Appreciating depreciation: Navigating the used bike minefield

Ben Purvis_BikeSocial
By Ben Purvis

Writing about bikes for 20 years. Published in dozens of titles on five continents. Mildly obsessed with discovering how things work.

 

It’s all too easy to judge the state of motorcycling as a whole by the rise or fall of the number of new bikes registered each year. But that figure is just the tip of a much larger bike sales iceberg.

Most of you know this already; the chances are your own bike is a used one. The number of second-hand bikes finding new owners each year vastly outweighs new bike sales; there were nearly five used bike transactions in 2017 for every new machine to leave a showroom and almost one in every three bikes on the road gets bought and sold on the used market every year.

If you want some real numbers to play with, in 2017 there were 109,604 new motorcycles registered for the first time. But during the same period there were 486,693 changes of ownership on the used market.

The typical machine on UK roads is now well into its teens and Government figures show this figure is rising fast. Bikes are living longer and new ones are getting more expensive, with a knock-on effect on the used market. Back in 2002 and 2003, an average UK motorcycle was 9.4 years old. Now that average age has gone up to 14.1 years, an increase of precisely 50% over the last 15 years.

And even if you’re one of the lucky 20 percent or so to shop brand new, a strong knowledge of the used bike market is an essential tool. Not only is there a strong chance you’ll be trading in your previous bike as part of the deal, or selling it privately beforehand, but the choice of new bike will impact the amount of depreciation it’ll suffer during the years you own it. Machines that cost the same new can have vastly different second-hand values, and it’s the original owners that suck up the vast majority of the depreciation costs.

 

 

The clear lesson is that the more knowledge you have of the used bike market, the better placed you’ll be to make a wise buying decision.

Most of us will spend countless hours researching possible purchases online, browsing through classifieds or boning up on specs, model changes and prices before settling on a bike to buy, but even then making a decision can come down to a coin toss or a gut instinct rather than specific information.

If you’re buying new, the problem is getting the information that no spec sheet will tell you; how much is this expensive purchase going to depreciate in the time you own it? Even if, like most new bike buyers these days, you’re using PCP rather than buying outright, that depreciation prediction is vital – it not only establishes the monthly cost of your PCP payments, but it will define the level of equity you have when the arrangement comes to an end. If, like most PCP buyers, you opt to chop in for a new bike at the end of your contract rather than forking out the large final payment, having chosen a slower-depreciating bike at the start of that deal means its value will be higher, giving you more equity to use as an initial payment on its replacement.

When buying used bikes, the vagaries of depreciation mean the range of options opens up to an insanely wide level. Are you better off spending as much as you can afford on the newest, lowest-mileage machine in your price bracket? Or does the savvy buyer go for something cheaper – perhaps older or less popular – keeping a little more cash back in reserve for repairs or upgrades and hoping that a previous owner has already swallowed the most bitter chunk of the depreciation.

 

2018 Yamaha Tracer 900 GT

A £10,000 bike will typically lose £2000 in the first two years

 

As with so much in modern life, the way the internet stores and disseminates data means there’s an unprecedented amount of information available to help navigate this minefield.

But interpreting it isn’t the simplest of jobs. We spoke to John Dickman and Ian Sidney, the guys behind free internet price guide www.thebikemarket.co.uk to get an idea of how depreciation affects bikes over the first few years of their lives and how much it can differ between different categories and models of bike.

The Bike Market monitors dealer asking prices (because dealers generally ask more consistent prices based on a ‘book’ than private sellers) and maintains an automatically-updated price guide for a vast range of models. By delving into this data it’s possible to see not only how the average bike deprecates over its life but also to compare that average with particular styles, and even specific models, to see how they differ from the norm.

Founder Ian Sidney said: “What we’re looking at for each model is the percentage difference between the dealer prices as they age. Then we can average that across all models to get an average depreciation curve.”

Using this curve it’s possible to start to get an idea of when the most significant depreciation hits. Not surprisingly, the first three to four years show the greatest losses, with depreciation starting to level out once bikes get past that age. Once out of warranty and into annual MOT testing, depreciation starts to level out. At this stage, a bike’s mileage and condition is going to start having a greater impact on its price than age alone.

“Prices go down a lot in the first three years and then start to stabilise,” said Ian, “But the graph really does start to flatten out about halfway down [at five to six years old], and it’s probably around the beginning of that flat bit that would be the best age to buy a bike.”

It’s clearer still when the typical depreciation is converted from percentages into an illustration of an imaginary bike with a £10,000 price when new. Expressed in the amount of money lost to depreciation per year, the curve shows that in the first year you’d lose – on average – £1248. That means a year-old version of the same bike would cost £8752, and in the next 12 months it loses £878, so not only does buying used keep money in your pocket in the first place, but it means you’ll suffer a smaller ongoing depreciation hit.

But it’s at around six years old that depreciation really levels out. A 2012 version of our fictional average bike, which cost £10k new, would sit in a dealer at £5697, and over the next four years would lose around £330-£350 per year in depreciation. So you’d only lose around £1k in four years of ownership; a smaller hit than the original buyer took in the first 12 months alone. Of course, at that age it will almost certainly be a previous generation bike, but that means its value is going to be hit less when another new version is introduced.

Ian said: “For the first three or four years the depreciation is considerable, but when you get to around six years it becomes more palatable and more stable.”

As bikes get older still, the annual depreciation losses shrink even more, but at the same time you’re sure to start racking up additional bills elsewhere in terms of maintenance and repairs.

 

BMW-R1200GS-Side-On

Fancy a used BMW GS? A six year-old model is the best value.

 

While knowing the average rate of depreciation across the bike market as a whole is valuable, what’s more intriguing is how different types of bike vary when compared to the overall trend.

For instance, it’s clear that adventure bikes – still riding the seemingly endless wave of popularity that they’d surfed since the launch of the BMW R1200GS in 2004 – quite closely follow the ‘typical’ depreciation graph. Since they make up a big chunk of the market, that’s not a big surprise; adventure bikes will, to a large extent, be influencing that typical depreciation.  However, there are still small deviations. Notably, after slightly lower than average first-year depreciation, adventure bikes as a whole suffer a bit more than average depreciation over the next three years. That they’re fashionable at least partly explains that initial hit. Good sales mean manufacturers are regularly updating their offerings in that part of the market, to the detriment of the second-hand values of the machines that become ‘old models’.

By the five to six-year-old mark, though, adventure bike depreciation drops well below the average depreciation, and remains there, at least until we get as far back as 2003 and 2002 models – notably bikes launched before the 2004 R1200GS began the current trend – which again see bigger annual drops in value.

Intriguingly, the trend for sports bike depreciation is almost the exact opposite of that of adventure bikes, showing a big first-year hit followed by lower-than-average annual losses over the next three years. Then, at around five years old, sports bike depreciation again moves slightly above average, where it remains.

If you’re looking for a bike that’s going to cost you less in depreciation, The Bike Market’s snapshot shows that naked bikes are a good bet at the moment. The annual depreciation in that section of the market is almost entirely below average, reflecting the durable popularity of unfaired machines. One even less depreciation prone segment – albeit for different reasons – is the cruiser market. An area where technology and modernity is actively shunned rather than seen as a reason to upgrade, cruisers tend to depreciate significantly more slowly than the average motorcycle.

On the other side of the coin we have market sectors that depreciate faster than average. Here we see sports-tourers – which stick fairly closely to average depreciation but generally sit just above the norm – and full-on touring bikes. These full-fat machines tend to suffer particularly vicious losses over the first seven or eight years when compared to the average bike. That’s probably a corollary of their high purchase prices and the big mileages they tend to cover. However, once they hit about eight years old, tourers start to outperform the typical bike on the depreciation front, retaining more of their value each year.

Scooters follow a fairly normal depreciation curve, and noticeably bottom out once they’re about 15 years old, hitting the point where surviving machines – worth only a few hundred quid – barely depreciate at all. The constant demand for L-plated runabouts for city dwellers and teens means there’s always a market for them. However maxi-scooters, expensive when new and needing a full bike licence to ride, suffer more at the hands of depreciation, losing a significantly larger percentage of their value than the average bike each year for most of their lives.

Of course, even narrowing down depreciation trends into types of bike doesn’t give the complete picture. There will still be specific makes and models that buck the depreciation trends that others follow. A reputation for reliability can help a bike’s value, just as a scandal over failures or a lack of dealer or manufacturer support can destroy its worth. And, of course, the fickle finger of fashion can always swing from one model to another. When it does, the simple equation of supply and demand (or oversupply and lack of demand) can have an instant and dramatic impact on values.

But those are risks you take with any purchase that you’re hoping will retain value when the time comes to replace it. By arming yourself with as much information as possible you’re always going to be in the best position to minimise the impact that depreciation has, or at least to be prepared for it.

 

TheBikeMarket Logo

 

How The Bike Market works

While there are various used bike price guides out there, these days most of them are hidden behind a paywall or available only to the trade. Which means for most of us the simplest way to get a handle on the value of bikes we’re looking for is to hunt through classifieds – or eBay, of course – to see how much is being asked.

TheBikeMarket sets out to take some of that legwork away by offering a free price guide based on real-world adverts.

Ian Sidney said: “We monitor tens of thousands of classifieds every day but we try to understand the make and model names and to throw away a lot of the adverts you might not want to see – like spares or repairs. The idea is to show a highly refined list of bikes for sale alongside a price guide that’s regenerated every couple of days.”

It’s also worth pointing out that as bikes age and depreciate their rivals are constantly changing. The models that were considered the competition when new might well lose value at a different rate, so even looking back through old road tests won’t necessarily tell you what alternatives are available for the same money.

Ian said: “We make a good attempt to show other models to consider as well. They’re based on the used prices as well as the competitors to the original bike, and they regenerate along with the price guide, so can change over time.”

 

 

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