Why Everything is Now A Monthly Payment

In 2025, it seems like you can pay for everything through some form of monthly subscription, or line of credit.

“Buy now, pay later.”

• Cars

• Holidays

• Clothing

• Takeaways

Yes, you can get takeaways on finance now.

Now, I’m not talking about a product or service that you can only pay for via a monthly subscription:

• Your phone contract.

• Mortgage.

• Netflix etc.

In this blog, I’m only referring to purchases that give you a choice, and why in the vast majority of cases, you should never go for the monthly finance.

So, if it’s taking longer to pay off in full, why are more businesses choosing this model over a cash-buying model?

Let me explain.

Why Monthly Payments Are Becoming More Popular

The monthly subscription model isn’t a new model. It’s been around for decades.

Think of the mortgage.

A perfect example of the monthly subscription model, where you’re paying off a loan from a bank, for equity in your home.

But, in recent years, this monthly payment model has invaded industries where consumers don’t need it.

Why? A few reasons.

It Looks Attractive to Consumers

It’s simple human psychology.

£10 per month for 30 months looks way more attractive than £300.

Why?

Because you pay much more attention to the money (£10 vs £300) than the time (30 months vs instant)

That’s why “buy now pay later” has become so popular, and businesses know it.

Businesses Can Charge Interest

If a business is cash rich, they might be able to introduce a financing option to stretch consumer’s payments over a long period of time.

On the face of it, this might seem like a win for the consumer, but in truth, it isn’t.

Why? Interest rates.

Over the duration of the financing, the consumer is paying back more money than if they would buy something outright.

This makes the product or service more expensive, and netting the business more in revenue.

As a consumer, if the interest rate is 0%, you’re fine.

Any more than that, and you should pay in cash.

Avoiding paying interest and getting into debt is a fundamental money rule for building wealth.

Becomes Affordable For More People

Paying a small amount each month for a premium product looks attractive in the short term.

What this does, is that it makes products more affordable to more people, who can’t afford it outright.

So, from a business perspective, sales can increase as the target market has grown in tandem with the ability to pay monthly.

Do businesses care that it’s a poor financial choice on your behalf?

Of course not.

They’re making more, and that’s all they care about.

The Problem With Monthly Payments

The problem with monthly subscriptions is simple.

Monthly subscriptions might seem better for the consumer, but they’re only better for the business, hence why they’ve become so popular.

As I spoke about above, there are significant positives to businesses, and significant negatives to consumers.

Let’s talk directly about these negatives.

It Looks More Affordable, But it Isn’t

Which looks more appealing to you?

• A designer jacket for £300.

• A designer jacket for £10 a month for 36 months.

If you answered the second one, you might want to take some more time thinking about this.

Sure, you can spread the cost of the jacket over 3 years, but there are two overwhelming negatives to this outcome:

• You’re paying more over time.

• Opportunity cost.

What I mean by opportunity cost, is that all these little monthly costs can be put towards something much greater.

Sure, £10 a month isn’t a lot, but imagine 5 or 6 of these coming out each month, or even more, for things you bought years ago.

It Keeps You Paying For Longer

Businesses love having customers who are paying them for a longer period of time, especially when it adds up to a greater sum, through interest.

• It looks better in their books.

• Their revenue is higher as a result.

• They can spread their costs in the same way that they’re spreading their revenue.

How to Approach Monthly Payments

When deciding on whether to pay in full, or monthly, watch out for these things.

Interest rates

This is the most important aspect of a monthly finance.

If there is any rate of interest on a monthly subscription, you’re going to be paying more than if you bought it outright.

The only time I ever chose a monthly payment over buying outright, was my phone, which I paid for over a 24 month period.

The only reason I chose this was because the interest was 0%.

But, even then, I wouldn’t do it again just to avoid getting into a habit of taking the monthly option.

Length of payment

The enjoyment of buying something new and fancy, can take you over, but it’s important to visualise where your life might be when it comes to still paying off a monthly payment.

If the payment is for 3 years, are you going to want to still be paying for this in 3 years time?

Think how different your life might be by then.

It always pays to think ahead, and it’s a worthwhile thing to do in situations like these.

Can you afford it outright?

On top of the other factors, consider this.

If you can afford something outright, it’s best to choose this route so you don’t get into a bad habit of choosing the monthly route.

If you can’t afford it outright, then you might have to ask yourself…

Should I really be buying something I can’t afford right away?

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