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In the Nordic countries with growing markets for consumer credit, a concern is that consumption desires in conjunction with easily accessible credit make financially constrained young adults vulnerable to problem debt and over-indebtedness. In addressing this concern empirically, we investigate whether retail offers of instalment payments of discounted cash prices tempt young adults to finance purchases of more expensive premium smartphones than they would purchase by cash payment. Descriptions of smartphones ranging from budget to latest premium models are in an online experiment presented to 152 Swedish young adults between 18 and 25 years. We employ a within-group design requiring the participants in counterbalanced order to choose a preferred smartphone twice, either if the default choice is paying the regular cash price or two-year monthly instalments with a 20% discount on the cash price. Although a majority chose the same smartphone twice seemingly not influenced by the retail offer, this was not the case for about one third of the young adults who despite a negative attitude to borrowing choose instalment payments of more expensive premium smartphones, and more than half of them at a price exceeding the regular cash price they choose to pay for a cheaper smartphone. Instalment payments as well as rental contracts are penetrating many consumer markets in which young adults are large segments. These new forms of accessible credit should be particularly attractive to those who are financially constrained with potentially negative consequences for their solvency. Our results suggest that regulation policies may need to be considered.

Overspending on smartphone purchases among Swedish young adults