Before I can answer your questions, what are your price points like?

Depends on the economics, insurance requirements, buyout options, etc. I'd consider it if it made sense.

Probably wouldn't buy a leased bike, due to warranty and provenance issues.

Sounds like a neat idea I would be open to looking at as a consumer. I'm kind of like you in that after a year or two I start getting antsy about getting a new bike, although when that happens I go straight to the pre-owned market.

Price point gets to some of the business modeling that I don't want to share openly, but price points would depend on things like credit rating and sales price of the bike, and perhaps term of the lease although I can't see a lease beyond 1 year honestly.

But broadly, think baseline 20% down plus sales tax amounts, then 80% of the remaining 80% over a year with a residual value of 20% of original retail at the end of the lease. Credit risk goes over the top of this, so a really risky lease might have a higher down payment (maybe 40%) and/or higher monthly payments but never to exceed total cost of the item over one year. The investment return (for the business) comes at the end of the lease term, not from the lease.

Residuals on bikes are tricky, especially with a specialty niche like tri, and that also affects (effects?) price point of the lease.

Still thinking...

Notionally, I like the idea, but the devil's in the details. What are the lease rates? How much of a discount for the purchase of a 1yr old bike (50% is great)? Any warranty? Frames or full bikes? How much customization of setup is allowed? Etc.

---

-Andrew

Sorry you lost me with Provenance Issues? can you explain? Thanks!

Indeed. All questions on my business case that I have right now.

Lease rates are very soft but answered in another post.

For warranty (this was brought up in another response also) I can't see any manufacturer offering a warranty on a used bike (which it would be). It would be like buying any other used bike except there might be a way to "refurbish" wear items like tires and chain, etc. to ensure some base level of road-worthiness. Something like a 14 day return period might help also.

Sale price of the previously leased bike (pre-owned bike - Bwahhahaha!) would have to be seriously managed, as that is where the true profit lies. To low and you lose revenue, to high and you have ridiculous carrying costs.

Frames, full bike, I think comes down to what buyers want. There is a hassle factor for a lessee that gets a frame then has to get it built up just to tear it down a year later. Plus if you can "get what you want" - i.e. high end bike, up front, then why customize beyond minor items like wheels, seat, pedals, etc.

One piece I would really like to include is an initial fitting as part of the lease. That puts the lessee in a bike shop early in the process with opportunity to generate revenue for the LBS through collateral marketing. Bikes are 35% margin, bike "stuff" is usually closer to 50%.

I would have no idea where the bike has been, how's it's been treated, etc.

Yea, I am out.

I am not sure you are using the term "lease" correctly, it sounds like you are doing a rent-to-own. In a lease you do not pay the full retail value of the car at the end of the term; your calculations would be 20% down, 60% for the term, option to buy based on residual value. That is what makes leasing attractive, I can turn the thing back at the end and wash my hands, or I can purchase it outright with favorable terms to me on a product I have already been using. If I turn it in, even though I don't have equity (not that bikes hold equity) I didn't pay for the whole thing in the first place and I have not inherited the risk associated with purchase - namely that I have a piece of equipment I may not want to own anymore which may be challenging to sell on the used market.

If you can't make this cheaper than the rates people get through Trek or Specialized financing don't bother. I think rentals or rent-to-owns are actually great ideas for products like this. A lease...sounds like a losing strategy.

Ah, I understand. I assume you would have the same issues with a used bike purchase as well if you could not get assurances from the previous owner of the bike? I see a lot of times on here that buyers of used equipment want to know mileage, etc. of equipment. I'm the same way up to a point, and have been burned a few times on used equipment purchases. I like the idea of a warranty of some sort on a used bike, just not sure how that would play out in real life. Good input, thanks.

Guessing it was the price point that pushed you away, so devil's advocate, what would be a good price point where you would consider it? What price point bike do you ride now?

Thanks!

No based on your example it is a lease. The residual of the bike would be 20% after the lease (lessee pays 80% over one year, in line with your car example) with no requirement to pay the residual at the end of the lease term - clean hands if you will. The sale of the bike comes to another (third) party after the term of the lease has expired and the bike is returned, it is mainly a way to dispose of the asset (bike) after the lease so I don't end up with a warehouse full of slightly used bikes. :) Obviously the lessee has the option to purchase the bike at the end of the lease if they want to, cost for that is still TBD.

Finance cost is a bit of a wild card, there are a lot of proprietary finance calculations out there to get folks attractive rates. Add in the end of year specials, model promotions, etc. and there are options to purchase that might make a lease less attractive. Also would not work for "buy and hold" type folks who see a bike as a capital investment and not a depreciating asset. So it is certainly not for everyone.

Thanks for the feedback!