Installment Selling and Finance Companies

• Date: 01 March 1938
• DOI: 10.1177/000271623819600118
• Author: Milan V. Ayres
• Published date: 01 March 1938
• Subject Matter: Articles

121

Installment

Selling

and

Finance

Companies

By

MILAN

V.

AYRES

I NSTALLMENT

selling

is

the

sale

of

goods

or

services

in

accordance with

the

terms

of

a

contract

whereby

a

part

of

the

purchase

price

is

paid

at

the

time

of

the

sale,

while

the

remainder

is

to

be

paid

in

specified

installments

at

stated

dates

or

at

stated

intervals.

Usually

the

installment

payments

are

equal

and

are

equally

spaced.

Most

commonly

the

payments

are

made

monthly,

but

quarterly,

weekly,

bi-

weekly,

and

other

periodicities

are

sometimes

used.

ORIGIN

OF

INSTALLMENT

SELLING

Installment

selling

is

not

new.

It

is

known

to

have

been

used

in

this

coun-

try

in

the

sale

of

furniture

as

early

as

1807,

or

one

hundred

and

thirty

years

ago.

Sewing

machines

have

been

sold

on

installments

since

1856,

or

for

eighty-two

years.

Pianos

and

encyclo-

pedias

have

been

so

sold

for

about

the

same

length

of

time.

Installment

selling

was

certainly

practiced

in

Eu-

rope

before

it

was

introduced

here.

It

is

said

to

have

been

used

in

Rome

and

in

Mesopotamia

more

than

two

thousand

years

ago.

Installment

selling

is

inherently

ap-

plicable

to

the

sale

of

things

which

have

a

relatively

long

life

and

which

cost

more

money

than

the

purchaser

can

conveniently

spare

at

one

time.

Thus,

it

is

evident

that

installment

selling

is

not

necessarily

restricted

to

what

we

usually

think

of

as

retail

sales,

nor

to

those

things

which

we

speak

of

as

consumer

goods.

As

a

matter

of

fact,

installment

selling

has

for

a

long

time

been

used

in

this

coun-

try

in

the

sale

of

costly

machinery

as

well

as

in

the

sale

of

land

and

build-

ings,

particularly

real

estate

subdivi-

sions

and

houses

built

thereon.

In

a

study

of

this

subject

made

for

the

American

Bankers

Association,

I

estimated

that

the

outstanding

install-

ment

debt

on

houses

and

lots

was

87

per

cent

greater

in

the

year

1925

than

the

corresponding

debt

on

goods

and

chattels.

However,

in

the

following

discussion,

it is

assumed

that

&dquo;install-

ment

sales&dquo;

refer

only

to

sales

of

goods

at

retail.

The

volume

of

installment

sales

ex-

perienced

a

great

increase

due

to

the

introduction

of

the

automobile.

Con-

trary

to

a

common

impression,

this

came

about

through

the

demands

made

by

prospective

purchasers

and

not

through

the

initiative

of

the

man-

ufacturers.

In

the

early

years

of

the

business,

automobiles

were

purchased

by

well-to-do

people,

who

were

willing

and

able

to

pay

cash,

as

fast

as

they

could

be

made.

The

manufacturers

thus

became

accustomed

to

cash

sales

and

were

unanimously

opposed

to

sell-

ing

on

installments.

This

led

to

the

introduction

of

the

finance

company,

in

regard

to

which

more

will

be

said

later.

BIGGER

OUTPUT,

LONVER

PRICE,

BETTER

QUALITY

The

introduction

of

installment

sell-

ing

greatly

increased

the

available

market

not

only

for

automobiles

but

for

other

new

and

relatively

costly

devices,

beginning

with

the

sewing

ma-

chine

and

including

reapers,

binders,

tractors,

and

other

farm

machinery,

electric

and

gas

refrigerators,

washing

machines,

oil

burners,

household

stok-

ers,

radios,

and

the

like.

I

think

that

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