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Subject:  Re: PTON's ongoing shipping trouble Date:  11/29/2020  2:07 PM
Author:  IRdoc Number:  73841 of 77914

In today's world of good equity returns and miniscule interest rates it might make better sense to not pay off purchases right away, and use the extra money to make more money. For instance I used to pay off mortgages early because being debt free made me feel good, purely psychological. But with even average long term returns of 9% or so in an index fund and a 3.5% mortgage rate does that make sense? Especially now that the interest may not be deductible. Of course there are the unknown risk factors involved in both cases. \
The deal is even better at 0% down and 0% interest as the Peloton Bike seems to be.
Is it correct that Affirm takes all the credit risk here?

The Peloton equipment seems to be sturdy and would have value after a repossession. Unlike money borrowed for a vacation..


According to this site: https://www.axios.com/affirm-lender-payday-peloton-a58c641b-...

Peloton paid Affirm more than $50 million just in the third quarter of this year. That more than makes up for the credit risk that Affirm is taking by lending to Peloton's customers.

So Affirm appears to take the credit risk in exchange for some percentage of sales. I agree that it makes sense to get 0% interest on large purchases. Plus, it's a good deal for customers otherwise paying for gym membership or spin classes. Instead of a $2000 up front investment, spend $100 a month for the bike plus subscription, and eventually get the bike paid off. Smart consumers will take advantage of free money. The next level, though, is that the consumer gets no rewards or credit card protection when buying through Affirm.

Back to whether Peloton has tapped out its market, hard to call that when there are still a lot of outstanding orders. They are still growing revenue sequentially and it's unlikely that they would hit a wall and suddenly saturate the market.
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