It's not just Peloton: Buy now, pay later is fueling a consumer debt boom

[brooklynite]

Grid News

Peloton, struggling to consistently move product in the fits and starts of covid waves, is counting on customers like Bishop to keep sales moving. The company even dropped its prices; these days a brand-new bike will cost just $1,500 — and an increasing number of people are opting to buy one on a $39-a-month-for-39-months payment plan, all at an extremely tempting zero-percent interest rate.

Affirm, founded by PayPal co-founder Max Levchin and which has been working with Peloton since at least 2018, is a venture capital-backed newcomer to the consumer credit market. Its name might be familiar, along with those of Swedish company Klarna and Australian company Afterpay (which was recently purchased by Jack Dorsey-founded Block).


These companies offer “buy now, pay later” (BNPL) financing that lets consumers get the items they want now and keep paying for them for months or years to come. They’re also experiencing explosive growth — with estimates of $100 billion in buy now, pay later spending in the U.S. in 2021, up from around $24 billion in 2020. By some estimates, 1 in 5 consumers uses some type of buy now, pay later company.

But like all consumer financial products, taking out small loans to pay for goods comes with some major potential downsides. For one, it seems like customers who use payment plans tend to buy a lot more than customers who simply use credit cards. The dispute and resolution systems are also less clear, and users are not always aware of what the implications for their credit will be by taking out the loans (although that may soon be changing).

[RB TexLa]

1. BNPL is nothing new.

It's how my grandmother bought her first sewing machine.

[MichMan]

2. I think inflation is playing a role

Instead of holding off to make a purchase, people think they are better off buying now before prices go up anymore.