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If I buy something like a smartphone or a new PC, when you have these choice:

  • Pay all the cost at the moment.
  • Pay it in 6/12/18 months (with loan but without any interest rate and any extra cost).

What is the best option and why?

I know that the problem depends on the money that you have but for normal people (not poor, not rich), normal salary, and normal expenses:

What is the best way?

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That question comes down to two main factors:

1 Earning potential aka PRO "have it now pay later"

So if you can have the phone/laptop/whatever now and pay it later, that means you'll have money 6/12/18 months longer than you'd have it if you would pay it right now. So your money can potentially earn you interest in that time and that very much depends on the interest rate situation. If you get like 2% on your 1000 Bucks your paying for your phone or laptop you'll get 20 bucks of the purchase price if you do it that way. Another aspect is that your laptop may be your working instrument and will enable you to do work you otherwise couldn't do. In that case the laptop is an investment into your future earning potential.

2 Future Discount aka CONTRA "have it now pay later"

You know that Simpsons scene where homer downs a bottle of vodka mixed with a entire jar of mayonnaise and says :"That's a problem for future homer. Man I sure don't want to be that guy!" Yeah.. that's what paying later means. Paying in the future will make your price sensitivity decrease because "It's a problem for future me". That means you are much more likely to over spend. By the way that is also the reason why stores offer financing options like this. You think it is interest rate free, which is true. But the price you are willing to pay if you not need to pay until in a year drastically increases. Therefor if you buy stuff for fun and not with the intention to generate money with it, pay it now. If you generate money with it, it's okay to pay later.

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    +1. But the contra-point is really just psychology. If you have already decided you want to make this purchase for the advertised price and now are just asking yourself whether to pay now or pay in instalments, then this point is pretty moot. It is really just relevant if you came to the conclusion "I would not consider to buy this if I would have to pay everything now, but I might consider it if I could pay it in instalments".
    – Philipp
    Commented Apr 9, 2019 at 9:20
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    @Philipp That is pure psychology true! Nevertheless it needs a lot of self discipline to rationally assess these issues. Therefor I would, as you suggest, not recommend buying something on rates if you wouldn't also pay the same price right now.
    – Lucas Raphael Pianegonda
    Commented Apr 9, 2019 at 9:30
  • @LucasRaphaelPianegonda Either a lot of self discipline or a clean bookkeeping scheme.
    – glglgl
    Commented Apr 9, 2019 at 10:08
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    Paying over time into the future instead of immediately also means that you now still have the full (or nearly full, if you make the first payment up front) purchase price in hand and ready to spend. You may be more likely to buy things you otherwise wouldn't have with this "extra" cash (especially if the person selling you this item offers you a "great deal" on related items).
    – yoozer8
    Commented Apr 9, 2019 at 11:46
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    The biggest problem with these in my opinion is the risk of missed payments. If you read the contract, you will often see that the loan DOES accrue interest all of the time, but there is a provision that if you make all of the payments on time and pay it off before the end then the interest will not be applied. BUT, if you pay late just once, all of that previously accrued interest (at a high rate) will suddenly show up in your balance and it will continue to compound until you pay it off! That's what these companies are banking on.
    – Justin
    Commented Apr 9, 2019 at 14:13

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