There are other concerns on what "afford" means (ie do I have the budget for this or is my cash for something else), but if the answer to the question is no, you can't buy that item yet.
It also allows people to build their credit without a credit card.
But yes: people shouldn't be using it to buy things they can't afford.
I actually looked into this when I first saw these companies spring up, as I figured it couldn’t hurt to build up my credit some more, for free.
Unfortunately, unless I was mistaken, what I determined was that these companies don’t report your positive activities to the credit bureaus. The net result is that there’s nothing but downside from a credit perspective.
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1. Stør was similar to IKEA but Danish and a bit more downmarkt
The seller would not give me a lower price if I paid all or a portion in cash at the time of purchase. The only cost to me is the effect on my credit, but that is negligible unless if you are not excessively indebted.
I used to offer 0% and absorb the cost of the financing (which cost me approx 2% of the profit) because it meant purchases from people who otherwise wouldn’t buy it.
The bigger concern, of course, is to what extent these service providers deliberately influence people to spend irresponsibly, particularly if they make it difficult to understand at a glance the financial repercussions of the loan policies.
It's the opposite situation to being in a big city, where you can get by without a car, and the concept of a "spare room" sounds luxurious if not wasteful.
This describes many, many people.
My car loan is 2.5%..inflation is currently 8.x% (averaged 2-3% over the previous decade) and a typical annualized market return is 7-10%.
Dropping $30,000 of cash on a car is silly, don’t sell assets that generate a return to buy a car, which is a depreciating asset…
I understand not borrowing at 18-25% for consumer garbage, but financing at a low rate for a car is definitely a good idea.