Blog

Should You Finance a Peloton? – Updating

Latest News suggest you the article Should You Finance a Peloton?

Reading Should You Finance a Peloton? – updating 2022

Select’s editorial team works independently to review financial products and write articles that we think our readers will find useful. We receive a commission from affiliate partners for many offers, but not all offers on Select come from affiliate partners.

Not sure whether to use your savings or swipe your credit card to cover your next major purchase? Email reporter Megan DeMatteo [email protected] to share your upcoming purchase and question to be part of the new CNBC Select show, Cash, Credit, or Loan? Series.

A popular choice for staying fit during quarantine, Peloton bikes are more affordable than ever thanks to wallet-friendly packages and payment plans available through popular point-of-sale financing company Affirm.

Bikes range in price from $1,845 to $2,495, with accessories like clip-in bike shoes, weights, resistance bands, and exercise mats available depending on the package. Payment plans start at just $49 per month for the Peloton Bike plan and go up to $64 per month for the Peloton Bike +. Whichever plan you choose, you pay for the bike over 39 months (just over 3 years).

With the social distancing restrictions imposed by the pandemic, Peloton’s financing options could be an affordable way for someone to achieve their fitness goals without leaving home. But is financing a fitness bike better than paying cash?

Beforehand, CNBC Select spoke to two certified financial planners to learn how to choose the right payment method for your wallet.

Read more  How Many Grams Are In A Tbsp? Here's the easiest way to convert them - Updating

Alicia R Hudnett Reiss, CFP

Washington, D.C
Pay cash or finance? Either (with a few caveats)

“If someone has the income and cash flow to make a big purchase right in cash (and is also on track with savings), then I think that’s fine,” says Alicia R. Hudnett Reiss, a DC based financial planner.

But some people don’t have a lump sum of cash to buy a large item, she says, so they have to finance it. And even if you’re able to pay cash, there are benefits to spreading the cost through funding.

Hudnett Reiss recommends considering a few factors:

  1. How much does the bike cost in the end including all interest? Because Peloton advertises its financing plans at 0% APR (subject to credit approval), you can finance your fitness bike interest-free. There is no financial incentive to pay cash other than to be able to forget the expense forever and move on.
  2. Note that there is a credit check. When you apply for financing, Affirm does a gentle pull (which means your score isn’t affected), and your credit score affects your interest rate. Peloton advertises 0% APR, but states on the Affirm website that your payment plan can include interest between 10% and 30% if you don’t qualify for 0%. The soft pull shows you which interest rates you qualify for, and gives you the option of taking the loan (at which point your activity can be reported to the credit bureaus) or walk away and pay the peloton using another method.
  3. How long do you want to finance it? The financing for Peloton bikes is three years, but the bike should last much longer. In general, you do not want the financing to outlast the actual use/value of the item you are purchasing. Take travel for example. There’s no point paying for a two-week vacation with a loan that takes two years to repay.
  4. How often will you use the item? “I bought my treadmill about six years ago and use it literally every night,” says Hudnett Reiss. “It’s worth the price!”
Read more  Deer Shedding Velvet Painful: Does It Hurt When Deer Shed Velvet? Does It Hurt When Deer Shed Their Antlers: [Shedding Velvet] - Updating

“Overall, if you fund the peloton for three years (specifically, with no interest) and keep/use the bike for many more years, then it may very well be a wise financial decision.”

Jeanne Fisher, CFP

Nashville, Tennessee
Pay cash or finance? finance

“A 0% financing offer is hard to beat,” says Jeanne Fisher, a Nashville-based certified financial planner.

“You should definitely pay attention to the fine print. Most likely, late payment or a defaulted loan will result in severe penalties,” she adds. Affirm does not charge any fees according to its website, but your behavior may be reported to the credit bureaus and therefore affect your credit score.

Fisher argues that a 0% interest rate is essentially an opportunity to borrow money for free: “From a pure opportunity cost perspective, it may make sense to take the loan and invest the money you have in something that could grow.”

bottom line

Financing a new Peloton could put the bigger purchase within reach, but first make sure your payments are affordable. Before funding a large item, review your budget to make sure you have enough left over after commitments like food, housing, and transportation are covered first.

Ideally, before making any major purchases, you should also have a secure amount in emergency savings and be in control of paying off debt.

Always read the fine print, but you should feel comfortable about taking advantage of the opportunity to borrow money for free. Even better, if you have the cash on hand to pay for it up front, come up with another plan for your money. You could invest it or put it in a high-yield savings account.

Read more  How Long Is A Block? Impressive Answer 2022 - Updating

One option might be to fund the peloton and put the $2,495 you would have spent upfront into a three-year CD account instead. With a fixed interest rate of 0.75%, First National Bank of America’s CD offers an annual interest rate that is more than double the national average. In three years your new peloton will be paid off and you would have made a little more money with your savings.

Editorial note: Any opinion, analysis, review, or recommendation expressed in this article is solely that of Select’s editors and has not been reviewed, approved, or otherwise endorsed by any third party.

So the article “Should You Finance a Peloton?” has end. Thanks you and best regard !!!

Related Articles

Back to top button