Contractor offer financing - should I bother going for it?

14 Replies

Hi everyone,

an HVAC contractor offers financing for a 15K project for 24 months at 0%

Does it look like a good move? What is the down side? Contractor's lien or something else?

Thanks in advance

Get other bids, and his, for a non financed price.

i got many bids, this one in the middle, rather closer to lower side

What's the upside for the HVAC contractor?? I've never heard of a contractor doing that, as they would have to have the capital to offer that. Can he sell that note? Is it for a name brand unit? Is there a maintenance contract required that isn't included in the financing?

The upside for contractor is:

1. that when you don't pay it off in 24 months they can back charge interest for the full amount.

2. They have an account with a third party financing company that will pay them(the contractor) the full amount(minus a financing fee) and then the third party will collect the back charged interest when the full amount is not paid during the agreed term

Both of these situations only benefit them if you don't actually pay everything off in 24 months. I don't know their exact terms but this is generally how "zero percent" financing works. Many people don't pay off the FULL amount by the end of the term and end up paying 15%+ when it is all said and done.

If they offer financing it means 1 of 3 things generally.

1. They have amazing margins and will cover the cost in the first few payments
2. They are large enough to eat the cost to add a benefit for their customers
3. They are large enough to have an account with a financing company

Hope this helps!

thank you very much, this helped a lot, how does this financing procedure looks like in general? just sign a paper and they do the job?

Just for a better picture of the project: it is to install new central air (heat 80% for the first floor and 92% for the second floor & AC 2 and 2.5tons) in the both units of a 2-family house, that guy proposed using Rheem units and keeps telling me that the brands like Collman (Coleman?) and Goodman are mmm... not good and he's going to do all the work including electrical and gas piping (which in my case of multifamily requires licensed contractors) and his price is around 14500

I'm not sure exactly how it works for that specific vendor, but for my company(foundation repair) we have a third party company that provides the financing and they get approved for something "like" a temporary credit card account. We compare it to getting a best buy credit card with the intro "no interest for 12 months" type thing. The obvious difference is that this is not a revolving credit line like a credit card. It's good for a specific amount of time.

To make an informed decision you should read the info and understand the fine print.

1. Who is lending the money
2. Who are you making payments to
3. Will they out a lien on the property
4. What happens of you don't finish paying by the end of the 24 months

If you can figure all that out you should be able to make a good decision

Sorry for the typos

1. Who is lending the money
2. Who are you making payments to
3. Will they put* a lien on the property
4. What happens if* you don't finish paying by the end of the 24 months

My concern would be loosing the control of the payment process as the consumer.  I would read the contract very carefully and find out how payment is authorized - x% down, y% at completion of the work, etc.  If the contractor is financing, what's to keep him from paying himself 100% of the job cost upon the start of the work?  

Let's say the contractor is 95% done with the work and needs to come back to tie up a few hours of loose ends to finish the job.  I wouldn't want to give up the ability to retain a bit of the final payment until all the misc work items are completed to your satisfaction.

Be careful!

This can work really well but you need to do your homework. If you not sure; feel uneasy or the terms are vague then skip it and pay normally. I have done this before with good results as it is usually a 3rd party doing the financing; not the company.

Sounds fishy to me.   I'm an hvac contractor and would never offer that to a customer.  I would offer them 3rd party financing, but you would know that as you would be the one to apply for the credit with them.   Aside from that.   Why would you put the 92% on the 2nd floor and the 80% on the first floor?   Heat rises and cold falls.  The downstairs heater will run more than the upstairs.  So why not put the more efficient furnace where it will being run more?

Originally posted by @Brian Mathews :

  Why would you put the 92% on the 2nd floor and the 80% on the first floor?  

Brian, I'm considering to move to the upstairs myself so I'm OK to invest a little more to save a bit on the bills. Also the first floor apartment is just smaller

One thing that @Brian Mathews  didn't mention with regard to the efficiency is that the 80% unit will send exhaust through a chimney. That means you might get CO gas leaking in either unit if the chimney is not lined and/or maintained properly. Did you get a price quote for the lower unit with direct venting (would need a more efficient unit for that)?

Thank you Steve, 

the first floor heating unit and the both water heaters will be using the existing chimney. 

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