Installment Buying in the U.S.
Estimates indicate that more than 60 percent of the yearly retail sales in the U.S. are credit transactions. About three-fourths of these credit sales are made on the installment plan. More than half of the automobiles, furniture, and household appliances are purchased on the installment plan.
They have learned how mass production helps them to get the goods and services they want at a price they can afford to pay. But mass production is not possible except when people buy freely. Many families cannot pay cash for major items such as automobiles, furniture, and appliances.
Under the installment plan, however, these families are able to purchase without cash. The opportunity for consumers to buy now and to pay later has increased mass consumption of goods and services.
Some economists believe that selling goods and services to consumers on an installment plan is one of the major factors in making our high standard of living possible. They reason that installment selling increases the consumption of goods, which in turn increases production and thus tends to lower costs.
There are some people who argue that many families would never save enough to make major purchases, but when they purchase on the installment plan, they are obligated to pay the installments when they come due.
Of course, government officials, bankers, and businessmen express concern about excessive purchasing on the installment plan. If many people who owe money on installment contracts lost their jobs or had their incomes reduced, they would probably not be able to make their payments.