FINANCING THE FLOW OF MAJOR HOME APPLIANCES*

Abstract

SEVERAL SCHOLARLY STUDIES are available on the sales financing of automobiles. Since nothing comparable exists for major home appliances, it appeared that an institutional study of their financing might be of some value. Major home appliances-the big kitchen and laundry appliances, radios, and television sets-are of significance in our economy and daily living. More than 45 million American families own, on the average, six major appliances; the total represents some $30 billion in unused consumer capital. Retail sales, mostly replacement, amount to more than $4 billion yearly and support nearly 100 appliance manufacturers, employing more than 300,000 workers, 3,000 distributors, and 30,000 dealers. Major appliances are durables of high unit value. They are especially useful for young families with children. Most of these families have inadequate incomes and reserves to acquire all desired consumer durables at once. Some 75 per cent of all major appliances are bought with credit. More than half are purchased with short-term instalment sales credit, but long-term financing of the essential appliances as fixtures in the home is increasing. The consumers' need for financing is reflected in the trade's needs for sales and inventory financing. Appliance dealers hold to maturity about 50 per cent of their instalment contracts; the remainder is sold-about three-fourths to commercial banks and the rest to sales finance companies and other institutions. Prior to World War II, external appliance financing for middlemen and consumers was considered inadequate. Sales finance companies concentrated on the more profitable automobile financing and banks were not interested in consumer credit. Most appliance manufacturers, unlike automobile manufacturers, supported their middlemen with liberal open-account trade credit. Today, most of the middlemen and consumers have adequate