Buying a personal computer on the installment plan is an important option for anyone without a bottomless bank account.
Now Gateway Inc., a large mail-order PC maker, has introduced a monthly payment option that’s not a rip-off.
Gateway’s installment-buying plan is called “Your:)Ware”–with a “:)” smiley-face emoticon embedded in the middle of the name.
Here’s how it works:
You pick the hardware specs, since Gateway builds all its systems to order, including the monitor and printer. The selection is done either at Gateway’s World Wide Web site (www.gateway. com) or by calling the company toll-free at (800) 846-4208.
Gateway then calculates a monthly payment and arranges a loan through MBNA America Bank, a large credit card operator in Wilmington, Del. You own the computer from day one, but owe 48 payments–in other words, four years worth–to MBNA.
Unlike leasing programs, the most common way to get a computer on credit, there’s no deposit, “last-month” payment or other up-front fees. And you don’t need to take any further action at the end of the payment schedule; a lease forces you to pay a “residual” fee, generally equal to the market value, to take possession.
The only additional cost with Your:)Ware is shipping, generally about $100, and any sales taxes.
Gateway and MBNA are currently offering an interest rate of 14.9 percent to qualified customers. That’s about half the effective interest rates on the leasing programs of Gateway’s two big mail-order rivals, Dell and Micron. It’s also better than financing a PC on the typical credit card, where rates are now in the 18 percent to 21 percent range. But you can still probably do better if you qualify for a home-equity or credit-union loan, where the rate may only be 9 percent to 12 percent.
I put together two price comparisons between buying a PC outright and financing through Your:)Ware.
Comparison No. 1: A relatively low-end system with a 266 megahertz Intel Pentium II processor, 32 megabytes of random-access memory, 2 gigabyte hard drive, CD-ROM drive, 56 kilobits-per-second modem, 15-inch monitor, and a bundle of software that includes Microsoft Word and Microsoft Works. Gateway will sell you this system for $1,254 up front, or for $34.84 per month through Your:)Ware. In four years, Your:)Ware buyers who qualify for the 14.9 percent rate would pay $1,672.32 for the system, or $418.32 more than paying cash.
Comparison No. 2: A relatively high-end system with a 400 Mhz Intel Pentium II, 64 megabytes of RAM, 8.4 GB hard drive, DVD-ROM drive, 56K modem, 17-inch monitor, and a basic software package leaving out Word and Works. You can buy this system outright for $2,479, or pay $68.87 a month. The Your:)Ware customer ends up paying a total of $3,305, or $826.76 more.
On the surface, this doesn’t seem too different from leasing programs.
While I prefer Gateway’s installment-plan approach over leasing, I’m annoyed to see the company touting Your:)Ware as offering “obsolescence protection” through a trade-in option.
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