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

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

#61

Post by dusted »

Ultimatt wrote: post #35
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").

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 /…

I disagree, it's death by a thousand paper-cuts.

Having my funds reduced to 91% the rest of the year is waaay worse for me, than having it reduced to ~0% the rest of the month. Because, the rest of that month, I'll be super-vigilant, I'll be acutely aware of why I have less money than normally, I know not to make anymore purchases, I know that this month is not for an extra treat, because I bought the other thing. Next month I'll be back up to 100% capacity.

This affects my model of my financial situation, because, it's a camera then.. ~91%, it's a new toaster there ~86% and then ~40% and ~20% and now I get into the dangerous "poor" mindset, it's well proven (and I can personally attest to this being a very real effect) that having less money makes it harder to be financially vigilant, there's opportunity cost* for once, but there's also a tendency to "treat" oneself more because things feel tight, there's a tendency to short-sighted savings (the more expensive pr roll toilet paper, versus the cheaper bulk option that has higher up-front cost for instance).

Now, to begin with, I'd go into "savings" mode a month before buying something expensive, so that I'm not at ~0% for a month, I'd never do that.

* Sure, there could be 100% opportunity cost right after paying in full for something, but the recovery to full capacity is also quicker. I really prefer the large, immediate consequences over the smoothed-out slow-squeeze.

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

#62

Post by kortilla »

Ultimatt wrote: post #38
kortilla wrote: post #26

Earlier quoted context omitted.

It’s financially reckless. What if you lose your job?

You then pay off your outstanding debts if you think there is risk you will be paying out more in the near term... That's why you only carry debt when you could otherwise afford something. Literally thats the point. Realistically though its even better if you lose your job because you have the cash in the bank you would otherwise have sunk into an asset. I just quit my job to be self-employed and have a bit of a care…

You can’t pay it off if you weren’t able to afford it up front. You’ve changed the scenario from “I can’t afford the full cost but can afford monthly payments” to “I can afford this and am using monthly payments as an interest free loan”.

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

#63

Post by dusted »

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…

I'm not entirely ignoring it, but I don't believe it holds true for things like cars. I've driven bangers my whole life, I mean really driven them to death, some to the point where they die on the highway, and I will do a quick inspection to decide whether I want to fix that or just have it towed direct to junk.

Now, cars are insanely taxes in Denmark, near 300%, and they lose about half their value the first year of ownership.

Every 2 years, there is a mandatory inspection of the car.

I buy a car with the following requirements: 1. My strong intuition that it can survive for 2 years with zero maintenance. 2. After 2 years, my TCO will be less than if I rented a new car. 3. It's freshly inspected so I don't need to worry about that for the next 2 years.

Sure, I get to drive old cars, but I bear zero risk, if I crash it, or someone drives into it, or I chose to use it as a ladder while wearing muddy boots (has happned) to reach something up high, I can do it, I can treat it as trash, it does not matter, it's not losing any value because I already wrote it off. A rental car, you can't destroy.. I feel having a car that I can destroy is worth more than driving a new car.

If, after 2 years, it looks like it can pass inspection, I try, and if it's cheap to fix, I fix what needs fixing, and drive another 2 years. This is a super-win situation, because then my yearly COO becomes about half of what it costs to rent. If it can't pass inspection, I toss it, and buy a new one and I have "broken even" compared to renting.

I get the "don't worry about maintenance" perk of renting combined with "not getting in trouble if it's pretty beaten up when I'm done with it" perk of owning.

Sure, it means that I run a risk of a sudden breakdown, in that case, I'll get it towed (to junk or home to fix) and I'll have to take the bus, work from home or arrange a day off for fixing it, but it's been my experience that it almost never happens that a freshly inspected car fails randomly within the two years until next inspection.

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

#64

Post by mschuster91 »

dusted wrote: post #63
mschuster91 wrote: post #24

Earlier quoted context omitted.

> "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…

I'm not entirely ignoring it, but I don't believe it holds true for things like cars. I've driven bangers my whole life, I mean really driven them to death, some to the point where they die on the highway, and I will do a quick inspection to decide whether I want to fix that or just have it towed direct to junk. Now, cars are insanely taxes in Denmark, near 300%, and they lose about half their value the first year of…

> I'm not entirely ignoring it, but I don't believe it holds true for things like cars. I've driven bangers my whole life, I mean really driven them to death, some to the point where they die on the highway, and I will do a quick inspection to decide whether I want to fix that or just have it towed direct to junk.

Yeah, but you have the knowledge and skills that you can determine if a beater car is worth the effort. Most people, however, do not have either of these... they get shafted by car salespeople who just want to push cars off their lot and fleece people later-on for repairs.

And the problem just gets worse with more modern cars - I can fix up something like a Volkswagen T4 van or probably, if it comes around, a lot of shit on any 90s era car. But for anything more modern, particularly stuff where you need specialized diagnostic toolkits, 2000ish Renaults where you have to plan three to four hours for a headlight replacement [1] or built out of aluminium or worse, composite material? Fuck that, I'm out. Modern car construction has completely sacrificed repairability in favour of crash resistance, lighter weight and/or cheaper assembly.

[1] https://www.ehow.co.uk/how_6471814_replace-headlight-renault...

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

#65

Post by Eddy_Viscosity2 »

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…

Not having money, i.e. poverty, and how you have to balance needs/wants/now/future is bit more complicated than this. In the same way you can't tell an alcoholic to 'just stop drinking' or someone in an abusive relationship to 'just leave them'. Because there is more going on than a simple econ 101 decision process happening.

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

#67

Post by christkv »

Dalewyn wrote: post #31
christkv wrote: post #15

Earlier quoted context omitted.

I think the argument is that its easy to get out of control and leave yourself exposed. If you have discipline then I don't see any problems. I might behov the industry to be forced to do more stringent credit checks before allowing it either by law or regulation.

I have no sympathy for adults (important distinction!) who have no discipline with their finances. They aren't children who literally don't know better. Those who do have financial discipline should not be inhibited for the sake of those who do not. Besides, /most/ cases of financial ruin aren't literal death. They are generally just very expensive and horrible-to-go-through life lessons.

Sure but regulations are the to avoid them creating systemic risk by lending to dead beats.

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

#68

Post by pandaman »

Vespasian wrote: post #37
yladiz wrote: post #11

Earlier quoted context omitted.

Okay, I repeat my question above: if you can afford to pay over 12 months (meaning, you don't go into debt to do so), what's inherently wrong with doing it instead of waiting 12 months and paying all at once, besides ideological reasons?

There is nothing inherently wrong with that but it's a lot more risky then saving up. Say after 10 months an unavoidable bill of $4k shows up and I got to pay it. If I'm saving up I can redirect that money. It sucks that I don't get the camera when I planned to but otherwise I'm fine. Under a BNPL plan I have no extra money to allocate and might have to dip into Credit (potentially with high interest). In short: Savi…

Your method is just as risky - say after you've just spent 5K on your camera an unavoidable bill of $4K shows up? Now you have no extra money and have to dip into Credit (potentially with high interest). Your best strategy would have been to have $5K on hand and still use financing if the terms are favorable - it keeps your funds at steady level, allows for future planning and gives you opportunities to invest or otherwise grow your capital. And yes, people without savings pay for that, it sucks to be such people but they are paying regardless if you take advantage of the financing scheme.

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

#69

Post by __alexs »

yladiz wrote: post #7
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…

I think this is a bit too simplistic of a way to look at it. Having sone debt is not necessarily bad, even outside of enormous purchases such as a house or car. First, c'mon, people don't (directly) finance sandwiches. Have you ever seen a sandwich shop accept Klarna? If you're talking about a credit card that's something but that's not what this article is talking about, which is BNPL. Second, in general it's not as…

> First, c'mon, people don't (directly) finance sandwiches. Have you ever seen a sandwich shop accept Klarna?

I put a (vegan) sausage roll from Gregg's on Monzo Flex the other day...

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

#70

Post by Alex3917 »

> they bought enough Peloton products to account for 30 percent of Affirm’s revenue

Funny given the hundreds of comments on HN, reddit, and elsewhere about how Pelton is a status symbol and/or people who don't like Peloton just aren't wealthy enough to afford one or whatever. (Including on MacRumors, since Apple was rumored to be considering buying Peloton at one point.)

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