I’ve seen several bike companies advertise payment/financing with these groups. I’ve paid cash (well…a credit card which I pay off the balance immediately after) for every purchase I’ve ever made other than my house. But I was looking a little bit at these and noticed they’re offering 0% for 6 months and potentially up to 48 months. With CD rates sitting at 4.5% for 5 months, part of me was wondering if it’d be ‘better’ to use one of these companies to purchase a bike which would allow me to stick the money I would have otherwise paid upfront into a CD.
In the end I think I’d only be coming out ahead maybe a couple hundred dollars. So not sure it it was worth the hassle and if it has any affect (good or bad) on credit scores. But just one of those things I was thinking about to pass the time while doing zone 2 and was curious if anyone had first-hand experience.
You’re better off signing up for a new credit card that has 18 months or whatever at 0%. You’ll owe only the minimum per month and you can force yourself to pay a balloon payment right before the 0% is up.
Open up a 10K or whatever CD for a 13 month term.
When the bike is paid off, you’ll still have the line of credit with no balance, which will raise your credit score.
OP, you’re right to calculate that you savings would be trivial. Suppose you buy a $5k bike on loan and park that money in a 5% APY CD for 12 months. You will save $250 on the bike, or 5% off msrp. Now ask yourself, if you were able to save 5%, would you be willing to go into debt to do so? Kind of a silly thing to do IMO, but it is subjective.
I don’t see any harm in it if you can snag a promotional 0% offer for financing. If it is something that you would buy anyway and the alternative is to use cash outright.
I’ve used a few of these services and just make sure I pay them off within the term so it doesn’t cost any extra. I haven’t had any issues with them. However, I would avoid it if it is a purchase you would not otherwise be able to make within your financial means.
That depends on one’s historical patterns of self control or lack thereof.
Debt by itself is not a bad thing. It’s a multiplier. In the hands of the financially responsible/savvy, it multiplies gains. In the hands of the irresponsible, it multiplies losses.
Yes. As long as it’s 0% interest, there’s not a good reason not to do it!. It’s free money, specially with interest rates around 5%
Who is offering 48 months at 0%? That’s a serious deal.
Canyon and Giant are doing 12 months.
It was on the Specialized site. But the caveat was you have to apply to see your final rate since the fine print starts that the rate ranges from 0%-29.99%. I would be pretty surprised if it came out to 0% for a 48 month term. But that is just conjecture on my part. If they did (or even do it for 36 months) I’d 100% go down that route. That was one of the reasons I was curious if anyone had done this to see what the longest term they got 0% at or what kind of rates they were getting for 36 or 48 months
It’s decidedly over-simplistic to say that those who lose through debt are irresponsible. That’s probably bottom of the reasons why people get in to trouble.
Financial illiteracy plays in to some extent, but the bigger reason is the double-whammy of lack of options and a system that’s stacked against those who can afford it least.
Lack of options because if you already have little or no headroom in terms of outgoings vs income, then any unexpected bill or issue with pay, etc. will tip you over into a situation where debt is unavoidable, and servicing that debt then traps you in a debt cycle.
Stacked against them, because the less you’re able to afford the debt, the more reduced the options that will be available to you, and the more those available options will cost you to service.
I can confirm, it is indeed 0% for 48 months. The 0-30% is applied if you do not pay off the balance on time. They back charge it, I believe. That’s the risk.
I paid 0%. Was a good deal for me.
Thanks for the insight. 0% for for that long is wild given where rates have been the past couple years.
In 2018 we bought my wife a new care and Toyota was running 60 months at 0% (and we were already getting a discount price so they wouldn’t be any cheaper paying cash). I don’t like having monthly payments/debt and really wanted to just pay it off. But I resisted since I knew it’d be kind of foolish to pass up a 0% loan for that long