Instalment Selling of Durable Consumers' Goods

Abstract

by the Department of Commerce. According to figures published by the Bureau of the Census,1 instalment credit sales amounted to 6.4 billions of dollars in 1929 and 3.6 billions in 1935. Instalment sales amounted to 13% of total retail sales in 1929 and 11% of total retail sales in 1935. For 1936, the Bureau of Foreign and Domestic Commerce has estimated2 that instalment sales amounted to 4.5 billions of dollars, or over one-third (36%) of total credit granted by retail establishments, and 12% of total retail sales (for 1937, the preliminary estimate is 12.25%). Durable consumers goods account for the largest portion of instalment sales, although clothing and soft goods have, to some extent, been sold upon an instalment base during the last few years. Contrasted to other types of merchandise, durable goods are items which retain a sale or resale value for some time after their original purchase. In the case -of the non-payment of instalments by the buyer, repossession, reconditioning and resale are advantageous. Theoretically, the resale value ought never to fall below the total of the unpaid instalments. Instalment selling has made the purchase of automobiles, radios, and similar expensive merchandise possible to an increasing number of people. The Census Bureau, for example, reports for 1935 that 59.9% of the sales of motor vehicle dealers handling new cars were made upon instalment credit, that 54.9% of the sales of household appliance and radio stores were of an instalment nature, and that the comparable figure for furniture stores was 48.7%. Undoubtedly, instalment selling has thus raised American standards of living while the increased sale of relatively costly merchandise accompanying this development has made possible economies in the production of such goods and their lower selling prices. These lower prices, in turn, have brought many types of durable goods within the reach of additional lower income groups. Here are the two great gains made possible by the wide use of instalment selling. Certain disadvantages, on the other hand, are also discernable. Instalment sales fluctuate more rapidly than open book credit sales which, in turn, fluctuate more rapidly than cash sales. Turning to the automobile industry, it is found that the number of cars (new and used) sold upon instalment credit was 63.0% of the total in 1929, 63.2% in 1930, 61.3% in 1931, 49.7% in 1932, 56.8% in 1933, 56.6% in 1934, 60.8% in 1935, and 59.4% in 1936.' Detailed figures for similar commodities indicate clearly that instalment sales fluctuate more rapidly than total sales. To the extent that this occurs, the durable consumer goods industries have * A paper delivered before a Round Table Session of the American Economic Association, the American Statistical Association and the American Marketing Association at Atlantic City, Dec. 30, 1937.