The economics of owning a Harley
I have heard time after time about how my Japanese motorcycle is not worth the resale value of what a Milwaukee built machine is. I concede that this is true but over the last years I have also been told to me that a Harley Davidson is an investment. I am writing this editorial to answer some of the questions I have about this rather obvious myth.
First, let us first define investment and what an investment is supposed to do for you, and how this term might apply to a motorcycle.
An investment is, to put it simply, a purchase made for the purpose of making money or financial gain in return.
So if an investment is made for financial gain then one of the basic premises is that you should buy the investment at the lowest price possible so that it can start being profitable as soon as you purchase it. Also it would make good financial sense that if you were buying for the purpose of making money at a later date or enjoying a return on your investment that maintenance and upkeep would be two areas that you would try to keep to a minimum if not avoid outright. Any extra cost that is associated with maintaining the investment means that the investment will not be so appealing.
I think these principals will be sound
once I have explained them. Lets explore them:
MSRP of a Harley Davidson Superglide $13,499.00
Average selling cost of a Harley Davidson Superglide $17,000.00
Making the negative cost of buying the investment $ -3,501.00 (over MSRP, pure dealer markup)
Already we are $3501.00 behind on our investment. This isn’t looking good.
But those who believe that a Harley is an investment will say that they can turn
around and sell the bike today or anytime for $17,000 dollars, thus they are not
out any money and the bike is a good ‘investment.’ Now the whole point of an
investment is to make money, not just break even, so the ‘investment’ theory
already fails here.
Ok let’s look at the cost built into the purchase that the buyer cannot recover.
Sales tax. Lets make that simple. Figure 8% $1,360.00
DMV License fees $ 375.00
Set up and delivery charge $ 300.00
For a total amount of
Combine that to the amount of advertising the bike for a week at $45.00 and we have a sum of $2,080.00
We now can say you are negative two thousand dollars if you sell it immediately, however, I think we have another problem, lets add the original negative investment of $3,501.00 for a new loss of $5,581.00 on your "investment." That's a 41.34% loss / cost to invest in a Harley Davidson! Not good. Let me put it another way, if someone came up to you and asked you if you wanted to make an investment, and it would cost you thirty dollars but you would only get twenty dollars back in the end (if you were lucky), then I wonder how many of you would actually buy into that ‘investment.’ Probably a lot of you, I imagine. The first clue as to if something is an "investment" or not is if it makes a return.
Now lets look at how we intelligently buy
an investment. Cash. But do you have twenty thousand dollars just laying around
for this purchase?
Probably not so we will finance.
We are just getting started it seems and we are $5,581.00 dollars down on the investment and we haven’t even managed a way to pay for it yet. Nevertheless, we must have a Harley Davidson so lets go and finance this beast of a fine investment.
How does 9 percent interest sound with 10 percent down?
Purchase price $17,000.00
Incidentals (tag, setup, etc.) $ 2,035.00
Minus down payment $ 1,900.00
Total amount financed $17,135.00
Payments on that for 5 years at 9 percent (60 payments) would come to $21,341.67. Are you following the math yet? Is it starting to make sense? Now we have a total of $23,241.67 invested into a $13,499.00 bike. Our investment has almost cost us double, and it hasn’t even made a penny back for us yet. Some investment.
So, we sign the papers and we buy the American dream and we ride it to our first meet with the guys, Wow doesn’t that Bike your friend has look good with all that custom chrome and Billet wheels. Not to mention he has $2500 in Screaming Eagle parts so it has the POWER you thought you were buying but didn’t get. So let’s pull out a credit card and get shopping.
Billet wheels $2,500.00
Chrome Accessories $3,000.00
Screaming Eagle parts for motor and style $2,500.00
Let’s not forget to mention credit card interest. I’ll make this simple. I will charge 14% twice representing 2 years of payments $1,120.00 and we add this to the above total for a new total of $9,120.00
Add in bike total and we have $30,467.67. That’s quite a bit of money for a bike that supposedly has a MSRP of $13,499.00. Or we can say we have invested 226% of its retail price just to get into it.
Now we have paid the new DMV Fees with the credit card and its still at $8,000.00.
So we are refinancing the home, we include this amount in the house to get rid
of the high interest. We do not include the bike, it only has 3 more years of
payments and we need the extra money of the refinance to pay off other credit
cards and such.
So we take the $8,000.00 at 6 percent for 20 years and get a total of $13,754.40. Add this to our total before and we get $44,222.07.
I am tiring of beating this horse so lets just say we use another $3,000.00 dollars in maintenance gas and tires and arrive 5 years later at $47,222.07, which is over three times the MSRP of the bike to begin with.
Now we go to sell our ‘investment.’
I get out this weeks cycle trader an notice that 5 year old Superglides are going for $14,000.00, which is about what the MSRP was on the bike brand new.
I subtract this from what I have in the bike and get $33,222.07. I am over thirty grand in the hole on this ‘investment’ and there is no way in hell anyone is going to pay me what I have in the bike. I am never taking financial advise from anyone who owns a Harley. I just lost 33 thousand dollars on a bike and it wasn’t even fun in the corners.
Are your eyes open yet?
They should be.