Outside the Bike: How much value your bike loses each year

Frame and Wheel eBay Store transactions: 2011

Item	Purchase price ($)	Selling price ($)	Change ($)	Years owned	Value per year ($)	Value per year (%)
2009 Colnago EPS 11-Spd Campy Bora Ultra wheels	15,000	5,500	9,500	2	4,750	32
2009 Time RXR Campy 11-speed EC90 Power Tap wheels	10,000	4,500	5,500	3	1,833	18
2010 Parlee TT frame set	3,500	1,200	2,300	2	1,150	33
2011 Specialized S-Works Tarmac SL frame set	3,000	2,125	875	1	875	29
2008 Cervelo P3C Zipp 404 clincher 650c	6,000	2,791	3,209	4	802	13
2010 Parlee Z5 frame set	3,500	2,082	1,418	2	709	20
2010 BH G5 frame set *	3,000	1,225	1,775	2	888	30
2008 Cervelo Soloist Ultegra Mavic Ksyrium wheels	4,000	1,250	2,750	4	688	17
2008 Specialized Epic marathon DT Swiss wheels	3,000	1,405	1,595	3	532	18
2008 Cervelo P2C Ultegra Shimano WH-R500 wheels	3,000	1,900	1,100	4	275	9
2008 Lemond Poprad Cyclocross bicycle *	2,000	720	1,280	5	256	13
Average	5,091	2,245	2,846	3	1,160	23

Frame and Wheel sold the bikes listed above on the Frame and Wheel eBay Store over the past 12 months. All of the auctions were reserve price auctions, with the exception of two offerings: the BH G5 frame set and the Lemond Poprad. The Colnago EPS did not sell for the price asked by the seller; the highest bid was $5,500. The average purchase price is $5,100. The average selling price is $2,200. The average holding period is three years. The data implies that these items lost an average of 23% of their value each year. The fact that a performance bicycle loses so much value so quickly is shocking for some sellers. But this is the nature of the industry: demand is created by brands pushing new models into the market each year, some of which have real innovative improvements to them while others simply have new paint jobs and graphics. Brands obtain their economies of scale only by executing huge production runs in Asia, thus they have a strong incentive to deliver as many units to the distribution network as quickly as possible. Indeed, retailers are buying in October inventory for the following year. This characteristic explains why retailers discount so much at the end of each year, and it is the reason why performance road bikes lose value quickly. 

Frame and Wheel will explore finally a business model that changes the industry from a push model of demand to a pull model of demand in a series of posts titled Outside the Bike. Frame and Wheel has been making oblique references to this idea in posts and in person for over a year now and now has the time to quantify it more thoroughly. Indeed, the question “Would you consider paying for your bicycle like a Netflix subscription” on the Frame and Wheel blog resulted in 5 Yes, 6 No 7 Maybe and 16 Please elaborate in a post responses. So there is interest and Frame and Wheel will oblige.

One client wondered why he should pay $5,000 on a bicycle when it is going to sell for only $1,000 four years later. The reasons are intangible and emotional, but Frame and Wheel’s practical philosophy on purchasing performance road bicycles given the industry’s current model was crystalized in response to the question. Here it is: 1) Do not spend wild amounts on a bike. A very light and fast road racing bike with fine wheels can be had for about $6,000. A good rule of thumb is buy last year’s model. 2) Purchase a standard package that will appeal to the secondary market. Go for main stream brands with a single group. Avoid elaborate customization and group mixing. 3) Hang on to the bike for two years or three years at most. If its any longer than three years, hang on until it falls apart. 4) Concentrate all time, effort and resources on that one bike. The bicycle is losing value wether or not you ride it; might as well enjoy it and extract as much value out of it for yourself as you can. Get rid of the winter bike, the group ride bike the spring weather bike, etc. 5) Take comfort in knowing that the bicycle can be sold for something on eBay when you are done. If you spend $5,000 on a bike and sell it for $1,000 after four years, take the view that you are only spending $4,000 and then ride the bicycle like mad.