What’s the price-quality correlation for bicycles?

By Felix Salmon
July 9, 2009

Although I’m generally a fan of credit unions, and I’m certainly a fan of bicycling, I’m not at all a fan of this new bike-loan product:

* Rates as low as 7.50% APR*
* 12-month term
* Borrow up to $2,500
* 100% financing of bike plus accessories

One of the best things about bikes is that they’re cheap. Yes, it’s easy to spend $2,500 on a bike if you put your mind to it — or much more even than that. But the only people buying $2,500 bikes should be people who can easily afford to pay cash for them: no one should be taking out a loan for that kind of luxury.

With any luck Eric Matthies will weigh in on this question on his blog — he knows much more about biking than I do. But my gut feeling is that the price-quality correlation when it comes to bicycles is pretty low, and that much of the time it’s actually negative. (What you gain in terms of lower weight — which is generally what you’re paying the big bucks for — you often more than lose on the functionality front.) If Portland credit unions want to encourage daily bicycling, I don’t think that a $2,500 racing bike is exactly what the doctor ordered.

I’ve spent the past day in San Diego (that’s why blogging’s been light) and my mode of transport while I was here was a rented Bianchi Cortina — a very nice bike which retails at $429. My feeling is that $400 is pretty much the maximum sensible price for a new bike for anybody who needs to borrow money to buy one. Maybe make it $500 with the accessories (helmet, lock, lights) included. But $2,500 is just silly.

Update: Eric Dewey from the credit union offering the loan pops up in the comments to say that the high limit was put in place as a sign of support for Portland’s custom bike builders. Which is nice. But I still like to think that we’re moving towards a world where people only buy a custom bike after they have the money to do so.


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I think you’ve implied a use (commuting?), and $400 is fine for that. For a kick-around bike you could get a cruiser for a lot less. For a mountain bike you’d need a shade more for something reliable.

Here’s a bike with fenders for Portland:


(Of course, with 7.50% APR maybe it isn’t charity … maybe it is (in the words of Steve Martin) a profit thing.)

Felix, don’t dis my credit union! We’re not requiring people to buy $2500 bikes – and we’re certainly not advising them on which bike to buy!

All we’re doing is trying to raise awareness that we are lending in innovative ways and supporting the biking community.

We set up the $2500 limit because here in Portland we have worked with local custom bike builders (small, tiny businesses) who make all kinds of interesting designs, few of which are racing models.

Love your work – but on this one, you need to come out here and see what’s happening in the bike lanes before you trash our products!

Posted by Eric Dewey | Report as abusive

A good city bike, in the Dutch style, has fenders, internal gears, chain case, skirt guard, hub dynamo powered lights, high-quality seat, etc. Those add up, but it’s worth it. $1,200 isn’t too much to pay for everyday transportation.

I see somebody made a complete list:

They’re a lot cheaper in Holland though, €750
http://www.workcycles.com/workbike/bicyc les/dutch-city-bikes/workcycles-secret-s ervice-mens-bike.html

Dutch bikes?

From the dutchbikesseattle site: “Put one of our mahogany boxes ($329)on the front for your tools, your dog or to hold your sweetheart’s picnic lunch. ”

Mahogany? $329? FOR A BOX?

Clearly, dutch bikes are for people with more money than sense.

Posted by Jon Hendry | Report as abusive

True story: When I was in college (1968-72), I really wanted a Gitane bike. But, at $125-150, it was beyond my means. About a month ago, I came across a Gitane at the Salvation Army store, with no rust and in virtually perfect condition. For $15 and a thorough once-over at a bike shop for about $75, my son now has the bike of my (college)dreams.

Posted by Stuart Levine | Report as abusive

It’d be better for people to buy a bike on this loan than put it on their credit card, which they’d likely do. The problem is they’ll then use the $2500 freed up on their cards to buy something else.

Posted by zach | Report as abusive

Very interesting. I think this is a good example of community-centered banking and I give them props for it.
A product like this could be great for someone (perhaps newly unemployed) who is facing a short-term cash flow problem, and would rather not run up credit card balances. Regarding costs, while basic commuters can be had for $3-400, some people may be better served by folding bikes (for multi-mode commuting) or other, more costly, bikes.
As a final point, I bet all those $400 bikes are made in China. As the previous commenter noted, Portland has a vibrant local bike manufacturing community, but their products tend to be more expensive. If a loan product like this allows someone to buy a locally-made $1000 bike instead of a foreign-made $400 bike the economic multiplier effect is massive.

Posted by Rockfish | Report as abusive

How is a $2,500 bicycle any different from a $50,000 car? I would be the farm my $20,000 Toyota has better functionality and reliability than most $50,000 cars and all $100K+ vehicles.

As the lender, the credit union’s obligation is to determine if the borrower can (and will) repay the loan. If the answer is yes, they should make the loan.

I can imagine a kid getting out of college and getting a good job with a good income. He lives in Portland and decides he doesn’t want to incur the cost of owning a car. If he wants to buy a $2,500 bicycle, who are we to judge.

Posted by Brad Ford | Report as abusive

“But the only people buying $2,500 bikes should be people who can easily afford to pay cash for them: no one should be taking out a loan for that kind of luxury.”

So, it’s OK to spend $25,000 on an automobile, but $2,500 is too much for a bicycle? Bicycles are not necessarily a “luxury”, they can also be serious tools for transportation; you only have to look at The Netherlands, Denmark, and Germany (and a few cities in the U.S.) to see that. When viewed in the context of automobile replacements, bicycles are incredibly good investments, even at the upper end of the price spectrum (and that’s well beyond $2,500).


Brad Ford as it right. There is very little correlation between price and quality above some threshold. Carbon fiber road bike frames will cost you more than $2500, but is this better then a $250 aluminum commuter frame? Depends on whether you’re racing on the roads of France right now or slogging through muddy streets on your way to work. Is a carbon fiber Mercedes McLaren SLR better than a Caddy Escalade? Depends whether your commute looks more like Le Mans or Paris-Dakar.

Posted by James Davies | Report as abusive