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Scooter Cost Ė How much does a motor scooter cost?

With gas hitting $4 a gallon during the summer of 2008 we witnessed a massive increase in scooter sales. And yet while conventional wisdom would say the purchase of new Vespa or Honda scooter is a great way to save on gas money, the numbers just donít agree. With all due respect to all those new brand name scooter owners in 2008 so proudly saving money at the pump, itís our opinion that buying a brand name scooter to battle the price of gas is being ďpenny smart, but dollar stupidĒ.

Do The Math

Letís consider the math thatís involved for someone considering the gas saving scooter endeavor. Let's say their car gets 20 MPG, and the scooter they buy gets 80 MPG, and gas costs $4 a gallon. Every mile on the car costs $0.20 in gas ($4 per gallon / 20 miles per gallon = $0.20), and every mile on the scooter costs $0.05 in gas ($4 per gallon / 80 miles per gallon = $0.05). So every time the buyer chooses to ride their scooter instead of drive their car they save $0.15. ($0.20 - $0.05 = $0.15)

So how many miles does a brand new Vespa LX 50 scooter need to be ridden before the savings on gas pays for the scooter? Well, the MSRP of a Vespa LX 50 is $3299. After tax, title, and dealer prep charges, the purchase of a helmet and accessories, the cost of everything is roughly $4000. So the answer to the question is: $4000 / $0.15 = 26,667 miles. So right at the 26,668th mile the return on investment is a whopping $0.15. But at that point every mile driven results in an earnings of an additional $0.15.

However the average life span of a motorcycle or scooter is less than 20,000 miles, according to section 2.3.2 of the Environmental Protection Agency's 2003 publication on motorcycle emmisions standards where it explicitly states the life expectancy of motorcycle classes:

"The purpose of the deterioration tests is to help ensure that the technology is durable and the measured emissions are representative of in-use permeation rates. The standards apply to motorcycles for their regulatory useful lives (5 years or 6,000 km for Class I <50cc, 12,000 km for Class I >50cc, 18,000 km for Class II, and 30,000 km for Class III). We believe that there should be no ambiguity regarding useful life because regulatory useful life is spelled out explicitly in the regulations."
Even a class III motorcycle (279cc engine or bigger) is said by the government to only have a useful life of 30,000 KM (which is only 18,641 miles). Some motorcycle experts will say the average life span is 35,000 miles or more because they (the motorcycle experts) know how to care for their motorcycles and extend the average lifespan. The average person doesn't. So will the person who buys a $4000 brand name 50cc scooter (class I motorcycle) in order to save money on gas ever really come out on top? Probably not. Their scooter's average life span is over before they get close to 26,667 miles.

$4000 or $1200

Now, do the same math, but use a $1200 scooter. How many miles does the $1200 scooter need to be ridden before the savings on gas pays for the scooter? Answer: $1200/$0.15= 8,000 miles.

To get a $1200 scooter youíre probably going to have to buy a scooter online for about $900 that is manufactured in China (plus around $300 in tax, title, and other stuff). To get an idea of what type of maintenance a Chinese scooter will need, read THIS ARTICLE.

Investing/Borrowing Costs

And of course there are other financial considerations. For example, what are the financing costs? If the buyer has $4000 of cash to spend one would assume that the costs above donít increase, but thatís not true. When all of the available $4000 in cash is spent on the brand name scooter, that is $2800 that is no longer available to be invested elsewhere. That is to say one could spend $1200 on a scooter and invest the other $2800 at 7% a year. Therefore the $4000 name brand scooter is costing you the opportunity to earn an additional $196 a year on your available cash ($2800 x 7% = $196). So thatís an additional 1307 miles ($196 / $0.15 = 1307) per year that the name brand scooter needs to be ridden above and beyond the China brand scooter to make up that cost.

And the reality is that most people donít have $4000 in cash to spend on a scooter. They have to borrow it. If one borrows the funds for their scooter at 10%, then the brand name scooter is costing $280 more a year in finance charges than the $1200 scooter. So thatís an additional 1867 miles ($280 / $0.15 = 1867) per year that the name brand scooter needs to be ridden above and beyond the China brand scooter to make up that cost.

Depreciation

We can also consider depreciation. Itís quite common that China scooters are called "disposable scooters", as people just ride them until they die instead of selling them later on. So letís assume the depreciation of the China scooter is a complete 100% as soon as the buyer accepts ownership of it.

The MSRP of the brand name scooter is already 17% below the acquisition cost after one pays for tax, title, dealer prep and everything else ( ($4000 - $3299) / $4000 = 17%). So on day one depreciation is already around 25% of oneís investment as no one will pay you MSRP for a used scooter ( ($4000 - $3000) / $4000 = 25%).

The critical cost point occurs as soon as the resale value of the brand name scooter drops below $2800. At that point the depreciation cost ($4000 - $2800 = $1200) of the brand name scooter begins to exceed the entire purchase cost of the China brand scooter ($1200). In fact, $2800 is only 15% below the MSRP ( ($3299 - $2800) / $3299 = 15%), and the buyer is already at 25% initial cost depreciation on day one. It's easy to see that depreciation of a brand name scooter will quickly exceed the entire purchase cost of a China brand scooter.

Name Brand or China brand?

Now, this article is not meant to discourage the purchase of name brand scooters. There are lots of reasons to buy name brand scooters. Buy them for fun, to show off, to love and adore, and for many other reasons. The reasons to by the expensive scooters are the same reasons people by BMW, Jaguar, and Porsche automobiles. However, as a way to save money on gas is not one of those reasons. No matter how much weíve looked at the numbers, more times than not the buyer trying to save on gas expenses by buying a name brand scooter loses out.

If the primary reason to buy a scooter is to save money on gas, we recommend buying a china scooter online. However, the experience of buying a scooter online is not for everyone. To determine if you are the right type of person to buy a scooter online, read THIS ARTICLE.

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