Words by Sam Robertson
In South Africa, bicycle sales are a big thing. Companies and shops are seeking alternatives to sell more bikes, and this is were bicycle finance comes in.
It’s that time of year again, all the sexy new toys that the bicycle manufacturers have in their toy box are being released into the market. And of course, that new bike is faster than your current bike. Way faster.
And so, the process begins.
There are of course a few incontrovertible facts about new bikes: 1) they are awesome; 2) they are faster
and lighter than your current bike, and (unfortunately); 3) they cost more than your current bike. As wonderful as ‘new bike day’ is, the hangover it causes can be worse.
Regular new bikes are not within reach of most of us. Bright and shiny things come at a price. And that is usually when we save that catalogue picture as the screen saver to our phones, close the app/ webpage, fire up Office and get back to work. Until now. Enter bicycle finance.
This is not a term entirely foreign to some of us, but until fairly recently it has not necessarily been pushed
much by retailers. That is presumably because they have not had to but increasing financial pressure in the
market place has seen a need for a bicycle purchasing stimulus. And why not?
We finance cars, motorcycles, houses, boats – in fact most major assets can be financed. We have credit
accounts at a range of retailers selling clothing, electronics, food and more. We even pay our school fees over an extended period. Why then do we not finance our bicycles?
There are numerous companies who are in the bike finance space at the moment. A cursory investigation reveals that they are all pretty much offering variations on the same theme. Interest rates, fees and payment terms are similar, ranging from about six months to 60 months with typical interest rates sitting at about 14% – 18% per annum.
But is it a good idea?
The conversation about financing expensive toys versus purchasing them with available cash is a slippery slope. How many of those late model SUV’s are financed? How many of the houses on the other side of the proverbial railway line are owned outright? I bet the next time you see a riding mate on a new top-end carbon machine the question will at least be posed mentally.
The concept of affordability should be at the heart of most purchasing decisions but is often tempered by the endorphins released on ‘new bike day’. You know that feeling and will know how disciplined you are/are not!
Affordability is such an important term to understand and abide by, that we have laws, regulators and court cases all attempting to define and regulate it. The National Credit Act came into effect in 2006. Since then, that Act has seen numerous amendments and regulations – many aimed at the ‘affordability’ concept.
To date however, it seems as though a consumer does not have to provide actual proof of income to a credit provider. This means that a credit provider does not have to (or worse, may not be allowed to) ask for an actual payslip or an actual bank statement proving income.
How dangerous is that?
The National Credit Regulator has published draft guidelines for the determination of affordability for comment, to make sure that credit providers do not provide credit recklessly. The comment period ended
four months ago, and it is not clear from the NCR website what has become of those guidelines.
“Of course I earn … uhm … millions a month. That’s why I am financing a bicycle rather than purchasing it in cash … You get the point. The people who should be protected from themselves are the very people who will do whatever they need to do in order to get that new toy.
And where does that end up? Well, it is unfortunately not an option to decide which monthly debt to pay and which not. As much as we are for ‘new bike day’ it absolutely cannot trump items such as school fees. To the extent that bicycle finance is bringing unaffordable bikes to those that can now afford to pay them off, responsible retailing and credit granting is paramount.
It certainly seems to us that the person doing the financing is not the same person who is selling the
bike. The bike salesman wants to sell bikes. Once the transaction has been concluded, how the consumer repays the financier is of little or no concern. Always remember that.
It is not this publication’s intention to get all preachy or dissuade anyone from getting onto an awesome new machine, but like with those idiots who toss gel packets into the veld, we absolutely have to add our voice of caution to committing to buying a bike you probably can’t afford. There are fabulous affordable options out there for those on a tighter budget.