Completely different scenarios. Most people need a car to commute to work, use for work, etc. And then most of these people aren't taking out loans to buy Ferraris and Lamborghinis.

Education: this is not a luxury item, it's investing in a career.

Vacations: stupid thing to finance. Why dig a financial hole for yourself on an essentially non tangible item? There are plenty of cheap vacations one can take.

Completely irrelevant. You may only be paying $160 in interest but you still owe $5160 for something that you didn't really need and couldn't afford in the first place.

Maybe someone doesn't need a $5000 bicycle or a nice vacation but they want them. Shouldn't they decide how to spend their own money?

At the basest level there's nothing wrong with it (yes, credit cards are essentially the same as financing). The problem is that a lot of people pay for non-essential things with loans and credit cards with the expectation that their projected income will sustain the monthly payments. What the don't expect is that things go wrong (they lose their job, get hit with other expenses like medical bills, etc.) and suddenly they find they can't even make the minimum monthly payment on their credit card. So what happens? More interest and late fees pile up and they default on their loan.

It's this kind of speculative mentality that got this country into the economic mess it's in today.

I use credit cards myself for almost everything, mainly because I accrue airline and hotel points, but I pay them off in full every month and never buy anything I don't already have the cash for.

Do whatever you feel comfortable with. To those people saying "OMG A LOAN FOR A BIKE? NEVERRRRR." Chill out and consider that not everyone is in your situation and you don't know anyone else's. If deals like no interest/same as cash for 12 months come up, why not take them and keep your cash for other investments? I make enough money to buy any bike I want with cash, but sometimes I "finance" them anyway and pay them off when I feel more comfortable letting go of the cash. No interest = no harm. Get over yourselves.

Absolutely, I totally agree. Except, when you take out a loan to pay for these things, IT'S NOT THEIR OWN MONEY. It's the bank's. Get it now?

yes, they should decide how to spend their own money. the problem is, you're suggesting that it's ok to spend money they don't yet have on something that's not a necessity. that's your opinion, and you're certainly entitled to it, but it's my opinion (and that of others) that it's a terrible decision to finance a bike.

Of course, but when we're talking about credit we're talking about spending the bank's money.

For most people, I'm sure it would be fine if this is your only debt and your debt to income ratio is great and all that. If you have a $10k credit card balance, a mortgage that is a bit of a stretch, a $800/mo car payment, and no savings, this could be a disaster. I try to make major purchase decisions with the what-if-I-get-laid-off factor.

I agree with all the general advice about only financing education, business, and a primary.

The only thing that I would add is that I decided a long time ago that as much as I love computers, I would absolutely never finance a computer. I figured that about six months after I had financed my first computer, I'd be homeless - living in a car with a trunk full of party paid for computers.

The same thing is true for bikes.

To misquote Dirty Harry: "A man's got to know his addictions."

What I'm suggesting is people should weigh the impact of their decisions first. To many people, financing a bike makes perfect sense. If it gets them out riding when they otherwise wouldn't, that's a good thing and likely worth the financing cost.

Just so you understand, not only did I not finance my latest bike but I got $150 from American Express to purcahse it then I paid the bill off

Ahhhhhh...but they aren't spending their own money. They are spending someone elses money that they borrowed. Money that must be repaid with interest. Your plan is based on optimistic future assumptions like a big tax return, a bonus at work, future promotions... The road to financial ruin is paved with such plans.

Don't get all offended. Do what you want, but if we are trying to give out real, useful advice...telling people to bet on that big raise is nonsense and simply bad advice.

not trying to pick on you, but I hear this rationale a lot on BF and it really bugs me. If buying something expensive is the only thing that gets you out and riding, you need to change something else and learn to be happy with less. That new bike feeling will be gone again in a few weeks or months no matter how much you spend.

Nothing wrong with that, but you are assuming that the buyer already has the money available to cover the purchase in cash. If he does, great.

Financing a $10k bike with no interest when you have $10k disposable income in the bank = no problem
Financing a $10k bike with or without interest when you have $10 in the bank = idiocy

Yes, until they crash after a week and the bike is written off as a total loss. Or they rack up $20000 in medical bills after that crash. Now you're in a deep financial hole with nothing to show for it. Yeah, that's a really good thing.

I can say the same thing about buying a Ferrari (and I've owned one). Sure you can borrow $200k to buy one and feel great driving it when you otherwise wouldn't, but I wouldn't be feeling that great if I knew I was in over my head in a whopping huge car loan.

Exactly. What can a $10k bike do that a $3k, or even sub-$1500 bike do that gets you out and riding more often?

I think if you can afford to finance a $7000 bike you can maybe afford to buy a $2000 bike. Further, I think that the $2000 will be pretty super and you can have lots and lots of great rides on it. if you have enough of these great rides, maybe you will stop worrying so much about super bikes, and spend your money on maps instead so you can have more super rides.

I wouldn't advocate someone spending money they don't have. I'm assuming they have enough savings for an emergency day. What I'm saying is a $5000 bicycle or a nice vacation may be worth the added expense of interest. I'm also assuming people are realistic about their expectations - you know pretty accurately what your income tax refund is, if you're in sales you know what your commisions will be, if your company reimburses expenses you know what they come to, etc. Those things should have 90%+ probability as opposed to the 10% chance on the next promotion.

I wonder what percentage of the overpriced bikes for sale were purchased on credit. Their price may be a representation of the debt value and not the bike value.

My wife and I have financed "things" with 0% financing for whatever number of months and we've never skipped any monthly payments. Even if we have the money to purchase whatever, as long as the option of 0% financing is available, we take advantage of it. We basically let our savings accumulate until the final payment before interest kicks in, then we pay it off. And we don't wait until the last week to make a payment. Most of the time we pay it off 2 months before the deadline. A good example is when I went to upgrade my tv. Prior to Circuity City closing, Sony had an 18 month 0% financing. Bought my flat screen with the Logitech One remote and made monthly payments until my wife got sick of managing it through on-line banking. I said pay it off... so 6 months from purchase, it was paid off.

Now I was ready to purchase my bike at Trek this past Christmas taking advantage of the 0% financing for 12 months. Prior to the bad news, we had talked about just using the "stash" and just pay it in full. Then from there, it went to my original plan of 0% financing. But things went sour after some "circumstances"... so I'm still without a bike.

As long as you can afford and not skip a beat and payoff before the special financing ends, go for it. However, I don't see myself financing $7k or more. I was already cringing at $3,500, and even hesitant even at the thought of financing it, but I'm no racer nor compete and just one of those "Fred's" that wants a nice bike for my own leisure. So I figured I'm okay with that idea. Then again, that's just my own personal opinion... agree or disagree.

Actually, you are advocating spending money you don't have. It's called taking out a loan.

Back in 2008, I'm sure the millions of people who are unemployed today were thinking that they only had a 1% chance of being laid off from their job. You might as well justify your loan by saying "I'm going to win the lottery in 6 months, so no problem."

The "added expense of interest" only makes sense if you can use it to your advantage. If you have $10k in hand and finance a $10k bike at 0% interest, you can take that $10k and invest it in something with a 5% return and end up paying less than $10k for the bike. But it doesn't work if you don't already have that cash in hand. Paying interest just to "have it now" is not a valid justification for any luxury item.

Also, emergency savings are for just that - emergencies. Buying an expensive bike is not an emergency. You are talking about disposable/discretionary funds, not emergency funds.

Face it - your advice sucked. Admit it and move on.

But what you're missing is many people get enjoyment out of an expensive bicycle (I won't use $10,000 as an example though). To them the excitement, joy and thrill of having that new high end bike right now is worth the added interest. Or the couple that has just gone through difficult times and sees a vacation in Hawaii right now is worth it. Or the couple that wants to buy their child a graduation gift.

Those expenditures may not make sense from a purely financial planning perspective but they may add lots of value to their lives. Again they are decisions people need to make based on their own circumstances.

0% interest AND you have money in the bank to cover it can be a good deal. Taking a loan out to get gratifiction right now because you assume you are going to have more money in the future = massive risk.

If you don't have money to buy a $5000 bike, then you don't NEED a $5000 bike. In fact, NOBODY needs a $5000 bike. I can show you countless examples of $700 bikes that will do the same thing. You can finance a Rolex, or get a Timex. They both do the same thing.

They may "add lots of value to their lives" but they are also taking away a lot of value by getting into unnecessary debt. There is a reason why predatory lenders exist today - because they take advantage of people with the "gotta have it now" attitude and soak them for all they're worth (and they're not worth much). You obviously think it's worth it. Fine, just ask yourself if it's worth it when you can't pay for your kid's education in 18 years or when you're 65 years old and have nothing saved up for retirement.

And how many times do you have to be told this? The interest rate is irrelevant. It's getting into debt that's the problem. So are you saying that financing a $200k Ferrari with 0% interest is something you should do when your income is only $40k/year and you have nothing saved up? You may not be paying any interest on the loan (great, right?) but you still owe $200k to the bank and you have a $200k liability in the form of an Italian sports car in your garage.

For someone who thinks he's wasting his time on this thread, you sure are spending a lot of time trying to justify yourself.

Just like people who refinanced their house and bought boats, RVs and vacations with the equity. Felt great at the time...until the good-deal period on their no-interest loans expired and the value of their house plummeted 25%. Seriously, your advice is what caused the housing crisis. Financing something you can't afford with the expectation of future financial gains.

Propofol,

I personally have very little debt. I pay for just about everything with credit cards (cash back) and then pay the bill in full each month.

But I respect the rights of people to make their own personal decisions. From your insistance, you don't seem to do the same.

Kinda harsh to blame one person or belief for the housing crisis. It starts at the Fed and goes all the way down the line. Back to financing bikes, yes people do it. Seems there's plenty of advice to not do it but that's your decision. I spent 5 months organizing my last build (2010 Supersix Ultimate-ish). My patience surprised me and my wife. Surprise yourself by considering other options and by all means, just do the math on the optimistic and pessimistic side of things. Then make your decision. GL

Not one person, but his ideas in general were shared by a great many people who are now massively upside down on their $500,000 investment.

Where do you seeing me say finance something for future financial gains?

I'm talking about short term interest to buy a bicycle