Interest Free Shed and Garage Prices

Posted on : March 16, 2011

Interest Free, the joke is on you!

In Summary

  • There is no such thing as interest free finance; the finance company will make money on any deal.
  • You are paying at least 7.8% interest and you are paying most of this upfront.
  • If you pay one day late outside of the fictional interest free period you are up for up to 27.8% interest
  • If you are extremely disciplined and pay off the loan in full before the fictional interest free period is over, then it is actually quite a reasonable interest rate.

The details

There is no such thing as interest free when buying sheds and garages, and in fact it is beyond Shedeye’s comprehension how this practice is allowed, given our strict Trade Practices Act.

The interest free deal is touted by many of the major shed companies in Australia and is little different to the tactics that major retailers use.

The first thing you need to understand is that you can usually only get finance for the Shed Kit price, as the cost of erecting the shed, the slab and site preparation is not covered.

Let’s say you are offered a $5,000 shed kit price and the Shed distributor is offering this as a 12 months interest free deal. You are definitely paying interest, and in fact you are generously paying the interest up front, and here is why:

  • The distributor has to pay a “Fee” to cover the interest free period of approximately 5%-6% for the total 12 months upfront. In dollars this means approximately $239-$284 paid up-front.
  • There is a $65.00-$120.00 “Establishment Fee” paid up front to take out the loan.
  • There is a $5-$7 “Monthly Account Keeping Fee” for the duration of the loan.

Does this look interest free to you?!  This equates to an additional $364 to $488 on top of your shed price. This means that the distributor will charge you this amount to cover their costs and label it interest free.

You should have been able to get the shed for a price of $4,522 – $4,646 without signing up for the interest free DEAL! To put it another way, you’re paying between 7.8% and 10.8% on top of the price of your shed.

There is no such thing as an interest free period, you simply pay more for the shed!

As far as getting finance for your sheds, garages or carports, this is the second cheapest option after drawing down on the equity in your house. However, if you do not pay off the entire balance of the loan before the interest free period lapses, you’ll have to pay approximately 20% interest on the entire outstanding balance (the same way credit cards operate). For example, if you pay off the balance on the first day AFTER the 12 months interest free period expires, the shed will now cost you $6,000.00 and you would have paid a massive 27.8%-30.8% interest rate.

If you don’t plan to pay the loan off within the interest free period, you must consider different options. In order of preference, redraw on your existing home loan, get a line of credit for any property you have or take out a personal loan, secured if possible. If all of these are out of the question, then do not buy the shed!

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5 Responses to “Interest Free Shed and Garage Prices”

  1. Roofer said...

    Shedeye,
    Do you have a list of these companies that promise the “Interest Free” angle in selling? They should be exposed for their deception. Is there an Australian Shed Association that can monitor this – seems Shedeye is the only watchdog in this industry.
    The ROOFER

  2. Shedeye said...

    Hi Roofer,

    Yes we do have a list of the wholesalers and the finance products that they use.

    It is a hard one though, as some Shed Sellers (Distributors) do not use the products even though it is offered by their wholesaler group. Most Shed Sellers are well above board and do disclose all of this information on their quotes, that is they have two separate prices to fully disclose the finance costs.

    The product itself is like any other finance product, and like the article stated, not too bad in the scheme of things, however the problem that Shedeye has with this is transparency.

    Like many aspects of shed industry there is no transparency and this is stopping the great shed sellers and manufacturers from rising to the top.

    While we are on transparency in the industry, you have to remember that there is no independent shed watchdog, and those that claim they are, are frankly full of bull. Anyone that claims they are independent should have a full disclosure of their affiliations and motivations.

    One of the so called independent shed associations was started by grants from bluescope steel and some other cash from other big players, they were not donations mind you! Are these groups acting in the interest of the public buying sheds or in the interest of roll formers?

    Remember two of the biggest Shed Seller Groups (Wholesaler Group) are owned by roll formers as per this article who are hell bent on protecting their interests.

    Kind Regards
    Shedeye

  3. Roofer said...

    Shedeye,
    Thanks for the info – but surely the groups you are talking of include ASI, The Shed Group, ShedSafe, MRCA, NASH etc which are solely paid for by the steel suppliers and rollformers? No different to the roofing industry which is under huge pressure at the current time. Why isn’t there an independant group or Association of the Shed Industry that operates. If steel is their main product in construction – surely the suppliers should not be involved if accreditation is stipulated, or if they are involved, then process is not transparent.

    ROOFER

  4. Roofer said...

    Shedeye,

    Have you had any feedback on steel sheds after Cyclone Yasi yet?

    ROOFER

  5. Mus said...

    I think this article is very one sided and typical scare mongering of a $5 billion dollar industry. I have been in the industry for a long time and customers are very aware they pay more for interest free. It is no different to the Good Guys motto of Pay Less Pay Cash but with a larger ticket price. The retailer is charged a fee to offer the service to their customers – they can choose to wear this fee out of their GP or build it into their pricing. While the charge may be high to the retailer it is no different from Visa, MasterCard or Amex – the retailer chooses if they want to absorb this fee or pass onto the customer in the cost of their goods.

    The reason a lot of companies choose to finance the kit only is they can only be paid from the finance company when the customer has received the goods. By not including the trades this minimises cash flow issues, but you will still find a lot of companies do finance both. They are still governed by BSA deposits and since they have no progress payments available take a bigger risk than a cash job.

    But in reality the reason the customer is choosing the interest free option is that they don’t have the cash available. So to pay an the full price and not get a discount is something they are happy to do. They can choose a credit card and have 55 days interest free and pay interest after, get a personal loan at a fixed rate with high loan fees and application fees, add it to their mortgage but pay it off over 30 years rather or put it on interest free at the full RRP price for 12 or 24 months.

    There is no deception in the process as the finance companies must follow strict government legislation around lending and all retailers who offer it must apply and be approved as an introducer.

    While I understand your notes – it comes down to the dealer chooses how they want to share or absorb the fee and the customer chooses whether they want to do it. Nothing more nothing less.

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