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Comment by RobPfeifer | Hacker News Reader

The Affirm loan product for peloton is 0% only (with no late fees in any circumstance).

Instead of $1,995 up front, it's $3,783 over 39 months due to a subscription contract bundled with the financing. This is a very clever way to claim "no interest" but actually charge 27% APR. There are absolutely customers who buy this but can't afford it.

If you didn’t buy the bike on financing you’d still have to pay the subscription if you wanted to use it as intended. Not sure why you’d consider the subscription an interest-like fee. The only criticism is if you stopped using the bike before you paid it off then yes you would be paying subscription fees for all the remaining months you never used.

For what it’s worth, according to the S-1 they stopped bundling the subscription as part of the bike financing in 2018, so people are just financing the bike alone now.

That is some interesting SaaS+hardware financial wizardry.

As you said, very clever.

And this is no different than the typical phone financing plan.

You pay for the phone over 24 months but they “bundle” the cost of an additional line. You would pay for the cost of the line over 24 months but no one would call that “interest”. You could buy the phone outright and just use it over WiFi just like you can use a Peleton without the subscription. But, in both cases, it reduces the functionality of the product.

In both the case of the phone and the Peloton, it allows someone who can't afford the item to pay for it on an installment basis. On an individual level that access to credit might be useful, but it's another form of leverage which is not always a great indicator.

In fact, if people are making use of that option unusually often, economists get worried. Prior to a recession, consumers often feel more confident (and take on more financial obligations) than they have the resources to keep up with.

Phone is very different IMO. I always lease my phone not because I can’t afford to buy it outright but because the upgrade cycle is so short (a year with iPhones) that if you are someone who likes having a new phone then it makes more sense to just lease one and upgrade whenever you want than to buy it and deal with the hassle of selling it later on.

The equation has changed more recently as smartphone innovation has really slowed and very incremental. In either case you can just keep you phone for 18 mo and buy it outright.

Leasing is different than what the phone companies are doing now. They just take the retail price of the phone and divide it over 24 or 36 months if you want to cancel your included service contract early, you pay off the remaining balance of your phone. They often allow trade ins or upgrades as an option, but there is functionally no different from 0% financing 24 months with a phone + service plan than 0% financing + subscription with Peleton.

I have a 128GB iPhone 6s from 2015 that my son is still using and will at least get the current version of iOS through September 2020. Phones have been “good enough” since the 2013 iPhone 5s.

I could have easily afforded to drop $800 on my iPhone, but why would I if it would cost the same over 24 months?

People have been getting “free phones” with a contract at least since the mid 90s when I was selling them at Radio Shack.

Cheap credit will not last forever..

Tell that to furniture stores that have had 5+ years of no interest financing forever. Of course they raise the prices to pay for the “free financing”.

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