Want to cut your rent in half? There’s a new, easy way to do that!
Just pay the second half in two weeks.
Sound crazy? Many landlords are offering this option now, just the latest incursion of buy now, pay later into consumers’ lives.
If you haven’t yet encountered the word precarity, that might be the most perfect definition I’ve yet heard. Imagine being so financially insecure that a two-week reprieve on rent means so much. Well, you don’t have to imagine it, because if you aren’t living this way, it’s likely your neighbors are.
As Wall Street continues to flirt with new highs, you’ll hear commentators talk often about two “pillars” of economic strength — artificial intelligence and the resilience of the American consumer. I’ll leave the AI bubble for another day, but today I’m going to talk about the “resilience” bubble.
Let’s talk about the new car market for a moment. Fully one in five new car loans come with $1,000-plus monthly payments now…and 20% of new car loans have 84-month-plus terms. In an economy where splitting rent payments is a lifeline, $1,000-a-month car payments are extraordinary. So are 7-year-long car loans. I know, I know, people can buy used cars, but that’s not the bargain it once was. The average used car price was $29,600 in December 2025, so people are taking loans out to buy them, too. And the average interest rate on used cars is north of 11%, according to Experian. Rock, hard place. You have to drive, and you need a reliable car to keep that job and gets the kids to school, right?
In other words, the car market is being propped up by borrowing. Expensive borrowing.
As is the retail market. The explosion of the buy now, pay later marketplace is a screeching canary in a coal mine that something isn’t right. I’ve been asked a lot about BNPL lately – by NPR’s Planet Money, and by Scholastic – and when I went for a refresher on the industry, the numbers shocked me.
Just in case you’ve been living under a virtual rock and haven’t bought anything online recently, many websites (including Amazon) allow customers to spread purchases over four payments, in theory with no interest penalty. This turns a $500 pair of boots into a $125 pair of boots (today) and….well, some debt. The psychology here is obvious, and it works. BNPL exploded during the pandemic, when people were stuck at home with nothing else to do but shop. The number of BNPL loans in the United States grew more than tenfold from 16.8 million to 180 million from 2019 to 2021 — from $2 billion to $24.2 billion in volume. Growth has surged since then. Today, about 90 million Americans have used a buy now, pay later loan. And the average user took out six BNPL loans last year, according to the Consumer Financial Protection Bureau.
And now, for the dark side. While, in theory, these are no-interest loans, 41% of consumers have made late payments and been liable for whatever fee their lender charges – up from 34% a y year ago, according to Lending Tree. But even darker: Consumers are using BNPL to buy essentials like groceries or, as we’ve seen, rent. Some 25% told Lending Tree they’d bought groceries using BNPL, up from 14% a year ago.
I’m not morally opposed to these kinds of “layaway” arrangements. They might make sense for a young person who’s just moved and needs to outfit a new apartment, for example. Or to pay for a surprise, expensive auto repair. Some folks call that a “bridge” loan, a one-time backstop for an extreme situation.
But instead of a bridge, millions of Americans are using financial instruments like this as a crutch. The number of consumers who hold multiple BNPL loans from multiple providers is also soaring, and that’s where things go sideways, fast. It’s much easier to miss payments and incur fees, and of course, that’s the ultimate robbing Peter to pay Paul arrangement.
The BNPL industry, with help for the current Consumer Financial Protection Bureau, recently shared data showing fairly low default rates on these loans – fewer than 2 percent were charged off or uncollectible in 2023, the report says. About 4% of borrowers paid a late fee. The data lacks context, however. This research from Stanford shows consumers who take out these loans suffer higher late payment rates across their financial lives – “rapid increases in overdraft charges and credit card interest and fees,” for example. This might be because BNPL loans are often tied to checking accounts with auto-draft payments. BNPL gets paid first, but bounced checks follow.
There are other downsides to BNPL, too. In general, paying off these loans on time doesn’t help a consumers’ credit score – so they aren’t a stepping stone to cheaper credit. And unlike credit cards, these kinds of non-standard lending programs enjoy few federal consumer protections.
BNPL appeals mostly to people who don’t have credit cards or haven’t otherwise established credit yet – typical for younger consumers. Tempting offers in bright colors lure shoppers. There is a massive generation gap in BNPL loans – while about half of Gen Z’rs and Millennials have used BNPL, fewer than 1 in 5 of those over 62 have done so.
You might think you are too smart to fall for all this, but I’m here to warn you – even if you’d never take out a BNPL, I fear we will all pay a price. Since BNPL loans aren’t generally reported to credit bureaus, lenders have no way of knowing how many BNPL loans an individual consumer has. And writ large, lenders can’t be sure borrowers of traditional loans – like auto loans or mortgages – don’t have some kind of BNPL debt hidden away in their financial lives. Bloomberg last year called this Phantom Debt that Wall Street can’t track.
To restate the thesis: In a world where renters are “splitting” their monthly payments in two just to get buy, no one should feel comfortable – let alone bet the farm, or the economy – on the resilience of the American consumer. We can’t go on living in a state of permanent precarity forever.
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