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The Truth Behind Buying a Brand-New Bike

Oct 15, 2017 8:00:00 AM / by Logan Reed

Want to buy a new motorcycle? Keep this in mind.

I’m just going to say it: You are better off buying used.Here’s a familiar scenario. You see a brand-spankin' new motorcycle that you love, and the price seems great. You go to the dealership, and everything goes smoothly. The salesperson even offers to throw in some upgrades for free, and you’re getting a discount on the sale price. You excitedly accept. Hell, 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? The cost you had in mind just increased two thousand dollars. Why?

 

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Fees, fees, fees.

Taxes and all sorts of dealership fees are added when you buy a new bike: freight, license, documentation, registration, and service, 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. 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.  

An example of some motorcycle dealership fees you can expect to find are: doc fees which can range anywhere from $1 to $999 depending on the state where the dealership is located; destination charges that are determined by the value of the bike, almost like a tax; freight, setup fees, and temp tags which are a state-specific fee, and many more.

You spend more money when you buy a motorcycle from a dealer
 
Keystone Markups (Warning: Math ahead) 

There’s something in the biz called a keystone markup. The actual definition is described as this:

“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.

It's explained easily enough. Tom has to make money somewhere, right? That’s understandable. It’s basic economics! Most of us just grit our teeth and deal with it; after all, you're getting a brand new bike. What really sucks is how much the brand new bike depreciates as soon as it’s off the lot and there's no way around it.


 

Instant Depreciation

A lot 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 200 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 salvage value of your motorcycle. This is done by taking 15 percent of the Kelley Blue Book value.

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.

 

Now, here's good news. RumbleOn has used motorcycles for sale and we can ship right to your door!

You can actually buy stuff that’s awesome and fancy, and not spend an arm and a leg on meaningless fees. Meaning, why not get a practically brand new bike for a discounted, pre-owned price? Browse our inventory of used motorcycles and powersports for sale and get a 3-Day or 150-mile Money Back Guarantee, a 90-Day Mechanical Guarantee, third-party full condition report and affordable shipping!

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Topics: Articles, Motorcycles, The Brain Bucket

Logan Reed

Written by Logan Reed

Rider. Writer. Harley life-r. Follow my coverage of everything from tips for motorcycle riders, to motorcycle humor, and everything else to do with living life on two wheels.

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