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Absolutely this. A bubble doesn't look like one until it pops, so you can't just say "everyone's buying $2000 spin bikes, everything must be fine." For starters

Absolutely this. A bubble doesn't look like one until it pops, so you can't just say "everyone's buying $2000 spin bikes, everything must be fine." For starters, Peloton does a majority of its sales through Affirm and other consumer financing instruments, and books them as revenue. It's more accurate to say "everyone is buying $2000 spin bikes using 30% APR installment loans." In the risks section, Peloton says that their revenue could decline due to changes in credit markets and decisions made by credit providers - a.k.a. if a bunch of people start to default on their expensive luxuries. "In the future, we cannot be assured that third-party financing providers will continue to provide consumers with access to credit or that available credit limits will not be reduced. Such restrictions or reductions in the availability of consumer credit, or the loss of our relationship with our current financing partners, could have an adverse effect on our business, financial conditions, and operating results."

RobPfeifer 7y ago
The Affirm loan product for peloton is 0% only (with no late fees in any circumstance).
- buttcoinslol 7y ago
  Cheap credit will not last forever..
  - scarface74 7y ago
    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”.
- etjossem 7y ago
  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.
  - tempsy 7y ago
    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.
  - dillonmckay 7y ago
    That is some interesting SaaS+hardware financial wizardry. As you said, very clever.
  - scarface74 7y ago
    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.
    - etjossem 7y ago
      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.
      - tempsy 7y ago
        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.
isoskeles 7y ago
When is Affirm going public? I want to invest in that.
- tempsy 7y ago
  If you want exposure to similar businesses look at Afterpay or Sezzle...both publicly traded already.

RobPfeifer 7y ago

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

buttcoinslol 7y ago
Cheap credit will not last forever..
- scarface74 7y ago
  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”.
etjossem 7y ago
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.
- tempsy 7y ago
  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.
- dillonmckay 7y ago
  That is some interesting SaaS+hardware financial wizardry. As you said, very clever.
- scarface74 7y ago
  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.
  - etjossem 7y ago
    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.
    - tempsy 7y ago
      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.

isoskeles 7y ago

When is Affirm going public? I want to invest in that.

tempsy 7y ago
If you want exposure to similar businesses look at Afterpay or Sezzle...both publicly traded already.