Finance Facilities

Most computers sold to consumers are financed either by finance loans or by credit card, and most commercial sales are on invoice terms or lease. If a retailer is not offering competitive finance facilities he is missing a marketing opportunity - but there is a problem here specific to the PC market.

Finance and credit card companies work under the Consumer Credit Act, Section 75 which makes them jointly liable with the retailer for the quality of the merchandise supplied and financed to consumers. This also includes any 12 month guarantees or extended warranties that came as part of the deal. Computers are not as robust as, say, furniture or TV sets, and, in today's competitive market, financiers perceive that small and medium sized computer retailers have a higher than average chance of ceasing to trade, and their customers then making a high number of warranty claims. When that occurs the financier suffers significant pain.

Many computer manufacturer retailers also use factoring or invoice discounting to help with their cash flow on normal invoice sales to corporate clients - and many clients will not pay their bills if their supplier (and their 12 month warranty) have recently ceased to exist. More pain.

This problem will increase, as in 2002 the minimum guarantee period will increase from 12 to 24 months. More pain is anticipated by financiers. And some smart consumers are also realising that they need to be more confident of any warranty, and taking finance is a way of protecting their interests.

So what does this mean? Either by experience or deduction, providers of finance are becoming increasingly wary of supporting computer retailers who manufacture their own hardware. Increasingly they are demanding that warranties and guarantees are externally and independently underwritten - and by a business that they know is a specialist operator in this sector - CPU. If they are not satisfied in this respect they will either not support you or if they do they will seek a “risk premium”.