Ask the trade: Could the cycle trade have a future in leasing & PCP finance?

With millennials increasingly unlikely to own their own house and streaming services like Netflix ever more popular, the previous norms of ownership appear to be changing, in some cases. The motor trade has been canny to jump onto this and even lead this trend, with leasing & PCP finance now incredibly common. CIN asks, is this something the cycle industry can learn from?

John Hamlen,
Managing Director,
Flag Bikes

Brad Illingworth,
Bike Category Manager,
Start Fitness

Would a leasing/PCP finance model work for the bicycle trade? Eg higher value bikes on three-year contracts and at the end of the period consumers pay a lump sum or upgrade with a new three-year contract, for example? 

John Hamlen, Flag Bikes
No; not with the current structure of UK bike retail. In the car industry only about 20% of customers pay the balloon payment and buy the bike at the end of the term. Accepting back four out of five cars sold is manageable because there is a very efficient secondhand market in the UK.

They can quickly resell them from their own lot, within the trade or, in the worst case, at auction. There are no such specialist channels in the bike industry. Maybe this is a business opportunity for an enterprising entrepreneur to shake up the bike trade!?

Brad Illingworth, Start Fitness
The concept itself seems plausible, bikes are developing at such a rapid rate (especially MTB) that high level consumers don’t tend to ride the same bike for more than about two to three years as they’ll be looking to upgrade the latest offering as soon as they can afford to – which is often as soon as they’ve settled the finance or the credit card that was used to make the purchase. A consequence of the rapid development is that a three or four year old MTB has depreciated so badly and can be so dated that their perceived value to the owner (and marketplace) diminished drastically – removing the romantic notion of continuing to use ‘old faithful’.

Could a subscription or long-term hire model work for your average bicycle dealer? Would it have to be led by a brand or distributor, with dealers working as ‘hubs’ on their behalf?

John Hamlen, Flag Bikes
Not for your average dealer because of the capital that will be tied up in the hire bikes. It could work for the higher end of the market e.g. riders treating themselves to renting a big-ticket bike to tackle the Etape du Tour or a cycling holiday in Majorca. However, even then, the renting season is short and it would be hard to recoup the cost of rental inventory before the bikes become outdated and undesirable for potential renters. Yes, it would
have to be led by the distributors and treated as a bond investment.

Brad Illingworth, Start Fitness
I’m not sure if it would be popular amongst the average consumer, but it could appeal to the real enthusiasts who enjoy using the latest products. I think that if it was brand or distributor led, it would help to standardise the packages offered to the consumer – dealers could follow the lead and work well as ‘hubs’ as you put it.

Do you already offer hire bikes? If so, what’s the average time a bike is on hire? If not, would you consider it?

John Hamlen, Flag Bikes
No. We are in London so space is at a premium and we’d competing with the Boris bikes on every corner. Bike hire is seasonal, and it is difficult to find a business model whereby we can offer bikes at an attractive price at the same time as more than covering capital, insurance and staff costs.

Brad Illingworth, Start Fitness
We don’t offer hire bikes in the normal sense, but we would certainly be interested in looking into any proposed long-term hire programmes.