Installment Purchases

Isaac Singer didn’t invent the sewing machine, but he did make a number of changes to the original design. He applied for patents for his innovations. Edward Clark was his attorney. When Singer couldn’t pay Clark, he gave him 37.5% of the Singer Sewing Machine Company, which they both co-founded.

Singer was the salesman. When he went to rural communities to try to sell the sewing machine, he ran into an unexpected problem. Women considered the sewing machine to be ungodly in that it took away work they had done with their hands.

Singer solved this problem by visiting the home of the local minister. He gave the wife of the minister a sewing machine. This diffused the religious issue, but another issue arose. Families couldn’t afford the sewing machine.

When Singer described the problem to Clark, the concept of installment purchases was born. Initially, installment purchases were called hire purchases. The original installment plan was a dollar down payment and a dollar-a-week repayment.

Installment purchases began to be used by other manufacturers of high-dollar capital items. Furniture, refrigerators, washing machines, and even clothing were bought on an installment plan.

Henry Ford realized that the market for cars was limited unless this could be a way for average citizens to pay for them over time. America became a mobile society because of installment loans.

With the inventor of installment loans came the consequence of indebted Americans. High-pressure sales were used to lure buyers into purchases they couldn’t afford. Thus, was born a new industry: collection agencies.

Overextended buying habits and unwise lending have led to worldwide economic crises such as the Great Recession that began in 2007 and lasted several years.

What began as a way for people to buy sewing machines has morphed into major societal impacts. On the positive side, installment credit has enabled widespread upgrades in living standards. It has helped bring about equity in that everyone can have access to a vehicle, a refrigerator, or a washing machine. But the negative impacts are also a concern. Overuse of installment buying can lead to personal bankruptcy as well as negative national economic consequences.

Installment purchasing is an example of a beginning where the originators had no idea of the longer term impacts it would have.

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“I will gladly pay you Tuesday for a hamburger today.” – Wimpy (from Popeye cartoon)

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