Why are some many riders gravitating towards used motorcycles instead of new? Read about it here.
Whether you're a beginner trying to buy a motorcycle for the first time, or a seasoned rider looking to invest in something completely different, who may still find yourself asking "how much does a motorcycle cost?" The solution is easy, buy used motorcycles. Here's why.
Think about this familiar scenario: you fall in love with a brand-spankin' new motorcycle and the price is almost too good to be true. Everything goes smoothly at the dealership—the salesperson even offers to throw in some upgrades for free, and you’re getting a discount on the sale price! You excitedly accept. Heck, you’re about to buy a new motorcycle and save some money!
Then comes the surprise. Doc fees? Set up? Destination charges? What is this? And just like that, the cost you had in mind increased two thousand dollars. The question is, why does this happen when you buy motorcycles new?
Fees, fees, fees.
Taxes and all sorts of dealership fees are added when you buy a new bike: freight, license, documentation, registration, service—just to name a few. There's no way around it, that's just business! Sometimes these range from a total of $200 to $2,000 depending on specifics, and, sometimes, a dealership will charge little or no fees but are much more firm about earning MSRP. A lot depends on your negotiation skills, your relationship with the dealership, and your market.
Examples of some motorcycle dealership fees you can expect to find include 1) doc fees which can range anywhere from $1 to $999 depending on the state where the dealership is located; 2) destination charges that are determined by the value of the bike, almost like a tax; 3) freight, setup fees, and temp tags, which are a state-specific fee, and many more.
Keystone Markups (Warning: Math ahead)
Familiar with a ‘keystone markup’? Here’s the actual definition:
“Gross margin that is 100 percent of the cost price or 50 percent of the sale price. Any item selling at twice the price that it was bought or produced is said to have a keystone markup.”
As an example:
Tom buys the ingredients to make cookies for $10. To find the keystone markup, you would multiply the cost of the ingredients ($10) by 1. Therefore, the keystone markup is $10. Add this amount to the original cost, and you get a selling price of $20.
Tom has to make money somewhere, right? That’s understandable (and, to be fair, it’s basic economics). And while most of us just grit our teeth and deal with it, what really sucks is how much the brand new bike depreciates as soon as it’s off the lot. No way around that, folks, and yet another reason it’s best to buy used motorcycles because most of their depreciation has already occurred. So, in the end, all you really end up losing out of pocket is the actual cost of the bike.
Like a new car purchase, the second you buy a new motorcycle and drive off into the sunset, it has already depreciated 15-30%, on average.
When you buy pre-owned, on the other hand, a quality pre-owned motorcycle has already instantly depreciated when it was purchased new. Whether it has two miles or two hundred miles on it, a used motorcycle is solid on its value and does not depreciate the moment you ride away.
Does such crazy fast depreciation even make the markups worth it?
How to Calculate Annual Motorcycle Depreciation Value
Here is a relatively easy way to calculate the approximate depreciation of your motorcycle using the straight-line depreciation method. Keep in mind, though, that insurance companies and motorcycle dealerships can calculate depreciation a bit differently, so these numbers shouldn’t be considered fail-proof.
1) Determine the value of your motorcycle.
2) Calculate the lifespan of the motorcycle, or how long it could be considered useful. A typical lifespan is eight years, so subtract the number of years since its production from 8.
Example: In 2017, a motorcycle made in 2015 would become: 8-2 = 6
3) Now, plug these values into this handy-dandy formula:
Cost of the motorcycle - Salvage value / Estimated useful life = Depreciation value per year
Example: $12,000 - $1,800 / 6 = $1,700 per year
Other items to take into account are any personal mods and aftermarket customization tend to decrease the value of the motorcycle even more. The depreciation is also affected by the number of miles put on, and it's reasons like these that new bike values drop rapidly year over year.
While, yeah, it sucks. Remember how “new” bikes become “used” immediately, and the pre-owned market becomes flooded. The value of used and older bikes is based more on the condition, so expenses eventually break even for used motorcycles.
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