Every once in a while I do a survey of the PC landscape to see what’s selling and what’s changed. In the heyday of the personal computer tech advances were routinely amazing. Today, computers are lifeless commodities, differentiated more by colors on laptop lids than by anything inside. And that’s fine: there was really only one performance requirement for computers, and that was that they be able to do what we want them to do without having to wait for anything to spool up or refresh or crunch. Now we’re there.
As with all else these days, this commoditization has put tremendous price pressure on manufacturers. While Apple still commands a premium because of its snob appeal, everything else is being squeezed to the nth degree. (I configured a couple of PC’s last night, and on one I had the option of upgrading my hard drive by 500GB for $39.) Margins are shrinking to nano levels, meaning corporate profits must be driven elsewhere. Which brings me to Dell.
I’ve owned a couple of Dell machines — from back in the day — and they were fine. They shipped fast, they replaced things fast, the machines worked.
Dell also used to make it easy to buy Dell by offering 12-month-same-as-cash options on their higher-end machines, encouraging people to lock in hardware for no additional cost. Which is why I was surprised to note that the option seems to have gone the way of the dinosaur on Dell’s site, except for their uber-goofy Alienware line of high-end machines which now come with a 6-month-same-as-cash option.
Curious about the omission, I drilled down into the financing section, which revealed that Dell has now shifted to an installment plan (meaning a loan with interest), while also offering a revolving line of credit called the Dell Preferred Account. And then I found this:
Q What are the available interest rates?
A Interest rates are determined by the Lender, Dell Financial Services Canada, based on its credit underwriting guidelines and depending on your creditworthiness, as determined by Lender in its sole discretion. For the Installment Plan, available interest rates are 13.99%, 16.99%, 18.99%, 21.99%, 26.99% and 28.99%. For the Dell Preferred Account, the interest rate is fixed at 28.99%.
That’s right. The top interest rate for the installment plan, and the only interest rate for Dell’s revolving line of credit, is 29%. 29%!
Given that most people can get either a credit card or a mafia loan for significantly less interest, why would Dell be offering a solution which effectively prices them out of their own credit market? Because Dell is targeting sub-prime computer buyers the same way banks targeted sub-prime borrowers. Get them on the hook, then bleed them.
Which is why I won’t be buying any more Dell computers.
— Mark Barrett
Lloyd Lemons says
You might get a mafia loan for less, but credit cards are all going to 30%. People who have had perfect credit and flawless payment history are being bumped from 6 and 7 and 8 percent up to 29.99%. The CC companies are trying to beat the new rules that will become effective in February. It’s the darkside of capitalism.
Point taken. Still, if I was a Dell shareholder, I would be thinking of lessening my position based on this shift alone. Driving revenue as a computer retailer by morphing into a predatory lender doesn’t inspire confidence.