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For people who are half decent with money the companies that offer "12 months no interest" type plans are the best. In theory, it allows you to invest the capit
by zer8k 3y ago
For people who are half decent with money the companies that offer "12 months no interest" type plans are the best. In theory, it allows you to invest the capital up front for the 12 months and then pay it off. You essentially can reduce the cost by whatever the prevailing interest rate on a 12 month CD is.
But yes, these plans (usually deferred interest) are designed to exploit people who are bad with money. They also usually go out of the way to hide how much you're racking up in order to maximize gain. This kind of person thinks "What's another $1000" when their bill is already at $4000. Furniture stores are infamous for this.
- restes 3y ago> You essentially can make money buying something. Well, only if you can earn more over 12 months than the asset you bought depreciated. I think a better way to look at it is that you can earn a small discount.
- borski 3y agoWith the 0% interest rate in Apple’s Pay Later, if you can’t earn more than that you have a gambling problem.
- hiatus 3y agoThe parent specifically mentions depreciation which you don't seem to be accounting for by only considering the interest rate of the loan.
- borski 3y agoFine, but the depreciation is not all that significant. Hypothetically, there is absolutely nothing stopping you from buying the device with Apple Pay Later for 0% interest, selling it unopened for full (or close to full) value, and making money from arbitrage that way. As a result, depreciation can be written off, I think, since I would argue if you do buy it and keep it you’ve gotten value from it even if it isn’t cash.
- acka 3y agoI'm not sure this will fly, or at least I think it depends on the issuer and the law in the particular jurisdiction of the buyer. I remember reading in the fine print of one issuer of BNPL in my country a statement that the buyer does not have full ownership of the product until after payment of the final installment of the loan has been received and confirmed by the issuer, implying that the product cannot be sold to a third party until the loan has been repaid in full. I am unsure if such a statement has any legal force but buyer beware.
- ta1243 3y agoAnd completely ignores the utilisation of the product being bought.
- randomdata 3y agoDepreciation costs should already be factored into the capital investment. You should not be accounting for it twice.
- furyofantares 3y agoY'all, the original post was edited, but the quoted bit about being able to make money by buying things was indeed wrong, you don't end up with more money by buying stuff this way. GP seems to have edited their post to talk about buying at a discount instead, as was suggested by this post you're all now bagging on.
- jayd16 3y agoThis assumes you can't get a lower rate that starts immediately, no?
- ta1243 3y agoI just this morning bought a new iphone. Choice was something like £500 up front or £20.88 a month for 24 months. No brainer.
- Gunnerhead 3y agoI’m assuming the latter if zero percent interest rate?
- aaomidi 3y ago20.88*24=501.12
- toomuchtodo 3y agoThis is not what most buy now pay later volume is though. It is marketing to originate what is essentially a credit card to a consumer cohort that is rightfully risk adverse to credit cards. https://scholarship.law.unc.edu/cgi/viewcontent.cgi?article=1574&context=ncbi https://scholarship.law.unc.edu/cgi/viewcontent.cgi?article=... https://www.consumerfinance.gov/about-us/newsroom/cfpb-study-details-the-rapid-growth-of-buy-now-pay-later-lending/ https://www.consumerfinance.gov/about-us/newsroom/cfpb-study... https://files.consumerfinance.gov/f/documents/cfpb_buy-now-pay-later-market-trends-consumer-impacts_report_2022-09.pdf https://files.consumerfinance.gov/f/documents/cfpb_buy-now-p... https://www.sfgate.com/news/article/influencers-lead-Gen-Z-into-debt-17142294.php https://www.sfgate.com/news/article/influencers-lead-Gen-Z-i... https://www.cnn.com/2022/07/06/economy/buy-now-pay-later-bnpl-inflation-data/index.html https://www.cnn.com/2022/07/06/economy/buy-now-pay-later-bnp... https://www.cbinsights.com/research/report/buy-now-pay-later-outlook/ https://www.cbinsights.com/research/report/buy-now-pay-later... (disclosure: I have submitted public comments to various regulators on the topic)
- saberience 3y agoIf you have to pay for a phone over 24 months then you can't really afford it.
- csmiller 3y ago
- post-it 3y ago> You essentially can make money buying something. You can save money buying something, which in a spreadsheet may look the same but is very different.
- jameshart 3y agoDepends on the something. Inflation as it is today, the price of a new something in 12 months might be up 6% or more over those 12 months, but you're locking in the price today.
- post-it 3y agoLocking the price in is only a guaranteed benefit if you 100% will end up buying it and the price does go up.
- ricardobeat 3y agoWhat kind of investment options exist for that? The amounts involved are usually very small and in 12 months the return will be insignificant. I bet you can count on your fingers the amount of people doing that worldwide, it's not really relevant for the conversation.
- SOLAR_FIELDS 3y agoYeah that kind of conversation makes sense on amortization of large amounts over long periods. If I buy something that costs $100 with a 0% interest rate on a BNPL scheme over 12 months, how much did I earn by investing that $100 elsewhere? Is there even a place that offers returns on that small amount of money? Even so, would it be anything more than a few cents? I guess you could buy half a stock of AAPL with it or something
- chiph 3y agoI've done that a couple of times buying televisions from Best Buy. Take the 12 month no-interest offer, then pay it off in 11 months - it's free money. However, they have changed the details in recent years. Prior to this it was an ordinary financing account. But now it is a Best Buy credit card account with a limit equal to the purchase price. This means that in the 1st month of the offer, you're at 100% utilization on that card. And this hurts your credit score. Not to mention it now has an annual fee with an interest rate potentially as high as 31.49%. And this is just too risky. Save your money, then buy what you want.