There have been numerous studies showing how people who pay for their purchases by credit card spend more money than if they would have paid by cash because they upgrade or buy impulsively. But, a lot of people pay off their balances in full each month and use their credit cards for various reasons – tracking spending, rewards and other benefits – so you could say, what’s the harm in spending a few extra dollars each month?

What actually adds up a lot more are the costly options that are added on to large-ticket items, especially when they are financed over several years. These are most often offered on new cars and homes, which are rarely paid for in cash.

Upgrades and costly add-ons

Salespeople are well versed in consumer psychology. When a customer is financing a purchase, it’s easy to upsell or add upgrades and accessories. Perceptions change on what people can afford when they are making smaller monthly payments.

Related: What I learned from working retail

Take a look at this MSN story which details new car features that are often purchased at the dealership, but are not worth the money.

Reframing the cost

Positive reframing is a way of viewing a concept in a more positive way.

Take a vehicle appearance package that adds $1,000 to the price of your new car. If you are financing your purchase this might add about $15 to your monthly payment. By reframing, that $1,000 price doesn’t sound too bad when it’s broken down into smaller increments.

Car loans are now tending to be stretched over much longer terms – 6 to 7 years rather than the previous 3 to 4 years. This keeps payments down and makes vehicles, and their add-ons, more affordable.

The show home enticement

There’s something appealing about buying a brand new house – you get to pick out the countertops, appliances, floor coverings, etc. You want to include features and finishes that reflect your personal tastes and lifestyle.

Many developers advertise their houses at comparatively low prices to get you to come and have a look. Once there, you become enamored with the show home model which is loaded with expensive extras. The base home may look very different and the advertised base price is going to rise considerably as you wade through the endless choices of options and upgrades that your builder allows you to select and you decide that certain extras are essential.

By purchasing upgrades through the builder you may get a better deal on pricing, but you are rolling the cost into your mortgage as opposed to paying out of pocket. Make sure any upgrades fall within your mortgage guidelines. It’s easy to overextend yourself.

Make sure the prices are fair. Some popular upgrade choices are profitable to builders and can be overpriced.

It might make more sense to make certain changes after you purchase your new home. Cosmetic features in particular – paint, lighting, window treatments – can be changed later on.

Final thoughts

Consumers prefer to complete their purchase in one fell swoop rather than purchase multiple accessories separately. Hence their willingness to upgrade car packages and home upgrades all at once in one bundled purchase. It’s just less of a hassle.

Also, some upgrades and extras can be worth the investment by adding value and enjoyment.

Sometimes upgrades on new- build homes are more cost effective if done at time of construction and can be difficult to change later on.

Take some time to research after-market prices to see how they compare. Wait a while to see if you really need the add-on, or if you are just caught up in the buying process.

Learn how to negotiate. Don’t be afraid to ask for some extras at no charge.

You can save thousands of dollars (and interest costs) if you only purchase the features you need or truly want.

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