Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-07-24
lnstallment Buying
Is Now Lessening
BY HARDEN COLFAy.

Nervousness as exhibited in con-
sentative quarters over the rapid ex.
tension of installment sales into added
lines of merchandise appears to be
disappearing with the reduction of
this system Of craftsmanship to a more
exact basis. A survey Of the situa-
ton discloses that while the volume
or installment sales continues strong,
it Is receding.
1nstallment selling is not new sys-
tenn OF merchandising. In reality it is
ancient. Certainly for more than so
years it has been common in the
United States in regard to musical in
struments and furniture. But the sue.
cess OF the automobile industry in dis
tributing it's products on time pay
ments led to a vast expansion Of the
system.
Investigations now being made In
various industries indicate that the
volume of installment sales is around
hve billion dollars annually, which
would be approximately one-eighth of
the total retail sales, and that the indi-
cations are this proportion will now
decrease rather than increase.
One reason installment sales are
falling off Is because a certain per-
centage of people who formerly took
advantage Of them when the system
was introduced into varied lines of
business have reached the point in in
come where they are able and prefer
to avoid service charges. .,.-
X X \
The National Association of Credit
Men at its recent convention in Louis
Vile decided that "credit facilities are
CIV <A
ent volume Of installment contracts
without undue risk" The organiza-
ton, by resolution, further asserted
that the plan now is more carefully
controlled and more safely directed
than 1t has been since this form of
selling became popular. At the same
time the organization recognized the
danger OF serious difficulties rising
from installment contracts If unem-
ployment should become general.
The automobile industry is the out
standing example of installment sell.
ing and has been In this business
long enough to be able to point to def
mite conclusions; the most important
is that repossessions are high only
when initial cash payments are low.
The experience Of the automobile in.
dustry has been that when the install
ment buyer pays more than the depre-
citation, thus leaving him an equity in
the car, he Is not apt to refuse to con-
tfnue payments. The exact statistics
for this industry in 1926 show that
with down payment of one-third, re-
possessions were 80 per cent; that
this increased to 400 per cent when
the down payment was % per cent,
and further increased to 1852 per cent
when the down payment was less than
one.fourth.
This analysis is an important con.
tribution to the information on INSTALL
ment selling. because automobiles &C.
count for more than two billion dol.
lars OF installment sales each year.
Within the last two years there has
been considerable spread in the
clothing industry of what may be
termed the Repayment plan, which is
selt'eXplanatory. Its success in in
creasing sales has been spotted.
y \ X y
1t Is noteworthy, however. that the
fnal payment within 10 weeks under
this plan does not exceed the average
settlement Of open credit accounts in
the clothing business, SO that in eff
feet the merchant has no more capital
outstanding and usually not as much
as he would have under a system of
charge It,"
Bankers Investigations indicate that
the average installment debt outstand-
ing at any one time is only 81 per
cent of the total annual figures. Banks