Remember the subprime mortgage crisis? It wasn’t that long ago, but then again it was before the invention of Tinder, so it probably seems like ancient history. A vastly oversimplified explanation is that big banks loaned exorbitant amounts of money to people so that they could buy houses that they couldn’t really afford. Then, when those people failed to repay the money, the bubble burst and the entire global economy went to crap.
The sneaker market has far less influence over the economy than home mortgages, but a bubble effect may still be at play. Like the housing market in the aughts, today the most hyped kicks get snapped up almost instantly and then are flipped minutes later for huge markups on the secondary resale market. Now the similarities between the sneaker bubble and the housing bubble are even greater with sneaker consignment store Flight Club’s introduction of easy-to-qualify-for financing.
Flight Club, which has outposts in New York and Los Angeles as well as a web store, recently partnered with Affirm to allow sneakerheads to pay off their purchases in 3, 6, and 12-month installments. The APR ranges from 10%-30% based on the length of the loan. All a user needs to apply for the credit is to be at least 18 years old with a valid home address and mobile phone number.
Sneaker blog Sole Collector ran the numbers on a few models to see what a user would end up paying over time. The Adidas Yeezy Boost 350 “Black” which just came out had a retail price of $200. At Flight Club, the shoes are selling for $1,000. If someone wanted to finance them, the total he would end up spending would be between $1,055.04 and $1,169.88.
On the one hand, It’s easy to say that $169 doesn’t seem like much for the privilege of having a year to pay off a loan. But odds are that someone who doesn’t have $1,000 to pay upfront is not the person who should be spending $1,169 on shoes over a year. This is exactly how people end up in credit trouble.
It is also unclear what happens if someone is unable to make payments on the shoes. Affirm performs a credit check when purchases are made and failure to pay would obviously hurt your credit score. But would Flight Club and/or Affirm then repossess your kicks? And what would happen if they tried to do it and you had already re-sold them to someone else? It’s easy to see things getting messy in a hurry. So for now, we’re going to stick to buying sneakers the old fashioned way, with cash, or the new old fashioned way, with PayPal.