Are you considering buying a luxury watch—perhaps a Rolex—using 0% financing? While it may sound like a great deal, the truth is more complex. In this article, we'll explore how 0% financing works, the hidden costs behind it, and compare it with a regulated financing solution.
0% Financing (Buy now pay later – BNPL) solutions have become increasingly popular in recent years, especially through providers such as Klarna and Affirm internationally or Cembra Pay and HeyLight in Switzerland. While 0% financing was originally offered for the purchase of consumer goods up to CHF 200 and short payment periods of up to 90 days, the option is now also offered for the purchase of expensive products up to CHF 10,000 and up to 48 months. Especially with longer terms, 0% financing reveals weaknesses. Yourasset looks at the pros and cons.
The Legal Side: Is 0% Financing Regulated in Switzerland?
Here’s something most buyers don’t know:
0% financing is not covered by the Swiss Consumer Credit Act (KKG).
What does that mean?
- There’s no requirement to assess your financial situation.
- Buyers who may not qualify for regulated loans can still be approved.
- This increases the risk of over-indebtedness, especially on high-value purchases.
- The debt accrued on 0% financing is not reported to the central credit register ZEK.
0% Financing – A Loan with Hidden Costs and Risks
The credit to purchase the offered product is interest-free, but the loan amount must be repaid in full, as with regulated financing. The costs of 0% financing are made up of interest costs and the provider's costs (mentioned earlier), and increase significantly for longer payment terms.
For 48 months, the costs are between 15% and 20%.
This issue becomes especially relevant when purchasing pre-owned watches, such as second-hand Rolex models. In most cases, merchants include the cost of financing within the listed price of the watch, inflating it beyond market value. This means you may be overpaying without even realizing it.
✅ Tip: Always compare the market price of the same watch without financing before making a decision.
Why It's Different with New Watches
When buying brand-new luxury watches from an authorized retailer or the brand itself, the situation changes slightly. Often, the merchant covers the 0% financing cost and therefore accepts a lower profit margin. However, the risk of overindebtedness remains. Therefore Yourasset recommends to apply a regulated financing from higher purchase prices starting from CHF 7,000 and financing terms longer than 24 months. If not a regulated financing, the 0% financing solution should also perform a financial creditworthiness check and not ignore it.
What You Should Consider with a 0% Financing
The advantages of 0% financing are more suitable for lower purchase prices (= loan amounts) of up to CHF 7,000 and shorter terms of up to 24 months, and almost exclusively for new watches. It is not or less suitable for pre-owned watches. Customer benefit from the convenience to align the purchase with their monthly income while the monthly rate shouldn’t present a significant impact on a consumer’s financial budget. However, as financing amounts increase, the limitations of unregulated 0% BNPL become apparent.
1. BNPL is mostly suitable for Smaller Purchases. Affordability checks should still be applied
For watches or other luxury goods priced under CHF 7,000, 0% financing allows customers to manage their expenses without high upfront costs. However, due to the risk of over-indebtedness, it is still advised that BNPL providers conduct affordability checks. A loan is a loan, whether it carries 0% interest or 5% interest—it must be paid back.
2. No Affordability Check Poses a Risk for Large Purchases
Most 0% BNPL providers do not perform an affordability assessment, which means customers may take on multiple payment obligations without ensuring they can meet them. While this may be manageable for smaller purchases, it becomes riskier when financing high-value assets even up to CHF 10,000 and longer repayment periods of up to 48 months.
3. High Merchant Fees and Risk of Payment Discrimination
Merchants offering 0% BNPL often face high transaction fees up to 10-20%, depending on the financing term offered (48 months being the most expensive option). This cost impacts their profit margins. For smaller luxury goods, these costs may be justifiable, but for high-ticket items, they can create pricing inconsistencies and present a disguised discount to customers opting for 0% BNPL that is not offered to customers using a direct payment method.
4. Lack of Consumer Awareness and Creditworthiness Checks
Research from the European Commission has highlighted that BNPL users are often less likely to fully understand the terms and conditions or the potential risks associated with these products. BNPL is frequently marketed as a ‘cost-free’ alternative to traditional consumer credit, which is misleading. Late payment fees can make up 8% to 35% of BNPL companies’ revenues, demonstrating how structural these fees are to the model. Additionally, rapid online approval processes often result in low-quality creditworthiness assessments, increasing the likelihood of financial distress.
Why Regulated Financing is the Better Choice for Higher-Value Purchases
For purchases above CHF 7,000 and longer financing terms up to 60 months, regulated financing solutions are the preferred solution as they allow consumer to align the purchase with their regular income while taking their financial situation into account too.
1. Compliance with the Law on consumer financing
Regulated financing adheres to strict consumer credit laws, ensuring responsible lending. Unlike 0% BNPL, it requires a creditworthiness assessment that examines income, expenses, and debt obligations to ensure a customer can afford to loan to purchase the product.
2. Lower Merchant Fees and Predictable Costs
Instead of BNPL’s variable, high-percentage transaction fees, regulated financing offers flat transaction fees (similar to a Credit Card based fee), allowing merchants to maintain cost control and avoid pricing discrimination.
3. Customer Transparency and Financial Protection
With Yourasset’s financing solution, customers gain full visibility into their financial situation and proposed financial commitment. Unlike BNPL that prioritize speed over thorough credit assessment, regulated financing ensures those are responsibly tailored to each individual’s financial situation.
4. Higher Financing Limits and Extended Terms
Yourasset’s regulated financing solution supports purchases up to CHF 250,000 with repayment terms up to 60 months, ensuring that customers have structured and manageable payment plans. This approach not only protects consumers from financial distress but also ensures luxury merchant adhere to their corporate social responsibility obligations.
Optimal implementation with Yourasset
Monthly payment options such as 0% financing or regulated financing are playing an increasingly important role in the luxury goods industry. They give customers the option of purchasing a sustainable luxury product with monthly payments that are adapted to their regular monthly income. In addition, the buyer is protected against future price increases (inflation), since the purchase price is fixed today. The 0% financing is suitable for new watches and amounts up to CHF 7,000 with rather short financing terms. For higher amounts and longer terms, the regulated financing purchase option offers more advantages for customers and merchants. Yourasset offers both solutions to merchants and customers and ensures optimal processing so that the merchant and the customer can focus on the experience of buying the luxury watch.
Sources: European Commission
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