Why does is cost more to rent a bike than a car?

That's the question asked over on CommuterPage blog.

So I'm looking at the Bike Oasis web site and I noticed their pricing: $7/hr & $35/day for a comfort bike; $10/hr & $50/day for other bikes. Something seems wrong to me here.  About 6-8 times a year I go to Enterprise and rent a car for $17/day over the weekend.

One of the 13 blogs I regularly read is Marginal Revolution (written by two George Mason economists) and this is the kind of question they would answer with a bunch of economics mumbo jumbo. Here's how I see it. The cost of the bike vs. car is only part of the equation. There is some ratio of revenue to cost that must be maintained. Rental cars almost surely have a higher rate of use per day (less time at the rental facility and more being rented) since bikes are rarely rented during the winter or on weekdays - meaning a bike rental facility has to make all it's money on about 80 days a year. This drives revenue way down. While some costs are based on how often the bikes are rented, most are not. In addition, car rental facilities have economies of scale in their favor. So while running a bike rental business for 100 bikes probably costs less than running one for 100 cars, the revenue is way lower too. If there were good, solid, safe, reliable bikes for $100 that would help too.

While some creative pricing could help (lower prices on weekdays and during the winter, frequent renter discounts etc...) there is really only so much demand. Which means that at some point it probably has to be subsidized.

I use to have this money making idea of setting up a deal with downtown hotels. Store a few bikes (2-5) there and rent them (via the front desk or when you check in) to guests for a $5 a day (or whatever the market would bear) with the hotel pitching in some on top of that, but I doubt it would make anyone wealthy.

In the comments someone complained about the lack of car repair style rentals.

i dropped my bike off at the shop for the necessary repairs. when they told me it'd take a few days to fix up again, i asked about renting one of their bikes to keep me mobile till mine was patched up. you could've knocked me over with a feather when they told me i'd end up spending another $150 just to have one of their bikes for a few days.

I've never worked in a bike shop, but I wonder if keeping a few beaters around for this type of situation makes sense. It'd be a loss leader, but it might be worth it.

Comments

[Jan]

I couldn't agree with you more. I think part of the reason why people don't rent bikes in the DC area is the relative safety of riding here - fewer bike lanes; cramped streets; drivers that aren't used to looking out for bikes; not as many "n" shaped bike poles to which to safely lock your bike.

[a_cyclist]

I work in a bike shop, and you are correct that bikes are only rented a few months of the year. During this time, they are ridden hard and generally abused by their riders. Add the cost of insurance to the cost of the repairs and profits start to disappear, but I think that the biggest reason rentals are expensive is that most shops make their money on sales and storing 40 bikes as rentals means that they have room for 40 less bikes to sell. Margins in the bike industry tend to be very low. Where I work, margin is only about 30-40%, decreasing as price increases. This means that if you buy a $1000 bike, the shop is only making $300-400 minus wages, electricity, insurance, etc. The profit made from rentals on any given day is less than the shop would make from selling a single mid-range road bike and a lot more hassle to deal with. Most shops are just barely staying afloat, especially with the economy the way it has been lately, and they can hardly afford to take losses on rentals even as they scale back hours to stay in business.

[Edward]

Here in Cambridge (England) cycle rental is common and profitable...there's a cycle rental shop at the train station. Costs are fairly reasonable per day, and very reasonable for longer term rental (about £1 a day once you go over a month, if I recall correctly).

Here, costs have a lot to do with cycle theft, which is the most prevalent crime in Cambridge (which along with Oxford is easily the cycling capital of Britain). Amusingly, the thieves (mostly addicts and drunkards who want a ride home) don't know anything about bikes, so steal the shiniest ones they can find, even though they're often worthless. A new shiny mountain bike from the local chain store can be had for £50. They get stolen daily. My two bikes are both older (one is a 20 year old touring bike, one is a 50 year old racing bike) and no one's even fiddled with the locks. However, I've fitted them both with top-of-the-line kit, but because the paint is a bit scruffy, they get left alone. So a rental shop would have to factor that in, on top of maintenance (a rental bike gets a lot of abuse from inexperienced cyclists...you'd be neck-deep in popped tubes and broken chains, as well as very high insurance costs).

I helped a guy just last week who had rented a cycle he didn't really know how to ride...somehow, SOMEHOW, he had slipped his chain and got it wedged so tightly between the gears and the frame that even pliers wouldn't get it out...I had to use a chain tool to take the chain apart and then pry the remaining bit out with vice grips. I wonder if the bike shop noticed the chain was about 3 inches shorter when he returned it...

[Kevin]

Two more important points:

1) Rental cars are sold as used cars after a fairly short service life in good, well maintained condition.

2) The big rental car companies buy the cars at (or maybe even below) cost as a type of exclusive brand marketing for the automotive companies (Ford, GM, etc.) You'll never see a mixup of Hondas and BMWs at a nationwide chain.

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[fyi]

Actually, despite the figures you quote for a single rental of a car or bike; in a lifetime analysis car will always be more 'expensive'...