Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The 'buy now, pay later' bubble is about to burst

theatlantic.com

Post reply on HN
Print view View original

51–60 of 276 posts

Re: The 'buy now, pay later' bubble is about to burst

#51

Post by [deleted] »

crote wrote: post #4
senttoschool wrote: post #2

“We found that most of the people that use buy now, pay later either don’t have or don’t use a credit card,” Marco Di Maggio, an economist at Harvard, told me. He said that Gen Z was skeptical of credit cards, possibly because many of them had seen their parents sink into debt. This is always weird to me. It makes sense why Gen Z does this. But weird. I can get 2-4% back on all my purchases using my credit card, incl…

Don't forget that there is no such thing as a free lunch, though. Credit card companies aren't charities! In general all those perks are paid for by rather significant credit card processing fees, which you pay for yourself via increased product prices. Furthermore, their goal is to normalize the use of credit cards, in the hope that you'll eventually stumble and get screwed over by the interest fees. Also, I think y…

[deleted]

Re: The 'buy now, pay later' bubble is about to burst

#52

Post by Ultimatt »

ivanche wrote: post #43
Ultimatt wrote: post #35

Earlier quoted context omitted.

Or you can afford the camera outright, right now. What's better out of these options: 1) Buy for cash the camera now. You don't have any cash in hand afterwards, and the camera is depreciating in value immediately as an asset only offset by whatever you do with it. 2) Buy via BNPL with no interest for 12 months, and pay exactly a 12th a month. You have the camera, but you also have 91% of your cash in the bank that /…

If we are to make up scenarios, I can take $5,000, go to a casino, observe roulette wheel and bet on black when I notice bias. Bam, I now have $10,000! I am the smartest guy ever! Seriously, OP never mentioned investing in a business equipment but wanting a camera. Also, that camera will depreciate no matter how you paid for it, but you conveniently mentioned it only in the scenario 1.

Because I assumed you'd understand the depreciation of the asset is a lot less than the appreciation on your investments or cash that you can do in the other scenarios. The entire point is its offset. Also that's not a business asset description, thats just normal life??? WTF buys a camera and doesn't offset some of the cost doing their mates wedding? You're not thinking rationally if you think using the credit system is comparable to a roulette wheel. You control its use. You can just clear the debt if its interest free, its not grown or changed. The credit system is designed around returns for people who can't afford something at all. It's utterly predatory, but if you financially are entirely above the risk of paying interest its just a lot of flexibility in preserving your cash capital.

Re: The 'buy now, pay later' bubble is about to burst

#53

Post by mrjin »

dusted wrote: post #3

I don't get it.. There's a childrens song in Denmark, it's lyrics go, roughly translated "and if you have money, then you can have, but have you none, then you may go!" (it's about buying bread at the bakery).. When I see how people spend money they don't have, I'm always wondering if their parents never sang for them when they were young, or if they are of a particular dim nature. Sure, I can see why some people wou…

Nope, it doesn't make sense as you mentioned. But imagine that you were an investment bank with almost infinite cheap money has nowhere to go, you will probably put it into whatever dumb idea out there as long as there is a clear exit strategy. It's virtually exploiting those financially vulnerable ones by providing heavy incentive to lure them into using BNPL and bump up the share price so they can exit with profit. Even if it did not work out, it just a failed investment that can be written off.

But for those desperate users, as long as they can get what they want now, they don't really care whether if they can repay at all.

Re: The 'buy now, pay later' bubble is about to burst

#54

Post by mrjin »

MarkusWandel wrote: post #8

"BNPL providers can offer zero-percent interest rates because they charge merchants three to four times the average credit-card processing fee." Right. And the vendor can't charge a higher price to the BNPL crowd, so they average it out over everyone. And thus the BNPL app user gets an "interest free" microloan, with everyone, even the people paying cash, having to pony up for the interest. Just like credit cards wit…

Even that was not quite right. Just take a look at those leading providers' financial reports, none would be pretty. They were virtually accumulating customers by providing heavy incentives using investors' money so that they could bump up the share price to allow early investors to exit. Making a profit was not even their secondary priorty.

Re: The 'buy now, pay later' bubble is about to burst

#55

Post by DocTomoe »

mschuster91 wrote: post #24
dusted wrote: post #3

I don't get it.. There's a childrens song in Denmark, it's lyrics go, roughly translated "and if you have money, then you can have, but have you none, then you may go!" (it's about buying bread at the bakery).. When I see how people spend money they don't have, I'm always wondering if their parents never sang for them when they were young, or if they are of a particular dim nature. Sure, I can see why some people wou…

> "But old cars break down and are expensive to get repaired" Yes, but you don't have money to pay someone else to repair it, old cars have cheap parts and are relatively simpler to repair, learn how to do it, you're not in a position to be fussy about what skills are beneath you if you can't pay someone else to do it, stop thinking so highly of yourself and get to it! You're ignoring the "boots theory" [1]. A new or…

As someone who only ever bought what you would describe as "trash" cars of up to 2000 Euros, let me give you some data.

Looking through my car repair/TCO excel file, I average to about 60 Euros per month in maintenance and repairs (that includes stuff like new tires every once in a while). Over the average lifetime of my cars (which is 5 years), that's 3600 Euros in repairs and maintenance. I regularly sell the cars for 500 Euros, so that's a TCO of ((2000-500)+3600) = 5100 Euros per vehicle, or about 1020 Euros per year.

The initial, 6-month manufacturer-suggested service for a new car alone is upwards of 2000 Euros, for a car that should not have and trouble. Most cars are nowadays impossible to repair yourself, or repair cheaply (new headlight bulb was 3 Euros before, now you have to change the whole 1300 Euro unit). But let's assume I'll have 150 Euros in maintenance per month... that's 9000 Euros. Depreciation over 5 years easily is a third of the vehicle's value, let's say 10000 Euros overall, on top of maintenance and repairs. Together, I get to a TCO per year of 3800 Euros, or a whopping 2780 Euros more!

Now, fuel efficiency. I drive about 25000 km/year. My clunkers consume - on average - 7.5 liters per 100 km - that's about 31.4 MPG. For something comparable, the manufacturer (if we want to believe them) currently lists about 5.8 liters per 100 km, or 40.6 MPG. This means that I could save 475 liters of fuel with a new car. A liter right now costs about 1.80 Euros, meaning I am leaving savings of 855 Euros on the table.

So ... I pay 2780 Euros more to save 855 Euros - BEFORE the extra cost of a loan to buy a new car ... NOT a good deal.

Re: The 'buy now, pay later' bubble is about to burst

#57

Post by nindalf »

This entire thread is focussed not on BNPL, but whether the entire concept of consumer debt makes sense.

Some folks say consumers should never take on debt for purchases, when they can save up instead. Others point out that it’s unavoidable in some cases. You may need a car to get to your job, meaning the asset you purchased creates value that helps you pay for it.

And yet others point out that you shouldn’t be financing food delivery. If you can’t afford that delivery now, then you probably can’t afford it spread over 12 months.

But ultimately this comes down to risk vs reward inherent in any financial transaction. The amount of leverage each is person is willing to take depends on their risk appetite. And everyone’s risk appetite is different. The folks frustrated with those who take out a lot of debt can’t fathom why others have greater risk appetite. The folks who do take that debt can’t fathom what’s wrong with doing so when it’s within their appetite.

That’s it, that’s the thread.

Re: The 'buy now, pay later' bubble is about to burst

#58

Post by srmarm »

cjrp wrote: post #16
ivanche wrote: post #10

Earlier quoted context omitted.

If you can afford 12 payments with interest, you can by definition also afford to save for 12 months and then buy the camera. BNPL and credit card companies are masters of exploiting psychology and especially currently prevailing wusiness and entitlement ("But I want it now!!!1!", "I deserve to treat myself like a king").

If there's 0% interest, you might be better off buying the camera now rather than in 12 months when the price has increased.

You also get to pay off a real-world lower amount due to inflation. However for many (most? myself included) the reality is that easy credit like this does lead to over extending in the longer term.

Re: The 'buy now, pay later' bubble is about to burst

#59

Post by ivanche »

Ultimatt wrote: post #52
ivanche wrote: post #43

Earlier quoted context omitted.

If we are to make up scenarios, I can take $5,000, go to a casino, observe roulette wheel and bet on black when I notice bias. Bam, I now have $10,000! I am the smartest guy ever! Seriously, OP never mentioned investing in a business equipment but wanting a camera. Also, that camera will depreciate no matter how you paid for it, but you conveniently mentioned it only in the scenario 1.

Because I assumed you'd understand the depreciation of the asset is a lot less than the appreciation on your investments or cash that you can do in the other scenarios. The entire point is its offset. Also that's not a business asset description, thats just normal life??? WTF buys a camera and doesn't offset some of the cost doing their mates wedding? You're not thinking rationally if you think using the credit syste…

Moral aside of shooting mates' wedding and charging for it(!), but as soon as you use equipment to earn it's a business/side gig. You may not like it but I'm sure tax authorities of any sane country will disagree with you.

For the rest I actually agree with you and think credit system is predatory and that if one can, one should take advantage of it. Just that buying something on credit because want, and using that something to earn money are two fundamentally different cases.

Re: The 'buy now, pay later' bubble is about to burst

#60

Post by strken »

Dalewyn wrote: post #42
strken wrote: post #30

Earlier quoted context omitted.

It's a hateful little piece of plastic. You carry it around in exchange for 2-4% cashback and fraud protection that should by rights apply to debit cards too, and the credit card company sits there hoping you give in to temptation and actually use the line of credit it represents, at which point they charge you usurious rates and distribute part of their loot to all the other poor schmucks they're conning. I have one…

>at which point they charge you usurious rates If you pay the statement balance due instead of the minimum payment due on your statements, you will end up paying no interest. The sky high interest rates only apply to statement balances that go past due, and having past due debt is also strongly disincentivized because they are horrible for your credit score. If you only spend money you actually have with a credit car…

If everyone only spent money they had with a credit card, then credit cards would not try to lure you in with free stuff and there would be no reason to use one. I pay my balance on time and "enjoy" "many benefits" derived from the human suffering of the people who weren't rich or sane enough to do so.
Post reply on HN