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TECH NEWS
Eddie Merckx EMX-5 from BikeLeasingCompany.comIt had to happen: leasing company launches 24 month contracts on bikes over £1,250
A company based in Surrey and founded by a cyclist who was frustrated by justifying his new expensive bike to the family is offering a leasing service for bikes, wheels or custom builds.
Paul Mander-O’Beirne was trying to buy a £3,600 bike when it became apparent that coming up with the cash wasn't going to happen and conversations with friends only confirmed his suspicion, "that cyclists all over want to buy nice bikes and they can afford a monthly payment but not all of the the cash up front."
His solution was leasing which has the benefit of keeping monthly repayments even lower than an interest free loan because the lease value you make the repayments on is calculated minus the secondhand value of the bike at the end of the lease period - Mander-O'Beirne calculates that at 30 per cent of the original RRP. The other potential advantage of a lease is that at the end of it you can hand your bike back and get another new bike on a new lease without the hassle of selling your old bike first.
Describing his Bike Leasing Company as an "innovative option for cyclists who love expensive bikes," Mander-O’Beirne says they will lease you a mountain, road or triathlon bike over two years while you, as he puts it, "enjoy all the benefits of ownership whilst avoiding the hassles of ownership."
Of course, car buyers will be familiar with the leasing options available although with typically larger amounts of money involved car leases tend to run over longer periods with bigger monthly payments. But the principle is the same; in simple numbers you pay a deposit and then 24 monthly instalments at the end of which you will have the option to hand the bike back, renew for a further year or buy it outright.
As an illustration; for a 2012 Merida bike with a retail price of £2,500 bike you would need to pay a 25 per cent deposit broken down into three initial payments of £208.34 - the first of which is paid upon placing an order, the second 5 days before delivery and the third up to 30 days after delivery. Once you have taken delivery, you commence with the monthly lease payments, in this case 24 monthly payments of £47.00. We make that a total £1,751.84 you're paying, which is £748.15 or 30% less than the retail price.
The Bike Leasing Company's case to you as a potential customer, apart from not having to come up with all the money in one go for a nice, new shiny bicycle, is that the 30% value that you haven't had to pay by the end might well be all the bike is worth anyway after two years. So you've kept it in your wallet without the aggravation of having to sell the bike to recoup that value plus the payments you have made are calculated on the value of the bike minus that 30 per cent residual value sor are lower than the interest free option.
And if you do decide to keep the bike, you can buy it for 35% of the original retail, which in the case of our example would be £875 meaning you've paid a total of £2,626.84 or £126.84 extra equating to 5.9%. We're not sure if that's an APR exactly but that's what the finance is costing you in actuality and the bike is yours at the end of two years.
Potential pitfalls? You're responsible for the bike which means if it's stolen you're still paying for it although Bike Leasing Company say they deduct the payments you've already made. So insure it properly, eh?
Also, like any finance based on RRP, you need to keep in mind what price you might get by shopping around and fronting up the money but that's only an option if you actually have the ready cash.
Finally, as you're renting from Bike Leasing Company as, in effect, your retailer, you will be limited to bikes and products that they have arrangements to supply. So far, they're signed up with De Rosa, Merida, Eddy Merckx, Felt, Argon 18, Kinesis, and Cielo on the road bike side, mountain bikers can choose from Yeti, Ellsworth, Kinesis, DMR, Intense, Devinci, Merida, Bionicon, Atomlab, Pivot, Commencal and Transition, and you can lease components from Enve and Fulcrum wheelsets as well as Marzocchi and Manitou forks if you're into mountain bikes, and, according to their Paul Mander-O’Beirne, the company is in discussions to add further brands all the time.
The self-employed get a tax, expenses offset and VAT benefit as the bikes are on a lease, not formally a Hire Purchase which presumably also opens up an opportunity for employers to operate their own leased bicycle fleet.
Bikes are delivered either assembled and ready-to-ride by courier, delivered and set up at home for you by a mobile mechanic or the same but with a service contract for the two years for which the costs are £45, £85 or £180 respectively.
Details: BikeLeasingCompany.com
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Bike Leasing Co posted this prototype website design on twitter: http://www.bikeleasingcompany.co.uk/get-a-quote
What do you think?
i had a look at the site and it really is piss poor. its good to see new concepts coming to the market place but i'm not so sure of this one. Good luck with it though.
Hello,
We acknowledge that there are issues with the website.
I would really welcome a few of you being involved in its development if you are willing to.
We are committed to listening to riders and would be grateful if you got in touch to let us know if you're willing to participate in reviewing and critiquing a new website that we develop.
An interesting idea this.
I'm struggling to see that it really makes money. You buy the bike at cost. You lease out the bike for two years, which brings you in 70% of RRP over 2 years. Then you've got a 2nd hand bike (condition: used) which is hopefully worth 30% of RRP and which may or may not be saleable.
I don't know what the margin between cost and RRP is, but I'm hearing a slight SQUEEEEK of cashflow being a bit of an issue. Anyway, that's your business not mine, and as ever I admire the brass balls of people who actually run their own businesses.
Simple business rule:- rent what depreciates and buy what appreciates.
Only problem to that is that bikes tend to be for pleasure so we don't have our business heads on when we purchase. Nice concept. Will it work? Yes I think so, website is piss poor thou contact a company like clever4 to sort your website out. In the mean time I'm continuing saving for my time machine TT at just short of 9k so far I have a tenner in the pot.
More debt, brilliant, just what most people in this country need.
...or an innovative business idea, which *is* exactly what the country needs more
I think this is a reasonable idea. I got my new bike a couple of months ago, but I will consider this when I come round to upgrade time (and I don't fancy broaching with the missus the idea of my dropping £3-4k on some Eddy Merckx beauty!) I appreciate there is constructive criticism re insurance etc, but I think these guys need to be applauded for bringing new a new option to the market, even if it isn't for you.
Hi Paul
you seem to brush over the repair side of things, on your website you state that you will supply parts, who is then meant to fit the parts?
Hi tas57,
Thank you for highlighting this.
You can choose who fits the part for you. You can do it yourself, arrange for one of our mechanics to visit you, or take it to your local bike shop to be fitted.
If it is a warranty repair, we shall arrange everything for you and sort everything out.
I hope that this answers your question.
Hi Paul. I congratulate you on a noble idea which appears to be sensible for both parties. I think some people are missing the whole point of your idea and that's that the customer may not be able to afford a high end bike. You present another option that's all.
What might tip the balance for some people though is insurance. I assume you'd expect the bike to be insured? Given the price of this on higher end bikes, it's often prohibitive against the cost of the bike and would detract from the lease value.
Hello ffrig1,
Thank you for your support.
I am speaking to 2 insurance companies about offering a very competitive rate.
As we're doing this somewhat differently, we can find a way to insure the bike so that the premium reflects the level of risk as the lease progresses. AS your liability reduces as each lease payment is made, the premiums can be much lower.
We'll let you know when we have it all sorted.
This insurance can be taken out at any time during the lease.
By the way, as things stand you are not obliged to insure the bike. Everything is explained here:
http://bikeleasingcompany.com/all-about-leasing/insurance-breakages-maintenance/
It's a good idea but i'm struggling to navigate the website, it says choose your brand and select your dream bike. When i click on a brand it just brings up the logo. Am i being dumb?
Hi Cervelo 12,
First of all I apologise that you are experiencing difficulties. In the words of my ex-girlfriends - it's not you it's me
We are adding new brands all the time and it is surprisingly time consuming to add the bikes to the website, so there can be a delay. I am sorry.
If you know what you are looking for, just get in touch via the contact us page or the quote request page and I'll call you back to dicuss.
If you would like to just have a chat, feel free to click on the Lets Talk Bikes button, leave your details and I'll call you back again.
Finally, the other option would be to call me directly on 020 3239 5883. If I am out of the office, leave a message and I shall call you straight back.
If you have to find someone who does 0% finance or will take cyclescheme voucher as full or part payment. I bought my bike 3 years ago through part cyclescheme part cash. I researched it for about a year before I got it and I changed/upgraded the parts to get exactly what I wanted. 3 years on it still turns my head when I walk past it in the spare room...you won't take your purchase decision likely.
I leased a car once and when it cam to handing it back they scrutinised the condition in minute detail and whilst I got a good deal on the car to attract me to the scheme you can't get away that you are lining someone elses pockets with a yield on your monthly payments and a margin on your bike at the contract end. What are you supposed to do at the end if you want to keep the bike but can't afford the final payment - get a loan ?! er yes. Rather defeats the object doesn't it.
Hello Martbo23,
Thank you for your comments:
Our customers can upgrade any component of the bike at any point during the lease. They can choose to either add this onto the lease or buy the upgraded part from us at trade price. It makes it a much more cost effectiove way to upgrade a bike.
There is none of that nonsense with us. We just ask that it comes back in a saleable condition i.e. not broken. Even if it is broken there is no drama since anything can be replaced at trade prices. If anything expensive breaks it's probably covered under warranty anyway.
This is detailed in our terms and conditions. We are more interested in someone coming back to us after 2 years and taking out a new lease rather than squabbling over the condition of the bike.
The car you mentioned was probably on a lease purchase scheme rather than a straight lease. From your description it sounds like the future value of the car was important in the subsequent deal you arranged. This is not the case with our approach. We just ask that you take care of the bike like it was your own. You are not penalised in any way for enjoying it to the full.
We expect the bikes to come back having been ridden to the full.
This is a somewhat perplexing comment. I think what you're saying is that a business is making a profit. I presume that you accept that a manufacturer, distributor and retailer makes a margin when you buy a bike. The only difference in leasing is that we take the place of the retailer. A retailer profits from you at point of sale. We have to wait quite some time for the equation to become profitable. The whole business has been set up to give you an equitable deal:)
Quite the contrary. If you had bought the bike outright you would most likely have had to take out a loan to pay for the RRP anyway. After 2 years, you only need to find a way to pay for 35% of the original RRP. This seems like a reasonable way to do it to me if your preferred choice is ownership.
This needs to be weighed up against paying only 10-15% of RRP as the initial rental on a brand new bike on a new lease.
So in summary try and get a 0% finance deal...
If you're buying on 0% finance you're still giving someone a margin cos they're buying trade and selling it at retail price, just like Mr Bike Lease man, don't see the problem there it's not as if the buyer is being particularly ripped off. Plus if you want to get any money back on the bike at the end of a 0% deal you're reliant on getting a good second hand price which is by no means a given.
If at the end you want to buy the bike but can't afford the payment you have two choices either give it back and lease a new bike, or put away the difference each month between what you would have paid back on an interest free loan and the payments you're making on this one and you should have the cash or most of it.
My downer on this deal would be if it was all going to get picky when you handed the bike back that doesn't sound like the case here cos I'm guessing that he can still turn a margin on the trade price so any money made on the bike handed back at the end of the contract is in effect bunce… as we say in the senior common room.
I'm all for new and creative ways of getting me on a new bike. My only question is supply, some of these top end manufacturers have long waiting lists don't they, what happens if Mr De Rosa is taking time over his art, or Mr Kinesis doesn't have any more of those tasty GF Ti frames?
Hello Denzil,
We have that base covered as well. For 8.34% of RRP you can reserve your bike for 2012 and wait up to 6 months to take delivery of it.
Alternatively, it's pretty much the same as everyone else. When they've gone, they've gone - until the next shipment arrives in the country
Although it's not something I would use, I can see the point of this and at least it's a more upfront way of acquiring an expensive bike than working the C2W scheme to subsidise your hobby, which plenty of people do. Good luck with it.
On a side note of constructive criticism, I concur with zanf - the website does not say 'premium brand' - it's like something from 1998, information overload, CAPITAL LETTERS, inconsistent layout, lack of a conspicuous brand name / logo & an ugly colourscheme (green and burgundy??)
I half expected to see a banner ad enticing me to send my unwanted carbon fibre in by freepost for an instant CA$H reward!
If you want it then save up for it. It's not difficult and more rewarding. I'd rather wait and know it's all mine from the moment I wheel it out of the shop door. Delayed gratification is always sweeter.
Finding the money is easier than a lot of people will have you believe. Spend less on your car, which depreciates faster than almost anything (most people buying a £3k bike are likely to have a nice car too).
Hello, I'm Paul, the owner of Bike Leasing Company. Thank you for your comments and observations.
I'd like to try and answer some of the queries and observations being discussed here:
Hello Simon E. I completely agree that you should only get what you can afford.
Thank you for your feedback and thank you for illustrating one of the main benefits of leasing:
If you have saved up to buy a bike, you can lease one and know that a significant portion of that budget can sit in a savings account just in case life throws you a curve ball in the future
Also, the monthly payments are so much lower than an equivalent 0% finance option, so your household has much more money at its disposal month to month.
Should life throw a really bad curve ball, and a customer lost their income due to unemployment, injury or illness, then the lease can be cancelled early. There are no arduous tie-ins. This is also applicable if the same situation affects another breadwinner in the home. After all, it makes no sense to pay for leasing a bike if you are too injured to ride, or your family can no longer afford the payments.
Simon E, when you have saved up and gone into a shop and bought your bike, you may have heard 2 almighty OOPHS followed by a slow wheeze:)
The first OOMPH was when you handed over your money and your bike had already reduced in value by 30% or so.
The second OOMPH was when you walked out the door and it reduced in value by a further 15-20% or so
The OOPHS were coming from the sound of your wallet being punched.
The wheeze is coming from the slow drain of money from your wallet as your bike continues to devalue whilst you're riding it
I acknowledge that it is a lovely feeling to own something very bling like a lovely bike.
However, how long does that feeling remain? Is it still there after 12-18 months, or has it been replaced by the pleasurable feeling of actually riding the bike?
Leasing gives you the enjoyment of riding the bike together with another pleasurable feeling. One where you can feel happy that money is staying in your pocket for much longer.
Again, I agree with you.
I don't know about others, but whenever I am trying to save up for something I want, an unexpected bill comes along, closely followed by another, making it even more difficult to save up.
These bills often come along straight after I have spent a lot of money. I usually find myself wishing that I had that money available to me. That's another way that I believe leasing helps.
Best of luck with your own saving up endeavours, however.
If my household has that much money at its disposal I can put it into a savings pot for a new bike. Savings rates are stupidly low these days anyway. And how can your monthly payments be better than 0%?
I can't say I did. Depreciation is a fact of life if you buy anything new. If I was really bothered by it I'd buy secondhand. My end-of-season Giant was significantly below RRP and it's not worth much now anyway. If I pay full price for my next bike I won't mind as I know it's what I really want and I will get lots of enjoyment from it.
Unfortunate things can happen to anyone but I'd prefer it happened when I don't have an unnecessary debt hanging over me as well.
Thanks but no need for luck, I've managed my finances this way for 20 years. When I have finally bought the item I've waited for (photography gear, hifi, several smart motorbikes) the pleasure is that much greater. I have always earned less than most people but I am careful with it and try not to waste money. It's a 'skill' anyone can learn if they want to.
Good idea, shame about the website.
Yes - hopefully they'll plough some of the profits back into a web designer...
Ergon 18? Must check that brand out...
I hear it's quite *argonomic*
Yeah they make super high end grips
A bit of a slip between the 'E' and the 'A' it was late. Argon 18 now.