Businesses that offer "no money down" or "no credit check"

[hooplady]

Wondering if I'm alone in this, or if it's rational. Whenever I see a commercial for a business that offers "no money down", "no offer refused", "no credit, no problem" I immediately make a mental note to steer clear. I assume that their prices must be higher to make up for covering the losses of poor credit risk customers. Often these are businesses that I wouldn't utilize anyway such as independent used car lots, furniture rental companies, etc. But sometimes they are in fields that I might need someday - HVAC repair, roofers, etc.

Is this Mustachian or just a knee-jerk response that should be ignored?

[Metta]

It’s a good instinct. If you ignored it and went into these establishments, what you would find is higher prices or lower quality for the price in many cases. Or contracts that are incredibly bad. I’ve had places refuse to give me time to read the contracts. One place I went into when I was desperate to get a washing machine that day told me when I asked to pay cash, “You might as well leave. We are not for you. That’s not our business model.”

[RobertFromTX]

HVAC, Roof, Plumbing, etc. - all their customers are homeowners (or commercial real estate owners). In the event of non-payment, they can file a mechanics lien on the subject property.

Mechanics liens have a higher priority (by law) than even the mortgage lender. So they usually get cleared up pretty quick or worst-case when the property sells, the title company will make sure the lien is cleared up before title transfer.

[MayDay]

They might advertise nothing down, but is everyone approved?

My company sells an expensive home building/renovation product and we advertise nothing down but you have to have good credit to get it. And we use a bank to actually do the finance part.

[M2 pilot]

A local "buy here pay here", no credit check etc. car lot in town had a car I was interested in a few years ago.  I tried and tried but could not get a cash price from the salesman.

[Just Joe]

Sometimes those car lots sell, repo, resale, repeat, etc. the same car. Very profitable. Probably helps if the car breaks down randomly so the buyer can't get to their jobs and has to dump the car b/c they can't afford to repair it. As frequently noted here - it is expensive to be poor (uneducated).

[Bloop Bloop Reloaded]

Yes, I stay clear of any business that adopts a 'friendly' approach to customer selection.

- In Australia the smaller banks almost always offer a more competitive interest rate than the big banks. The big banks even have subsidiary online banks that have the same underwriter but that offer better rates. Why? Lower level of customer service + stricter approval criteria.

- Insurance companies operate the same way. That insurance company that promises it can insure everyone including Granny and Learner Larry is not going to offer good overall rates, is it?

- Likewise, a store that offers generous interest-free terms is going to be making it up one way or another. Given that usury is mostly illegal nowadays, it's probably making it up from other customers.

So when shopping around it pays to find a store or service provider that discriminates as much as it can.

This also works in reverse. I'm a service provider and if I want, say, 40 hours of work per week and I need 8 recurring clients to hit that figure, I want to price my services so that only that number of willing clients can afford me. It makes no sense to price my services to have 40 potential clients...because then I'm wasting the excess demand.

[Paul der Krake]

Your instincts are correct. Good businesses don't want to deal with the hassle of non-paying customers. Steer clear.