Skip to main content

Zero Percent Finance - Really ?

Pranam

Our elders taught us to spend less and save more .But now, we are taught spend more as it will help our producers , sellers , Banks and NBFC's  and hence the economy.

Now to sell the sellers come up with innovative ( or cheating ) ideas one such idea being Zero Percent Finance (ZPF) .Aisa kabhi hota hai kya ? . The best economic lesson is "Caveat Emptor" i,e "Let the Buyer Beware."

Let us dissect this ZPF myth with an example. Suppose that Ramesh want's to buy a AC from a store the price being Rs.48000 with a cash discount of Rs.4000. However the budget of Ramesh is Rs.35000 only and hence he says no .The smart sales executive ( not salesman) counsels him and says "at our shop we will not allow money to come in between you and your dreams as we provide ZPF". He says you just need to pay Rs.1000 processing fee and Rs.16,000 i.e 4 months EMI in advance and rest you can pay in installments .Ramesh praises the sales executive buys the AC and does the ad for the store free-cost to his friends and relatives .

 

Now whats wrong in the above transaction - 

1.     Ramesh bought AC worth Rs.48000 instead of his budget of Rs.35000 which might strain his cash flows and savings

2.     He thought that he pays no interest however the truth is .He forgo a cash discount of Rs.4000 secondly the actual loan availed is Rs.32000 and not Rs.48000 as he is paying advance of Rs.16000 . So the cost of funds turns out to be Rs.5000 ( Rs.4000 Cash Discount and processing fees of Rs.1000 ) .In percentage terms is turns out to be 23.44% on annualized basis.

 

So दिखावो पे मत जाओ अपनि अकल लगवो

 

Comments

Post a Comment

Popular posts from this blog

Importance of Documentation in Start Up Investing

Pranam According to INC42 , the Indian start-ups have raised about $42 Billion in 2021 spread over 1584 deals, the same was $25 Billion in 2022 spread over 1517 deals . However, the same between the period I Jan 2023 till 21 March 2023 was $3 Billion spread over 3 deals. As per Tracxn Indian Start-ups raised a mere $5.46 billion in the first SIX months of 2023 as compared to $17.1 billion during the first SIX months of 2022 i.e a substantial decline of 68%. There are many reasons for this decline , however this post is not for understanding the reasons for such a decline . In this post I will like to highlight the documentations that goes with such Startup Funding Deals. All said and done, the start-up ecosystem is here to stay as the Government of the day is also promoting the same or atleast that is what is being said.  The investors are willing to set aside a part of their corpus to invest in this HIGH RISK asset class.  And accelerators and angel funds have made such a investing po
Post a Comment
Read more

Markets - Machine to transfer the money to Patient from Impatient - A Brief Story of Harshadbhai's Favorite ACC

 Pranam In this post, I have tried to find out what would have happened to investment of the person who might have invested in ACC at its highest during Harshad Mehta times , but would have been holding the stock till now. I understand most of the people who might have invested @ Rs.10,000 the highest price of ACC in June 1992 would have sold the share as that is what most of us will do in such a chaotic environment . The following chart is self explanatory -  Points to be noted -  1.The Base price of one share of ACC which was Rs.10,000 at its peak of 1992 is now Rs.80,680.6 i.e approximately 8X 2. The CAGR returns including dividends till December 2022 is 7.7% . 3. Rs.10,00,000 invested in June 1992 ( the most stupid decision) is now Rs.92,38,080 i.e 9X  In many documents  it is clarified that based on the research carried out by Harshadbhai and his team , they started purchasing the shares of ACC from a level of Rs.300/- and effected most of the purchases by Rs.3000/-. The stock the
Post a Comment
Read more

12 Native Gujarati Advice for Share Markets

This is the advice of Market Veteran NILESH SHAH, Group President and MD, Kotak Mahindra AMC published by Value Research . I did my articleship at Hamam Street, behind the BSE Tower, three decades back. I was attracted to the stock markets, like my colleagues, to make quick money. In those days, the stock market was the Wild West, with terms like ‘company circle buying’, ‘vandho’ (dispute), ‘payment crisis’, ‘galo’ (gap/difference), ‘patavat’ (settlement), ‘bad delivery’, etc. Might was right. Bulls and bears were making money and retail investors like me were getting slaughtered.  Luck guided me to an old sub-broker wearing traditional dagla (overcoat). I am happy to narrate his advice, in native Gujarati, which has helped me immensely over the years in managing money.  1.While we do Laxmi Pujan on Dalal Street every Diwali, you need to worship Sarasvati Maa every day. Knowledge and wisdom are critical to making money in the stock market.  2. Investment is about common sense, which is
Post a Comment
Read more