One part of America’s car culture is a financial system well-lubricated to get people behind the steering wheel and locked into a loan repayment or leasing plan. Essentially every bank or credit union is ready to get you a car loan as quickly as possible.
But what about a bike? Even a high-quality bicycle is far, far cheaper than a car. Yet if you don’t have $1,000+ in expendable cash, it’s out of reach. Why should it be easier for me to get a car loan for a $20,000 car (or boat or RV) than it is to get a loan with a comparable interest rate for a $1,000 bike? Sure, you can put that on a credit card, but the interest rate will likely be more than double that of an auto loan.
Now, Verity Credit Union is entering the fairly young bike loan market, offering its members bicycle loans at a current rate of 6.24% APR.
To promote the launch of the program, they are holding a Facebook photo contest that will raise funds for Bike Works. Verity will donate $5 to Bike Works for each of the first 100 photos submitted. Today is the last day, and it doesn’t look like they are at 100 yet, so submit a photo of you and your bike to get a little cash to Bike Works.
More details on the bike loan program, from Verity:
A healthy lifestyle is a great lifestyle — Verity Credit Union is happy to help you get in gear with a bicycle loan.
Whether it’s for a ride through downtown or tackling a new trail, competitive low rates and programs to help you save are sure to make your cycling dreams a reality.
Bicycle Loan Essentials:
- Competitive interest rates
- Term up to 24 months
- Auto payment discount available
- Maximum loan amount of $7,500
- Minimum loan amount of $500
- No payments for 90 days
Do you know of other bike loan or bike financing options in Seattle? Let us know in the comments.
Comments
38 responses to “Verity Credit Union launches bike loan program, fundraiser for Bike Works (last day!)”
Good on them for targeted marketing, anyway. I assume Seattle shops are like most American bike shops with credit applications on hand at the checkout counter?
I hate to say this, but if you’ve got 20% to make a downpayment on a $1,000+ bike, you should buy a used $200 bike instead and save your money….
It totally depends on your situation, level of bike knowledge (if you know a lot, then you don’t need my advice), the kindness of your bike-knowledgable friends who also own tools, etc.
I am assuming a few things here. 1) You don’t already know a ton about bike repair. 2) You would like your bike to be able to carry your stuff, climb hills easily and otherwise serve as a daily mode of transportation. 3) You don’t want to spend a ton of time meeting with strangers on Craigslist to find a bike that fits you. 4) You would rather not save now and spend a lot of time and money at a bike shop fixing issues as they arise (this is how most people buy cars, so applying the same idea here).
As the owner of a $200 used bike, I wouldn’t suggest it for someone who is just looking for dependable wheels to get them around town. Especially if you are not a do-it-yourself kind of person (if you are, then the $200 bike is perfect because you’ll learn a ton fixing every part). It worked well for me because I wanted to learn how to fix a bike. I’m now pretty familiar with most parts, which is great. But I’m assuming not everyone is interested in this. Again, the car analogy here would be someone buying a junker and working on it in the driveway. Very few people want to do this (though, sure, bikes are WAY easier to work on).
Higher cost city bikes (not talking racing) should be less likely to break down quickly. Higher cost tires can be less likely to get flats (OMG my Schwalbe Marathon Plus tires are the single best bike purchase I’ve ever made). How many people take up commuting, then fall out of the habit because their bike develops an issue, even one as simple as a flat they get annoyed trying to fix?
Of course people can ride cheap bikes for a long time. People do this with cars, too (though they rarely last as long as a bike). But as cycling becomes more mainstream, I imagine the market for solid, dependable new bikes could grow quickly. The Honda Civics of bikes, to painfully stretch the car analogy further.
I’ve helped a ton of friends buy bikes, and I’m now convinced that it’s worth it to simply spend the $1K or so getting bomb-proof tires, racks for hauling your bags, quality rechargeable or dynamo lights, a solid lock, etc. But, of course, few of my friends have $1K in cash to just drop on the spot, so they cheap out on some or all of these elements (understandably).
While right now a lot of people might not consider something like a bike loan, I could easily see it becoming more normal as our bike culture continues to morph into an everyday sort of thing. Imagine a bike shop advertising a $1K bike as “dependable” with a price tag like “$44/month for 24 months.” Seems appealing to me…
And it’s not just the bike itself. Getting a warranty/free service is a valuable thing for people that don’t have the interest or time to fix and maintain the bike themselves. My father-in-law bought a Trek from REI for more than I would’ve spent, but it came with some pretty sweet servicing deals. When he has problems, he just brings it there and they take care of it.
Good point. And your odds of funding a bike theft ring drop dramatically when you buy from a shop and not craigslist…
If you can’t handle craig’slist, then get a bike from one of the good used bike stores, “Recycled Cycles”, “Columbia City Cycles.”.
But borrowing $1K to buy a bicycle is not a fiscally smart idea. And if the other “low cost” loans are anything to go by, you won’t be paying $44/mo for 24 months. If you don’t have $1K in cash, what kind of credit risk are you? Well a high risk one, those folks pay 24% and higher on their loans..
Better to buy a lousy but new bike from target.com
http://www.target.com/p/takara-men-s-kabuto-23-road-bike-black-yellow/-/A-13938501#prodSlot=medium_1_3
or
http://www.target.com/p/schwinn-men-s-700c-tourist-28-road-bike-red/-/A-13241183#prodSlot=medium_1_6
Either of those bikes would last you 24 months of riding. At which time you’d have $800+ in your pocket. Get it to last another 4 months and you’d have $1K and a used bike you could resell on craigslist for $50.
Didn’t your parents teach you the true cost of borrowing to buy something that decreases in value?
Gary, I have to correct you on one point. Verity’s bicycle loans are a flat rate. Everyone who chooses to get a bike loan with Verity will pay the same cost for the loan, namely 6.24%, though if they opt to have automatic payments that lowers the cost of credit to 5.99%. This is not risk-based pricing.
Beyond that, I encourage everyone to make a decision that is right for them and their situation. In many cases, this may involve using credit to purchase a bicycle. What Verity is offering is an affordable financing option to those who wish to use it. Financing through a credit union also helps people access the other benefits of credit union membership.
Gary, a Target bike doesn’t come close in comparison to a good quality bike like Trek, Giant, Specialized etc. Many times a target bike will sit in garage and not get your moneys worth because they are not as enjoyable. Doesn’t apply to all people but to each their own. Your statement should apply to cars also as most are not worth what they cost. Buy a $200 Target bike 6 months later worth $75. Buy a $1000 quality bike and it holds its value far longer. You see Treks and others that are 4 or 5 years old that have only lost $200 of there original cost.
I think this is fantastic. In my own biased experience $500 is a good threshold below which quality diminishes dramatically, and above $1500 (again, my bias) you’re mostly spending money either for vanity or to bike competitively. Buying between $500-$1500 gets you a high quality ride of your chosen style that will last you several years.
My only quibble is that the interest rate seems high. BECU offers car loans as low as 1.84%. Is the 6.24% a flat rate, or is that an average rate? Even so, a 2-year loan at 6.24% on a $1,000 bike would be a very manageable $44/month, with a $60 in total interest paid. That could induce many more people to forego the Walmart $50 special in favor of a good quality ride.
Hi Zach,
My name is Sasha Kemble, and I work for Verity (and also hold the distinct privilege of being our first bike loan-holder!). The 6.24% is a flat rate, though we give a .25% discount if people opt for automatic payments, bringing it to 5.99% APR.
Because vehicle loans are title-secured (using the VIN#), they have greater security for credit unions and banks, and therefore present a lower-risk loan for any lender – hence a low APR. To better compare this bike loan rate, it’s more on par to compare it to the rate of a personal loan – a loan for the purpose of buying something (or paying for a service) that can’t be title-secured. I hope that helps you better understand the reasoning – we strive to be transparent (it’s part of the “ongoing education” aspect of the cooperative principles that we – and other CUs – govern ourselves by).
For me personally, my other option would have been to put a bike on a credit card. This bike loan enabled me to have a better rate and more affordable payment to get my fantastic bike that I can’t get enough of riding, and left my credit card for emergencies (like a root canal – true story. Ugh.).
And good math! On the flyers we have in bike shops (R + E Cycles and Gregg’s among others) we provide an idea of what payments would look like per $1000 for 12- and 24-month terms. You’re right on the money for a 24-month loan!
If you have any questions, please feel free to reach out. I’m our staff trainer, but I *love* talking to people about our bike loans and the benefits of belonging to Verity or any credit union. You can reach me at sashak (at) veritycu (dot) com.
Thanks, Sasha! You can tell I’m not in the financial industry because I didn’t even think about the title issue and how that would affect rates.
Here’s a question I’ve thought about since posting. How, specifically, does this work? Would I buy the bike, then go to Verity with the receipt for the loan? Or would I go to Verity first?
Hi Tom!
It’s a good idea to be in touch with us first – that way, you can get pre-approved, and know that you’re ready to go when you’re shopping and find the bike you want. (Or know that you can go and get the bike you’ve been dreaming of!)
Then, when you’re ready to purchase the bike, Verity can either cut a check based on a purchase order, or deposit funds into your account so you can make the purchase then and there. I opted for the latter option, and used my debit card to buy the bike. (Verity offers points on its debit card, so I felt it was a nice way to get an extra benefit on a purchase I was planning to make.)
I’d been doing some research in advance of my shopping, to get a sense of what was out there that I was interested in. I then got pre-approved for the most expensive of the bikes that was under my consideration, then went and test-rode the top contenders at various price points to find the one I settled on (which, fortunately for me, was in the mid-range).
I appreciated having a sense of what the payment amount would be for the various bikes, as that did weigh into my consideration. I knew I was willing to pay a little more for a comfortable bike, but wanted to keep conscious of my overall budget. I was also able to include my saddle and tire upgrades in my loan. (We also will cover a few other extras at the time of purchase, such as lights and a rack for the bike, but I already had ones available to me.)
I hope this helps!
I’m not an expert on loans, so I’m having my trouble wrapping my head around this idea of title-secured new car loan being a lower risk for a lender than a $1000 bike loan.
Sure, the auto loan is title-secured, so if I borrow the money for a new car and default, the bank gets the car. But the car has immediately depreciated a lot, just by virtue of having been driven off the lot. If I default right away, the bank gets the car, but they’ve in effect “lost” more than $1000 on the deal, since the car’s value has probably decreased by more than $1000.
In the bicycle case, even if the bank doesn’t get to repossess the bike, they’re still out no more than $1000 on the deal.
What am I missing? I guess down payments could factor into the car loan, but new car depreciation happens pretty quickly.
Matthew, the likelihood that someone will do a first-payment default is fairly low. Credit scores help determine what is called risk-based pricing, which means that financial institutions set rates that help to mitigate the risk that various score ranges may default.
Higher credit scores (read: lower risk) get lower rates. Lower credit scores (read: higher risk) get higher rates. There may be other underwriting decisions that govern whether a financial institution will make a loan. For instance, people with a lower credit score may have to meet the condition of putting a down-payment down on their vehicle in order to secure financing. Having some skin in the game lowers the risk that someone will walk away from their loan.
So, think about if everybody decided to get a bike loan, and then just walk away. If we had 100 people with $1000 bikes decide to not pay, then we’d face a loss of $100k. That would be a loss to the organization that would impact the benefits provided to the rest of the membership. (As a not-for-profit, earnings in excess of operating expenses go back to our membership through higher interest rates paid on deposits, lower interest rates on loans, and services and programs designed to help our membership and our community.)
If 10 people walk away from their $10k car loans (so, same amount lent: $100k), presumably we’d be able to track down those vehicles and resell them, even at a loss. Even if we’re selling them at 80% of their value, it means we’d be looking at a loss of $20k instead of the $100k that we’d be looking at with the previous example.
And though you’re absolutely right that the greatest depreciation occurs early on (really, for the first 2-3 years), people tend to walk away after they’ve had the car for awhile, and the car needs repairs that they can’t afford, or has somehow been damaged in an accident. (That’s why we also offer mechanical breakdown insurance and GAP insurance at costs more affordable than dealers offer, to help reduce the risk of that happening.) By then, things are leveling out more, with people not being ‘underwater’ in their loans.
With bike loans, a lender will have no right to claim that bike. There is no possibility of claiming that bike to recoup that loss (and provided that a nice bike has been kept in good condition, it does still hold some value!). And so that’s where the risk comes in.
Besides, by offering a flat-rate (not risk-based) scoring, it means that we’re enabling all of our members to get the same financing option. This makes it a great option for someone who is hoping to rebuild their credit, as positive payment history accounts for 30% of a credit score (and usually the past 2 years of payments has more of an impact). Therefore, if someone pays their bike loan on time every time, they’ll undoubtedly have an improvement in their credit by the time they’ve paid the bike off.
I see it as a vote of confidence that the people we lend to will do their best to pay us back (and hopefully talk to us if anything in their life changes that makes it difficult for them to pay. Sometimes, life just happens.). Credit unions originated as a group of people pooling their money to make loans to one another, and that is essentially still the case today. This means our lending practices are different than banks – if you have checkered credit, a bank may dismiss you based on score alone. A credit union will look at your credit history and begin a conversation to understand what impacted your credit score, and make a loan decision based on that.
Okay – I got carried away. Does that help make lending practices more transparent?
Zach, another thought might be competition. If everyone got into the bike loans game, I wonder if rates would be pushed down further… (again, I know little about the financial industry)
Also don’t forget that with license plate scanning technology, people who don’t pay their loans have a tough time evading the repo guys..
http://www.reposystems.com/inner.aspx?pg=alpr
Bicycles? Not so much.
I hope this generates more interest in cycling numbers. As demand increases we will generate more competition and innovation in bike design and function too.
Personally, I think it’s a terrible idea to take out a loan on a depreciating asset. Pretty much anything but a house or an education.
It’s not that hard to buckle down and eat Raman for a few months and buy with cash.
That said, I really appreciate verity making the effort at equal opportunity usury. J/k.
As for Craigslist, I simply don’t buy unless I’m at the sellers residence. That cuts out the majority of thieves.
It is hard for a huge number of people to save up $1K of cash. And, ironically, having a dependable bike is one of the best ways to get your finances under control when you’re living paycheck-to-paycheck. I’m sure one could come up with an economic formula to prove that the advantage of having a dependable bike would save you more money than the interest accrued… (emergency bus tickets, unexpected trips to the bike shop, etc).
Of course, I’m not trying to help people justify buying a bike you can’t actually afford. But I’d say a dependable set of wheels is a sound investment, even if the resale value depreciates a bit.
While I wholeheartedly agree that riding a bike is an awesome way to save money, I just can’t support recommending a loan for one.
If someone is truly that poor that they can’t afford a new bike with cash after a few months of savings, they shouldn’t buy a new bike. They should start with a used bike and fix it themselves, if necessary. I’ve bought a number of $200-$400 high quality bikes on craigslist. They generally are ready to ride and don’t need any serious work for at least a year – more than enough time to save and avoid taking out a loan.
Then after you’ve saved up, you have a spare bike when your fancy new one is in the shop, or lend to an interested friend!
I know the depressing consumer cycle of borrowing before you can afford something is extremely popular. I just find it distasteful and harmful to propagate as a reasonable financial strategy, particularly for someone with a low income to which this seems to be directed.
Yes, even for something and kick-ass awesome as bike ownership!
Sure, the lending cycling is bad for all kinds of reasons. But compared to just throwing it on a credit card, this is more responsible. You have to admit that.
biliruben, that all sounds like a judgment call that’s between an individual and their lender.
For me personally, I haven’t a clue how to repair a bike, and if I didn’t have a lovely friend who owns a bike shop (shout out Mobius Cycle!) I wouldn’t have made it through the 3 years of riding a crappy bike to scrape together the money for a really nice ride that I will hopefully be riding the rest of my life (again, shout out to Mobius Cycle for my lovely steed).
I think a bike loan is a great idea. And, since this is my CU, I’m thinking about whether one might be a good idea so that my partner can get a bike too.
Okay, I’ll begrudgingly admit it’s (probably, given who would take out this loan) better than a credit card.
And I’ll also say it’s also much, much better than taking out a car loan.
I’ll give you that.
Other things it is better than:
And it’s massively better than playing the lottery!
Bird suits. It’s much better than base jumping in a bird suit.
Riding in the second ave. bike lane. Better.
Juggling Portuguese Man-of-War. Better.
Going down the counter-balance on a giraffe unicycle. Better.
There may be one or two more things, but I can’t think of them at the moment.
Haha! It appears we’ve reached agreement, then!
Though going down the counterbalance on a giraffe unicycle just made it onto my bucket list.
biliruben, while you’re not alone in feeling that it’s only wise to use credit for large purchases that are likely (but by no means guaranteed) to appreciate in value, you’re forgetting something key.
In order to be eligible for a mortgage, people need to have a credit score. In order to get the best rates (and thus, save money) consumers have to demonstrate responsible use of credit. Credit cards are one of the easiest ways that people can gain entry to building credit, yet things like billing cycles and how interest works is really confusing to many people.
I’m sure we’d both agree that credit cards are how people get into the most trouble with credit, using it for all sorts of everyday things they may already have forgotten about by the time the bill comes due.
For individuals who’ve never had credit before, this provides a safe introduction to building responsible credit behavior. It’s a lot easier to feel good making your bike loan payment each month, on something that you’re presumably using most days, then it is to want to pay your payment on your credit card, whose balance may have gotten racked up on rounds of drinks for friends, meals that were “meh”, and gas and insurance for a junker car. Having an installment loan is a good way to get into the habit of paying for credit, and builds habits that can translate to being a good mortgage-holder.
Credit unions strive to help educate their members about credit, and help set them up well for the future. We talk to them about what behaviors they can cultivate now so that if they decide they want a house 5, 10, 15 years from now, they’ll be in a good position to afford it. That of course also includes talking to our members about building positive savings behavior, too. If someone is going for a mortgage, they’re going to need to have money saved up for a down payment and closing costs.
While I commend those who are able to pay cash for large purchases, it simply isn’t realistic for everyone. What about the young adult who is working three part-time jobs and needs transportation more reliable than the Metro in order to be on time for their shifts? (I know one.) Would you be able to look them in the eye and tell them that they should be saving up money before they buy a bike? This is the reality for a number of young people.
You mentioned that education is a worthwhile thing to get a loan on, but I find that a less reliable investment than a bike. There are so many smart, hard-working people who are using their bikes to get to the job(s) they need to service the debt that their education put them in. Though they may one day be earning at a capacity that allows them to easily save for purchases, this is one of those purchases that may make a real difference in their life right now. I am proud to work for an organization that is helping people afford reliable transportation.
I’m also glad that no matter what reason someone may wish to finance a bike purchase (like that it’s fun, healthy, good for the environment), that we are available to help fill that need they have. We want to help them celebrate that purchase.
Oh, yes. Student loans. I could never have afforded to write this blog if not for 1) Bicycles being such an affordable way to get around and 2) The student loan act of 2007 that created income-based repayment of federal student loans.
Of course, that means I have this huge student debt looming over my head collecting interest. But at least I’m not defaulting on it like some of my friends who got private loans. I have no idea how most people in my generation are ever going to buy a house.
I certainly don’t suggest that everyone should go dig themselves into hundreds of thousands in debt for a house or education! I’ve seen people unready for either fall into that pit. It’s really hard to dig out of. Ask my sister.
I think this probably all goes back to our failure, as a society, to educate our populous on the basics of personal finances. When we have to teach people the hard way by laying small traps that probably won’t completely ruin their lives, we are doing something wrong. There are sharks in these waters, and they prey on the ignorant. Not to say you are a shark, Sasha. I’m sure you try your best to educate. And borrowing for a bike is pretty benign when it comes to borrowing. Agreed.
The upshot is that there are a lot of great used bikes out there, a lot of great classes to learn how to fix them, and great people to meet while you learn. The feeling of satisfaction you get when you fix your own flat or learn to swap out your cranks is really nice, and can really get you out of a fix if you are stuck on the open road some time.
A cheaper used bike also has the added benefit that you have to worry much less about it being stolen, and if it is, you don’t feel the need to risk your life to retrieve it. I’ve been there, and I don’t want to own a bike that I would put myself in harms way for again. If I wouldn’t pretty feel fine about giving my bike away to a friend in need, I don’t want that bike. Plus, I keep all the great, local wrenches working and earning on the things I haven’t figured out yet or don’t want to invest in the tools, like overhauling my hubs.
It’s really a philosophy, and I understand it’s not for everyone. Thanks, Sasha, for giving folks an option if they don’t think it’s for them.
I absolutely agree we need to work harder to help provide everyone with the tools of financial literacy! I don’t think we disagree at heart, though I understand why you’re skeptical of bike loans. I’m hopeful that in offering them, it will help provide an affordable option to people who may otherwise put them on bank credit cards (talk about usury). Or, you know, just help someone get their dream bike a little quicker, so they can get out and help change Seattle’s conversation about biking. The more people we have out there on bikes, the more attention that will come with it, and (I hope) the safer our roads will become for all road users.
And I agree that the learning as you go along is the fun part. Yesterday, I got my first flat tire on my commute, and I got to learn how to fix it. Today, I’m eager to find a new rider with a flat, so I can teach them. I bought my bike with the intention to have it for years, and I know that I will learn repairs that come up. But I also know that I didn’t have the time or the resources to dedicate to doing a lot of overhaul of a used bike. My old bike was precisely that, which was why I barely ever rode it. Having a nice, safe, road-worthy bike makes all the difference in me getting out there on it.
Speaking of, I should go do that now… :)
This is a wonderful idea! Because I have never taken out a loan, I never even thought of the fact that it’s not common practice to give out bike loans. When I got serious about biking for transportation, my fiance (at the time) and I planned out the perfect around-the-city bike for me, with handpicked components and built from the ground up. The total cost was around $4000 which we were able to afford after we asked for gift cards to our bike shop instead of any other wedding presents. (Kitchen and house stuff, I can buy anywhere, but this was a once in a lifetime bike!) That said, I realize this is definitely more than is necessary to spend for a suitable, durable, stylish bike. Additionally, I can see this being a boon to all the awesome hand-built bike makers out there. There are some really cool designs coming out, and it’s exciting to support a local craftsman, but very few people have the cash flow to buy such a bike.
Good point! After all, if bike manufacturing in, say, Detroit is going to help heal the wound left by departing auto jobs, people are going to have to get used to paying more than $500 for a bike: http://www.shinola.com/shop/bicycles/the-runwell-bicycle.html (extreme example, but you get the point)
http://bombusbikes.com
What a silly debate. This is just another way to market a loan.
There is a point at which the cost of a bicycle has diminishing returns for the average person, and I think that’s well under $1000. I’ve commuted to work on a $350 mountain bike through the woods and gamelands of Cowtown and on a $600 new bike in Seattle. I rode that second bike on the STP. The parts I have are good, I do the same type of routine maintenance as PriceyBike owners, and I’ve never had any parts fail. Maybe a $1000 bike would be lighter and faster so I could keep up with the cool kids on the Tour de Dexter, but I get from point A to point B just fine.
I’ve been poor, and I was 32 before I owned a car, so I am speaking from experience here. Taking out loans is something you should do only if you absolutely have to do so, because the less money you already have, the more debt is dangerous. Buy a solid bike at a price you can afford, not more bike than you need that gains you nothing.
I find it quite troublesome that people seem to think there are exactly two types of bikes: “reasonable” sub-$1000 bicycles and overpriced $1000+ bikes.
What about folding bikes, especially if you commute during rush hour? Those tend to start at $600 for the extremely cheap ones, and go up rapidly. Being able to fold up your bike and take it on the bus could mean the difference between making it to work on time, and having to wait for 3 buses to come before there’s a spot available on the bike rack. This is why my wife now rides a folder.
What about cargo bikes? The midtails start around $1000 with no kid features, and that’s only in the past year. Before that, you were looking at a pricy xtracycle. If you need to get multiple kids to school, $1000+ starts to look pretty reasonable. Cheap kid trailers make work for some people, but they also don’t work for many others.
How about people with disabilities? A custom or unusual bike means a steep price hike. Or the E-bike, for people who have trouble making it up the hills? Or the trikes, for folks with balance issues?
And so on..
Agreed! If you want an e-assist family bike, a loan will come quite in handy.
I want to thank Andres for their comment.
These days there are many quality bicycles, useful, life-changing bicycles, bicycles that can make a person or a family’s mobility just open up in powerful and empowering ways. There are cargo bikes that can help entire families go completely car-free and be happy about it! There are adaptive cycles, electric assist bikes and specialized bikes that can help seniors or folks with mobility challenges take control of their transportation, get out of their homes and live more independent and fulfilling lives. There are freight bikes that can help businesses cut their carbon usage to zero. There are family bikes that can enable a parent to take parenting back from the car and introduce their children to the active, mindful lifestyle that I bet many of us are lucky enough to enjoy.
Many of the people who benefit from the remarkable cargo bike would not be able to make it work on a more standard bike. These bikes are the right tool for their job. And the good ones, the ones that hold up, are more expensive than most of us are used to spending for our bikes. Especially those of us who have easy access to bike culture.
I agree with Biliruben that there are many ways to spend too much on a bike that make little sense to me, seem frivolous or vain and I just wouldn’t do. Sports car-type bike purchases. Those are fine for enthusiasts and athletes who make that their thing, but not for me. But to imply that finding a suitable $200 used bike and refurbishing it yourself is as simple as falling off a log is false. I LOVE used bikes and love teaching folks how to work on bikes but not everyone is going to have the time or capacity to take on that kind of project. For many, what sounds like a fun and empowering process to those of us privileged and lucky enough to have developed these skills and to have access to bike resources, is instead a frustrating and expensive impossibility.
And again, for those seeking to do more than commute, for a mom who needs to drop two kids off at two different schools before getting herself to work and needs to pick up the week’s groceries on the way home; the bikes that are able to do those jobs cost a little bit.
That’s why we’ll be offering information about Verity bicycle loans at G&O Family Cyclery!
Yup. This long-ass comment is basically an argument couched in a plug for my new bike shop. Hiyaaaaa!
No, really, Verity is great. They are not payday lending loansharks. These rates are good and will make getting a high-quality cargo bike possible for more of our customers. And hey, anyone who wants to save before buying a bike outright is still able to do so! I am very excited about bicycle loans!
Ok, a cargo bicycle could be worth financing. First, they can be pretty expensive for the better built, larger, electric assist tricked out ones. Second, if you use the cargo bicycle to replace a car, ie go from 2 cars to 1, or 1 to none, it’s going to be a net win cash flow wise. Especially if you were financing your cars. Thirdly if you are using it to transport small kids, cash flow can be tough because, a) kids are expensive b) as they age, they get bigger and the cargo bike gets less useful to transport them. So there’s a time limit on the need.
Thirdly, I applaud the credit union for not jacking the rates. However only if those borrowers replay will those rates remain low, or else you’ll need a better credit score to get one.
But finance a $1K carbon fiber road machine… probably not a good choice.
I don’t have a dog in this hunt; the bikes I use tend to cost a lot less than the ones Verity proposes to finance, but since what I do all day is deal with various aspects of secured lending, I wanted to confirm SashaBikes’ position on the reason the interest rate would be significantly higher than the cost of a car loan.
Cars are titled, serial numbered and licensed, meaning that even though the value of the car decreases significantly when it leaves the lot, the lender has a reasonable means of making sure that it can, upon default, repossess the vehicle and get a significant portion of the loan back by reselling it. Cars are also insured, and in the event of a casualty to the car, the lender can be repaid the loan.
Bikes, as we know, are not titled or licensed (in my hometown, we did have bike licenses and the police did find and return stolen bikes, but it was a small town and a long time ago; it’s not happening in Seattle today). The value of bikes tends to be at or below most people’s loss deductible on stolen goods. And while the lender can take a security interest in the bike (in fact, it can get one without even making a filing, since the bike is consumer goods and the loan will count as a purchase money security interest), bikes are simply too easily made to disappear for a lender to give any value to that security interest.
That being said, the rate that Verity is offering is a heckuva lot better than the rate on nearly all credit cards. I don’t encourage anyone to take out a loan without a good deal of reflection, but as others have said, there are expensive bikes that can be life-changing for some people and those who can qualify for and readily make the payments on such a loan shouldn’t be driven away by thinking “how come this is so much higher a rate than a car loan or a home loan?”
Sound Credit Union also offers bike loans:
https://www.soundcu.com/personal/personal-loans/bicycle-loans-2/
Hopefully the largest credit union in our area, BECU, will start offering a similar option (hopefully with a better rate!).