payment system the trade in motor cars would ho very small.” So declared tho managing director of a large motor importing concern.

“ As far ns we nro concerned here, easily 97 per cent, of our sales arc made on the hire-purchase plan,” be said. “From tlw buyers’ and our point of view, hive purchase is another way of saving money. Say a Icilow gobs £6 or £7 a week, and perhaps spends only £1 on amusements. At the end of the year ho has nothing saved. By saving £1 or £2 a week to pay for his machine, ho has a valuable asset at the end ol twelve months. It is really teaching the, people to ho thrifty. 'Within the past two and a-half years my firm has sold nearly 1,000 cars. '1 hose people have their cars, and of that number wo liuvo had to deal with only twentyfive or thirty oases whore payment has not been maintained. There is not too much hire-purchasing ol cars going on, or those figures for defaulters would ho much higher. The figures apeak for themselves.” Hire purchase was a sound investment, the motor dealer said. People who complained about the plan might he the owners of houses; how had many people purchased their homes.'' Of course, the purchase had been spread over many years, on a scheme identical with that now so prominent in iho motor trade. As in purchasing a car, many people would ho unable to acquire a house property it terms were not available. “Would it not ho extravagance tor a man earning £6 to purchase a car?’ the dealer was asked, and lie replied that the contrary was the fact. In most cases it wa.s the opposite. The men had to be thrifty to run their cars. A man could make his car just as expensive as his pocket ■would permit; u ho could afford an oxi>eiidituro of only £1 or £2 a week on running his machine ho was compelled to limit his mileage. Motoring was expensive only when a man could afford to make it expensive. , Enjoyment of fife for all was argued by tile director, who said that the man who could afford to purchase a £-')0 car on the casy-payment plan was able to enjoy himself as happily as his wealthy neighbor. Before purchasing the cat the man with the family spent perhaps £1 or 30s rm pleasure for himsclt only; but now his family derived the benefit from the expenditure of the & The farmer had to ho .considered. The evolution of transportation in the cities had soon nearly the total passing of the horse and cart and the commission of the motor car. ‘ In the days gone by a farmer took all day going to and' from town, but now can travel at least live times as last, the motor importer said. “ That time is now devoted to farming ms laud, m men means greater productivity and higher returns.” Most of the cars sold In the farming community had been disposed of under the hire-purchase plan, .tractors were also being used to pay for themselves. ~ , . In support of his argument that instalment buying was popular, the director stated that many commercial firms adopted the plan when acquiring trucks. They found that their money was tied up in indents or would he needed; yet they had the benefit ol the best transportation by extending theirpavmcnts over a period. The scheme of hire purchase was fully explained, it being shown that interest was charged at the rate of 8 ixt cent, for twelve months on a sliding scale, down to 21 per cent, lor three months. One big motor concern in the dominion possesses its own financing department, while another association indulges in a good deal of financing for motor eai buyers. Beloio a car is sold on the instalment plan the buyer lias to take out a comprehensive poliev, including a third-paitv risk, up to £I,OOO, the premium on a £IOO vehicle being £9 per annum. “The hire-purchase plan will mean greater prosperity for the individual,” the dealer declared. BEST SERVICE FOR HIRER. Half the number of motor cycles which pass you during the day have been purchased by instalments^ The “pay while, you ride idea has pleased the. cyclist and has made a grcfltpr dcniciincl for tho machines. J list is what a motor cycle dealer had to sayon the subject. From his experience the percentage of defaulters was infinitesimal, which proved that the purchase had not been an extravagance for the young man. Many man who had the ready money to hand over the counter and take away a new machine preferred to take advantage of the hire purchase plan, which meant interest at 8 per cent. “If I were a purchaser,” said the proprietor of the agency, “I wouldn’t huv straightout, as 1 can guarantee that the hire-purchaser always gets the best service.” BOON TO PIANO TRADE.

When sales fall off, the sign is written that the business man must hold out some greater inducement for the public to buy. The war gratuities and the money available after the armistice made'for many sales of pianos with a deposit of £'lo, but, with the stringent times, the sellers had to resolve on new schemes. One firm in Dunedin jig to £O,

and tho manager said that other firms had fixed-tho same mark. Without the use of the hire purchase, tho piano sales would be negligible, according to this manager. Tho percentage of instalments sales was over 90, ot which nearly all wore sales to townspeople. ' His firm’s experience was that the country people lived loss extravagantly by not spending money on tho attractions which were to be loiind in the city nightly, and they were able in nearly every case to pay cash lor their instruments. .. Dow city people—tbc workers—con a place their hands on £IOO in ready cash, lie stated; their money was cither tied up in their homes, or they wore below that mark. Times were hard, too, and few people would be able to enjoy tho piano in their own home if the fin® purchase was not in existence. Jne terms on a piano costing £9B wore to down, and tho balance spread over easy payments. He did not consider tho deposit 100 small in comparison with tbo value of tho instrument, as a piano was one of the few things which showed little depreciation after ten years’ service. Unlike a motor car, a piano would be then nearly as good as new. When the instrument was purchased, tbo sellers bold a lien ovgr it until the final payments were made, and if the buyer defaulted—and there wore few defaulters—the machine was taken back in practicallv as good condition as when it left the shop. His firm allowed all pianos purchased to bo exchanged for another within two months from the sale, and surely there could be no loss if .fbe piano bad to bo taken back within that tunc if the payments bad not been kept up. However, be admitted that if tbo payments censed at the end of a year the proposition was not. a good one for the seller—but it was worse for tbo buyer, who lost the money already paid on the purchase. In hire purchase selling, the big firms bai ret the pace, which tho smaller dealers had followed, the manager declared, as it was in their interests to sell on terms. . lOvcu among the young men wlio purchase tho saxophones tho defaulters arc few. The deposits vary from £5 to £lO, as tho moaning instrument is also a “pricy” article. The saxophone, tho dealer" said, was coming rapidly into favor through the opportunities of tho hiie scheme. In America tho playing of tho saxophones was not confined to the men. women and girls playing them extensively. He said that the young people could not afford to pay tho whole ! u co of tho instrument at once. SMALL PAYMENTS DAD.

Of the articles used in the home, llm gramophone has been perhaps the most popular medium for the use of the hire purchase. Ju fact, the payments have been reduced in some cases to so low a level that the hire, charges are not Fair, according to a well-estab-lished Dunedin man. lie quoted the prices of an Auckland firm lor a. machine valued B*s. The deposit was 2s 6d, with 100 instalments of a like amount. Ho contended that 2s Gd down was not a lair biro. 11c said he would refuse to allow a ernmophone to ho hired for a night at half a crown. The purchaser would make investigations, the bailment would ho signed up. ho would pay his 2s Gd deposit, and ho might keep the machine lor six weeks without making further payments. Ihe .sellers then stepped in and retrieved the gramophone, after the people had had a good old time at an expense of only half a crown. . The concerns most responsible lor tins state of affairs wore the finance associations which were formed. Ho was strongly against time payments with such small deposits. Reasonable time to pay was ail right, but the present charges adopted by some firms were absurd and bad. Ho bad found no difficulty in getting at least onethird of tbo purchase price depositee. The man who could not afford to pay one-third doTvn on n small machine could not afford to own a gramophone. To the question as to the ultimate .effect of purchasing with small deposits, the gramophone man said he was not prepared to say other than that the present system was the wrong thing. Don’t you think it is a good way of paving?” ho was asked. _ . ; ‘No. I think they go in with tbo idea of not paying,” came tbo reply. Snell a, small deposit as be bad quoted was not conducive to making people, keep up their payments. Tbo typos or customers could be picked by a salesman immediately, and bo was in a posi(ion to sav that when selling .gramophones on‘the plan of onc-tbird down lie had never signed up a bailment. Flo had trusted his selected customers always, and in not more than two cases had bis judgment on them failed. _ ■Purchasing gramophones on the biro payment plan was unprofitable to tbo Imvors in tbo long run, bo said, as the charges were increased by at least bb 1-3 per cent. A dealer in gramophones sold on a lower deposit admitted that tlio <ucrage of defaulters was about 8 per cent, when machines wore sold at a first payinput of about os, and further payments of 2s 6d per week. So far as he was concerned, the brand of gramophone sold bv him was of cheaper cost, hub tho deposit terms had been fixed by the manufacturers for whom he acted ou commission. LADIES’ FUR COATS.

There is a. different class of hire purchasing in the drapery shops. A lady will soo a pretty inr coat in iho window and go insido to put down a deposit. Bbc continues to pay small amounts off tho cost, and when tho full amount is paid she takes away the coat. , . , Tins method of dealing was explained by a. drapery store proprietor, who said that the trading on that lino was done mostly in the mantle department. He was of the opinion that deposits were accepted by every drapery shop in town. .. “ Sometimes the women arc unable to pay off tho amount, and if the period from the time of the deposit is not too long wo refund their money, allowing them to take other goods from the shop,” ho said. “But when a valuable coat has been put aside, and it could have been sold many times over, wc keep them down to thdr contract.' In his opinion this class of purchasing wail on a rapid increase, and was bcTng practised generally. To customers of good standing goods were sold, and payments were mad© weekly. Other people asked lor this instalment plan, but the request was refused, or the people referred to a man who dealt in giving orders for tho purchase of drapery. , . . . , Tbo people buying the coats were not n-irls. They were usually middle-aged women, who found it impossible to pay the full amounts at the time. On tho first day of his sale 100 deposits had been made. Ho considered that the deposit ami payment system was a good one, as, although a moro expensive coat than would otherwise ho bought might be contracted for the mantle goods were not luxuries, such as motor cars and cycles, gramophones and pianos. “SYSTEM IS A CURSE.”

“ The system is a curse,” declared an electrician of standing. The growing demand for the adoption ot the hire purchase plan had reacted on the people, and ho had to contend with the bother every day. Even when a man was out lor cash business the people endeavored to obtain time to nay, and, like a drowning man, the retailer clutched at the straw. The habit was growing, and the people even used it with their paltry light, ho declared. In the electrical line there is mncJi to appeal to the housewife. The day of the electric home is a close future possibility, what with powered washing machines, electric sewing machines, heaters, cookers,, toasters, water jugs, and the one hundred and one other articles for the house. ‘file electrical dealer said that people asked that 9* waabinjj machine to

and they then gave I orders for its instalment. The account i followed, and then tho people came in and wanted terms. In tho original cost the full payment had only been allowed for. The machine was now second-hand, and when tho buyer passed a £lO note across tho counter : as tho deposit the retailer had no altcr- ' native but to take it and allow terms. This experience also applied to liouscI wiring, .installations, and tho other electrical lines. I But the City Council has now issued I an extended payment service for the purcliasc of any approved electrical appliances, such as irons, ranges,' radia- , tors, water heaters, etc., which are supplied by the retailers. In this case tho corporation assumes the role of tbc ; financing concern, and the retailor re- ] ceives his full payments within a forti night of the installations lining passed | by the inspector, the purchaser repayl ing to the council. The dealer said i this would improve tho position, which j had been becoming so bad that it had I been no pleasure to bo in business. I The council will refuse to back the ! purchase of such articles as washing I machines and vacuum cleaners. WHAT THACKERAY WROTE.

W. M. Thackeray, in a scries of letters from an uncle to his nephew, warned his correspondent that the worst purchases he had made wore on credit, as he had never received satisfaction unless ho had paid when his purchase was made, A furniture man repeated Hie words when lie discussed the plans of sales in his line. Ho declared that there was very little hire purchase going on in the furniture business. That class of dealing had been tbo vogue in prewar days, but it was in small quantity nowadays. One or two linns might be doing a small business on those lines, but lie would be very sorry (o have to depart from Ibe cash trading. However to reputable people credit was_ given only after tho most careful inquiry. ' RADIOS TOO RISKY. Radio is coming into its own. Inquiries arc being made every day foi sets, hut two dealers seen by the inquirer reckoned that the proposition of soiling on hire purchase was altogether 100 risky. One said the system was a curse, and what lie had to say about electrical articles applied also to radio. Another dealer said ho pitied any man who sold on instalments, as Hie sets might lie returned in short time by the buyers. Radio was one of the things which might result m a croze. Only the other day a father bad advised him not to sell any more parts (o his son, who was spending too much money on bis latest bobby. There appears to be little hire purchasing going on in the radio world in Dunedin, for tbo, reason that the dealers are adverse to it. Then there arc other lines, such as typewriters and books, which can be purchased on the instalment plan. What will ho tho future of this non-cash trading?