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Harvey Norman was founded by Gerry Harvey who has the distinction of being sacked by Alan Bond. The first Harvey Norman store was opened in Sydney following the sacking in 1982. More stores followed and Harvey Norman Holdings Ltd was listed on the Australian stock market in 1987. It has gone on to be a multi-national bran.
In the 1990’s Harvey Norman was a major retailer of computers and computer software. They were an Apple supplier until Apple withdrew their support, not returning to harvey Norman until 2004 with the launch of the Ipod.
Growth continued organically until it started making acquisitions of other stores starting in 1998 with Joyce Mayne. Many more electrical stores followed, especially in Western Australia. By the year 2000 the chain had 100 stores. Retravision, a struggling electrical retailer followed and the more successful stores were re branded. Those that were not successful, were closed down.
Harvey Norman regularly offers Interest Free Deals with 'Interest Free' periods ranging from 12 to 50 months. However, they will be adjusting their ticket prices before each deal starts so that interest is already factored in. For example if they offer a 48 month interest free deal, they raise their prices to hide the interest.
The saying "there ain't no such thing as a free lunch", means that things which appear to be free are always paid for in some way. This certainly applies to credit, which is never in fact free.
Credit is the granting of a loan and the creation of debt. It is any form of deferred payment, which allows one party to provide resources to another party where that second party does not reimburse the first party immediately (thereby generating a debt), but instead arranges either to repay or return those resources (or other materials of equal value) at a later date.
Providing credit is rarely a benign, charitable act (ever heard of a charitable bank or pawnbroker?). Most often it's a means to earn money by encouraging others to incur debt and pay interest for the privilege. Where ‘free credit’ is concerned, that interest is hidden in the up-front cost of the goods and the penalties that occur should the debt not be paid in time. You'll notice that retailers that offer ‘free credit’ have regular sales to clear product from their floors. You won't get credit for free on these items though, as the credit loading has been removed to achieve a cash price.
Flexirent has long been offered in Harvey Norman stores. It has also been descibed as a for of predatory lending. The Australian Capital Territory government even issue a warning about it as follows:
“The ACT Office of Fair Trading urges caution regarding lease or rental agreements that are being offered as an alternative to purchasing goods such as computers and electrical equipment.
The ACT Commissioner for Fair Trading, Tony Brown, described the experience of a Canberraconsumer to demonstrate the main features of these agreements.
“Adrian of Cook wished to purchase a laptop. He chose to enter into an agreement with Flexirent Capital Pty Ltd trading as ‘Flexirent’on 13 June 2006. The agreement required Adrian to make payments over 3 years.
“Despite the laptop, extended warranty and IT support having a retail price of $2,450, Adrian was required to pay $4,246.56 over the 3 years. That equates to an interest rate of approximately 40%.
“The agreement did not entitle Adrian to own the goods at the end of the 3 year agreement. The only way Adrian could own the goods was if the Flexirent agreed to sell him the goods at the end of the lease period, and at a price that was not specified in the agreement. Otherwise, Adrian was required to return the goods to Flexirent at the conclusion of the lease.
“These arrangements are known as ‘consumer leases’, and sometimes consumers think they obtain or are entitled to some tax advantage just by entering into a consumer lease for goods.
“This is not the case. If people believe they are eligible for a tax advantage from a purchase they are considering, they should obtain independent and expert taxation advice before they commit themselves to the purchase and the method of payment.
“In any event, consumers should compare all the options for purchasing goods when considering a consumer lease like that offered by Flexirent. Saving the money prior to purchase; lay-by; a personal loan; - or even store finance – are options that may represent a better deal.
Commissioner for Fair Trading – Office of Regulatory Services Ph 02 6207 0422.”
Gerry Harvey himself asserted in January 2008 on Australian television that Flexirent, should be turned down by the average family despite promoting it widely in his stores.
Remember that offering a cheaper cash price on a ‘free credit’ item would dishonest.. If the credit really is free then you should get free credit on the reduced cash price too (the credit is ‘free’, remember). But you won't. As a rough guide to calculating the interest, at an average 20% yearly then by a rough calculation this would mean approximately 40% of interest over 4 years period. (It’s not 4 x 20% because the balance owed decreases with time so it works out to approximately half that amount).
You don’t become as successful as Harvey Norman without being hugely profitable and they are certainly that.
New Zealand's leading retailer has a huge range of products now available to buy online.
harvey norman nz