Peloton Adding Activation Fee for Customers Buying Used Equipment

Buyers of a used Peloton exercise machine will now have to pay just a bit more than before. Announced in a Q4 fiscal year 2024 shareholder letter, fitness company Peloton is now charging a one-time “used equipment activation fee” for buyers in the U.S. and Canada.

For purchases of a used machine through a sales channel not owned by Peloton or a third-party distribution partner, U.S. customers will pay a $95 activation fee, while Canadian buyers will shell out $125 CAD. However, customers charged the fee will get special deals on Peloton accessories, like shoes, mats, and replacement parts. Buyers of a used Bike or Bike+ also get a “virtual custom fitting.”

“Although these secondary market sales are not from Peloton-owned channels or any of our third-party distribution partners, we want to ensure these new members receive the same high-quality onboarding experience Peloton is known for,” Peloton noted in the letter.

Peloton recognizes the secondary market as a crucial channel for subscriber growth, which increased 16% in the fourth quarter. The churn rate for buyers of pre-owned equipment is also lower than for subscribers who rent machines.

Customers who purchase a secondhand machine are obviously looking to save money. Used Peloton Bikes can easily be found on Facebook Marketplace costing hundreds of dollars less than retail, which can easily reach $1,400 brand new. Peloton’s activation fee will be a way to capture some revenue lost from equipment sales that occur in the secondary market.

“It’s also worth highlighting that this activation fee will be a source of incremental revenue and gross profit for us, helping to support our investments in improving the fitness experience for our members,” said Interim Co-CEO Chris Bruzzo, according to FOX Business.

In May, then-current CEO Barry McCarthy said he was leaving the fitness technology company. At the same time, Peloton announced plans to reduce its workforce by 15%, affecting nearly 400 jobs worldwide.

As of the end of the fourth quarter, Peloton had nearly 3 million customers paying for a connected fitness subscription and 828,000 paid app subscribers. The company reported a total member base of 6.5 million for the quarter.