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Recently, my house’s air conditioning system decided to fail, without warning, around the hottest day of the year. Since the system was older, fixing it didn’t make sense for my personal finances. I was pretty much forced to replace it with a new model – at a price of around $ 7,000. I was really, really unhappy.

Fortunately, I had the $ 7,000 available in my savings account to cover this expense. I make a point of saving money for emergencies because as a homeowner I know costly repairs can happen at any time.

I almost didn’t withdraw my savings because the air conditioning company offered me a deal that looked good: finance my new air conditioner at 0% over 24 months. With this offer, I could have accepted a monthly payment of around $ 300, which my incoming paychecks could cover without drawing on my savings. And since this was a 0% financing offer, I told myself that I had nothing to lose.

In the end, I paid for the replacement of my air conditioning system using the money from my savings. Here’s why.

Fishing with 0% funding

You might assume that 0% finance offers are too good to be true. But for the most part, they are completely legitimate. It’s not uncommon to receive these offers to finance a purchase, whether it’s furniture, a new car, or a home repair.

But before signing up for a 0% finance offer, it pays to ask a key question: is there a discount for paying directly?

Often times, when companies offer 0% financing on an item or service, they factor the cost of the financing into the quote for the job. I was quoted about $ 7,200 to replace my air conditioner at first, but that $ 7,200 assumed I would fund the replacement unit.

When I asked for a rebate for not funding my air conditioner, the quote fell to around $ 6,900. It is still a lot of money. But since I had money in my savings account, and withdrawing that money wouldn’t deplete my emergency fund, I thought it made more sense to pay for my air conditioner up front and save the $ 300.

That doesn’t mean you always get a discount if you forgo 0% financing and pay in one lump sum. But in some cases, you will get some savings by paying directly. And that’s why 0% finance offers don’t always make sense.

If you don’t have money in savings to cover a given expense, or if you want to keep more cash (i.e. make sure you have enough cash), then financing offers at 0% is often a good way to go. Say you are looking to buy furniture worth $ 5,000 and can finance it at 0% over two years. If you only have $ 7,000 in your savings account, you should probably take out the Funding Agreement. If you don’t, you will end up with only $ 2,000 in the bank to cover unforeseen expenses.

But if in this example you have $ 25,000 in savings, you might want to pay for your furniture directly if you can get a discount. In that case, you’ll still have $ 20,000 in cash, and if that’s enough to cover at least three full months of living expenses, you don’t have to worry about withdrawing $ 5,000.

In my case, I’m glad I asked to prepay for my air conditioner in exchange for a small discount. Although I was unhappy with the expense, saving a little bit of money made me feel better about the big picture.

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