Credit and Hire purchase

What is hire purchase?

A system that allows customers to purchase items they can’t currently afford, and pay for them in installments, after an initial down payment (around 40% during the 1920s)

Which industry had the biggest impact on the development of credit facilities?

The automobile industry

Did Henry Ford believe in credit schemes?

No, he paid his workers higher wages so they could buy a Model T outright.

Did General Motors believe in credit schemes? What was the outcome of this?

Yes, resulting in General Motors overtaking Ford in sales by 1927

Name at least 4 consumer goods commonly bought on credit (6 listed)

Cars

Radios

Telephones

Washing machines

Pianos

Furniture

What are credit ratings? Did they exist in the 1920s?

Credit ratings are an evaluation of the risk of an individual or company trying to buy on credit.

No, they had not yet been developed

What was the consequence of no credit ratings after the WSC?

Millions of Americans could not complete their payments, leading to them returning goods, and companies losing money and laying off workers or going bust.