Help on Sportbike Depreciation, anyone??

Anyone got a bit of experience in this area? I'm mulling an idea around in my head but don't have a good idea on the devaluing of sportbikes, otherwise, it'd be a bad purchase.

I looked all over the net for a whole afternoon. Right away found the formula that dealers apparently use:

Cost of motorcycle -- Salvage Value / Estimated Useful Life = Annual depreciation value

Then:

Multiply the value you calculated in above step by the number of years since you purchased the motorcycle. Then subtract that value from the purchase value of the motorcycle to get the depreciated value.

But then factoring in things like Mileage, right? And rarity of a bike for the region too...

Anyway, any help would be appreciated and then I'll pm you the scenario I'm looking at.

Thanks a tonne!

I don't know regulations in Canada, but in the United States we have book depreciation and tax depreciation. For all intents and purposes, almost all small businesses just use tax depreciation tables b/c they don't have to provide financials to the general public.

If you look up the Canadian tax regs, it will tell you how to depreciate the vehicle. Tax depreciation is usually better b/c you can expense more upfront which helps you protect your earnings now. If you were in the US I'd probably set it up for MACRS at 7 years just to be conservative. Though you could probably put a motorcycle on a five year life (refer to Canadian tax regs, it should tell you the useful life).

For book depreciation it's just (purchase price - salvage value)/useful life. A lot of people use salvage value of zero then they pay tax on the sale proceeds whenever the vehicle is eventually sold. You don't depreciate based upon mileage unless your company policy states that vehicles must be disposed or sold at certain mileages. Even then, it is still unusual to depreciate based upon mileage unless the company extracts the useful life on a much shorter time table than allowed by standard depreciation methods.

If you're not talking about business depreciation, I can't help you. Resale value is a crap shoot and is often times dependent upon regional demand and legislation.

<div class='quotetop'>QUOTE (Jumkie @ Feb 26 2010, 10:21 PM) <{POST_SNAPBACK}><div class='quotemain'>LINK

lol thanks, that is EXACTLY where i got the formula. It'd just be nice to throw the ideas around with some one who knows the industry and has more experience who i could bounce some ideas off of.

What are you looking at. Regardless of what it is, it is a buyers market and you should be able to get a deal. If you can find what you want at a dealer, you will do better than from an individual. The dealer got if for wholesale and needs it off his books. An individual, more often than not has a payoff and is trying to get the payoff,regardless of how far upside down he is. Dealers usually put about 70% of average retail when they ACV [Actual cash Value] a unit. That doesnt mean they will set it out on the floor for average retail. Say average retail on a bike is 6 grand, the dealer probably has around 4200 in it.He might set it on the floor for 6900 and come down to 6000 to make you think your getting a deal. It is up to you not to make an emotional decision. Look the average retail up yourself, not what the dealer tells you it is. Take 70 % of that figure and add whatever profit [10%] you think is fair. Under this scenario you would want to pay around 4700 dollars for the buke

IMO any new bike is a 'bad purchase!'

Don't get me wrong, they're more than worth it. Remember, you only live once, and you can't take it with you! But, even if you've got Bernie Madoff's tax advisor working for you, it's unlikely you'll ever monetarily justify the the bloody thing!

What constitutes a 'good' or 'bad' purchase in your eyes?

While the tax depreciation rate may be linear, real-world resale value does not follow a nice smooth progression. You'll take a big hit the moment you drive off the lot, and resale value will continue to plummet during the typical loan period. But later, after 6~10 years or so, the value of a clean bike will tend to level out and will often remain nearly constant for some time. Like Pov says, "It all depends..."

Also keep in mind that you'll be paying a lot more for insurance in the first few years, when the (bank's) bike is worth more.

<div class='quotetop'>QUOTE (mylexicon @ Feb 26 2010, 10:23 PM) <{POST_SNAPBACK}><div class='quotemain'>I don't know regulations in Canada, but in the United States we have book depreciation and tax depreciation. For all intents and purposes, almost all small businesses just use tax depreciation tables b/c they don't have to provide financials to the general public.

If you look up the Canadian tax regs, it will tell you how to depreciate the vehicle. Tax depreciation is usually better b/c you can expense more upfront which helps you protect your earnings now. If you were in the US I'd probably set it up for MACRS at 7 years just to be conservative. Though you could probably put a motorcycle on a five year life (refer to Canadian tax regs, it should tell you the useful life).

For book depreciation it's just (purchase price - salvage value)/useful life. A lot of people use salvage value of zero then they pay tax on the sale proceeds whenever the vehicle is eventually sold. You don't depreciate based upon mileage unless your company policy states that vehicles must be disposed or sold at certain mileages. Even then, it is still unusual to depreciate based upon mileage unless the company extracts the useful life on a much shorter time table than allowed by standard depreciation methods.

If you're not talking about business depreciation, I can't help you. Resale value is a crap shoot and is often times dependent upon regional demand and legislation.

Thanks a lot for that, very thorough.

I'm not exactly sure whether i'm looking at book or tax depreciation.. Put plainly, I would like to start a superbike rental company, but need to know a reasonable resale value so I can turn the bikes over after a year to keep up the image of the rental company (I know that's not how rental companies make money, but I'm not in it for the profit, and am willing to make slim profits and a slim salary to sell a good product to a broader spectrum of customer for their enjoyment).

The reason mileage was a factor was because I expect 26-43,000 km's on a bike during the riding season. I know people look at that when they buy used. However, that the bikes would be well maintained is also a factor.

Hmm.. "crap shoot".. you are probably quite right. I've been looking a lot at used Ducati's and Aprilias the prices are all over the place.

May I ask where your financial experience comes from? You sound well-educated on it.

He's a small biz accountant out of TEXASS!!!