Are Motorbikes Really Getting More Expensive?

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How Much More Expensive is the Latest Honda Fireblade than the Original Blade from 1992?

Does anyone buy brand new motorcycles outright anymore? Aren’t they too expensive to buy outright? PCP, where you effectively lease the bike – paying for the initial depreciation only – seems to be a far more popular way to get new metal onto the street.

A brand new bike can be yours for only a few hundred pounds a month, which makes them affordable to most budgets. So why don’t people save up the cash before buying?

I think it’s largely due to our debt based money system, which revolves around credit expansion. The central bank which runs the U.K. monetary system aims to devalue our currency at a target rate of 2% per year. As you’ll see, they most often overshoot the mark. If you want to read more, check out the appendix below

Technology is Inherently Deflationary

I recently came across a very interesting book by Jeff Booth called The Price of Tomorrow. Jeff’s book is about how deflation is coming, and that this deflation will be caused by the wave of new technology which is all around us.

Think about how your iPhone makes your life more efficient, it allows you to do things that wouldn’t have been possible 10 years ago; A smartphone costing £500 is a multi-functional tool. It is a stills camera, a 4k/slow-motion video camera, GPS, it can perform photo and video editing, is a personal computer, a word processor, a website editor, a guitar tuner, a dictation machine, a fitness trainer, a biometric data logger. You name it,  some app developers out there can provide it.

You can essentially run a global media business using nothing more than an iPhone and an internet connection. This power is evidenced by the thousands of YouTube millionaires making a living on line.

For all of the years than I’ve been alive, we have been experiencing inflation. As Central Banks have done their best efforts to devalue the future value of money, the prices of the products bought with these devaluing currencies have been steadily rising, but they’re fighting against the inevitable deflation which is part and parcel of the Information Age.

I recently pointed out that motorcycles seem to be getting more expensive. But are they really? If Jeff is correct, technology should be getting cheaper, not more expensive.

Has the price of a brand new Blade really changed?

So I decided to do a bit of research. I took a motorcycle which has existed since 1992, the venerable Honda Fireblade, and I charted it’s price since 1992 to 2019 using data from https://www.thebikemarket.co.uk/honda/cbr/cbr1000rr-fireblade:

It all started in 1992 with the first FireBlade, the 893cc “foxeye”

the 918cc

And then the 929cc – PGM-Fi

the 954cc (looks best in red & black, with blue and white a close second)

In 2004 the FireBlade became the 998cc CBR1000-RR Fireblade (one word, no capital B);

998cc engine became 999cc in 2008, a model so accomplished, it lasted for nearly ten years, with a facelift in 2012.

And so to the new 2017 model also 999cc

(Photos courtesy of https://www.thebikemarket.co.uk/honda/cbr/cbr1000rr-fireblade)

But Doesn’t Tech get Cheaper AND Better over Time?

I assumed that, all things considered, the price of that motorcycle should be the same, or cheaper, except with significantly better technology today than back in the early 90s.

Just like your iPhone gets better as well as cheaper every year, shouldn’t the same apply to bikes? It should do. Engineers get better at designing, things get more efficient, markets grow, prices fall.

Here’s the list price of the various models of blade since 1992:

1992 – £ 7,390

1993 – £ 7,565

1994/95 – £ 8,195

1996/97 – £ 9,265

1998/99 – £ 9,265

2000/01 – £ 8,795

2002/03 – £ 9,030

2004/05 – £ 8,600

2006/07 – £ 8,600

2008/09 – £ 9,300

2010/11 – £ 11,175

2012/13 – £ 11,300

2014/16 – £ 12,000

2017/19 – £15,225

These prices seem to be rising. There’s no doubt the bikes are better now than ever before, but has the cost in real terms, gone up, or down?

To answer this question we need an inflation calculator, so we can view the prices from a stable datum point.

If we start with the same price in 1992 of £7,390 and adjust it for inflation, you may be surprised at the results.

I went to the Bank of England inflation calculator and adjusted prices each year according to inflation observed.

Here’s the chart:

    – The blue line is the RRP of new models over the years.
    – The orange line is the original price of £7,390 adjusted for the inflation year-on-year between 1992 and 2019.
    – The green line denotes £7,390 while the yellow line is the inflation adjusted price that we would expect if we had a sound currency which wasn’t losing its value every year. In 28 years, your money is worth half what it was originally.
    – The black line shows the increases and decreases in prices relative to the baseline 1992 cost

Click on the link below to download the excel file and have a play yourself.

fireblade-prices.xlsx

What you can see is that the current Fireblade, is the same cost (actually £200 less expensive but who’s counting) as the original FireBlade from 1992, after adjusting for inflation.

Think about that for a second. The real cost of making a litre sports bike as good as Honda can has not risen for 28 years. It rose initially, in 1996 to be slightly more expensive, but between 2000 and 2017, the latest FireBlade was less expensive than the original, sometimes by up to £2,000.

When you factor in the technological improvements (ABS, traction control, braking systems, refinement) we’re getting a lot of value from Honda.

It’s a shame we can’t say the same about the  national currency.

 

Appendix (For those interested in monetary economics)

Deflation is the Death of Credit based Money

There’s a reason why central banks aim to create inflation, to try to prevent deflation which is catastrophic for a debt based system, but that doesn’t make the end result any better for the individual who puts his finite time and energy into earning money that is continually losing value. #BuyBitcoin #BTC.

If you saved up all the money you needed before buying a motorcycle, each year you’d find yourself falling further behind, as the value of that cash was gradually eroded by money printing. You’d feel like you were always playing catch up, struggling to keep your head above water. Many do feel this way.

Whether people consciously understand this and act in the most sensible manner or whether they just follow the ‘offers’ that arise in a credit based money system, one thing is for certain, very few people save money.

Saving for a Rainy Day

If you want evidence of the lack of savings, look at the personal and corporate crisis caused by a couple of months of COVID19 lockdown.

“Savings? What are savings?”

“I don’t save money, I’ve got a £599 car payment to make on my Evoque!“

When nations operate a system of monopoly money (this isn’t meant to be a derisory term, just a statement of fact – the Central Bank has a monopoly on the creation of legal currency), there is no incentive to save, as tomorrow’s money is worth less than today’s.

So people generally buy their bikes on credit, because they have no savings, because the system doesn’t incentivise them to have any. And when a black swan event comes along, they are ill prepared, the central bank has to print even more credit to ‘bail out’ the system, and the can is kicked down the road for another 10 years, growing ever weaker each time.