“Hey Dad, should I buy a Peloton Bike?”
Well kids, that is a personal decision:
During the early days of Covid, people were afraid to be within breathing distance of anyone. And while it was suggested that we stay at least 6 feet away from each other, 6 feet didn’t seem nearly far enough away to feel safe. With the gyms being closed, people started buying workout equipment like they had been buying toilet paper. “There was none to be found anywhere!”
Unsurprisingly, Peloton was quite profitable during the depths of the pandemic. The all-time high Peloton stock price was $167.42, on January 13, 2021. Those of us who have been around for a while, have been through the Treadmill /Exercise Bike craze many times before. Unfortunately, they all suffer the same fate. After a year or so, they become something to throw your clothes on when you’re too tired to hang them up. Or they find their way to some obscure spot in the attic or basement. However, some fortunate ones do find new homes through Craig’s List or Facebook Marketplace, 50% cheaper than their owners’ original purchase price. “That’s called a bad investment.”
The closing stock price for Peloton, as of June 28, 2024, was $3.44. That’s a 98% decrease from its all-time high of $167.42. Anyone who has been around awhile should have seen this coming from a mile away. “An investment in this company has been worse than buying the bike, but I digress…”
“So, you want to buy a Peloton Bike and put it on your credit card, and pay the $25 monthly minimum credit card payment, because you need to work out and that price fits your budget?” Let’s take a look at what that might look like:
Lets say you buy the Peloton Bike for $1560. Look closely at the chart above. Do you see the “Minimum Payment Warning?” Understand that if you just make the minimum payment due of $25, it is going to take you 10 years to pay this Peloton Bike off. Do you really think that you are going to ride this thing for 10 years? Let me help you with that answer: “NO!”
Additionally, by the time that Peloton Bike is paid off in 10 years, you will have paid a total of $3,576 for an exercise bike that you purchased for $1,560. That’s $2,016 more than the original price you purchased it for. Not only that, it will be obsolete before you even finish paying it off. “That’s just nuts!” Frankly, if you use that bike for more than 1 year, I’ll be shocked. Life happens and situations get in the way. However, “It’s your money and your choice”.
Don’t get it wrong, this blog is not about purchasing a Peloton Bike. This blog is about any credit card purchase that you can’t pay off, in full, when the bill is due. Feel free to replace “Peloton Bike” in this blog with anything you want to buy; PS5, designer handbag, Jordan sneakers, trip to Aruba, or red bottoms (“do people still wear those?”). It doesn’t matter. The message is still the same. You need to evaluate anything you “want” to buy with a credit card to determine if it is worth the long-term cost and the stress of that monthly credit card payment. Frankly, “If you can’t pay cash for it, it’s probably not the right time to buy it”.
Subtly, this blog is also about fully understanding what you are investing in. If you don’t fully understand the long-term viability of what you are investing in, don’t invest in it. “Be smart with your money”.
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