Blog written by Dr. Noel Cass

E-cargo bike access: Total Cost of Ownership, the appeal to second car owners, and leasing

“But actually being able to kind of prove that actually like-for-like it’s not costing you anymore every month, and then you get a whole bunch of additional benefits, then it becomes almost a no-brainer doesn’t it?”

This was what one of our participants said would sway him towards purchasing an e-cargo bike; what he called the “man maths” of whether it would make financial sense. He elaborated that:

“I just want to get to a point where … on rough, you know, back of a fag packet maths … you go, ‘yeah, I can see where the cost of that is coming out of some other pot of money’.’’ (L138)

This concept of ‘man maths’ was his wife’s response to his previous suggestions of purchases, like a new car (see Box 1).

Much research has focused on the intangible benefits this participant mentions, and we are working in Elevate on what the carbon savings and health benefits of our participants might be approximately. But can we also attempt to answer the ‘hard’ questions about whether buying an e-(cargo) bike would save someone money?

A video on YouTube by Global Cycle Network does an admirable job of this’. In this video, 3 years’ ownership of a £5k e-cargo bike is compared with ownership of an £11k car. They use a 10% annual depreciation figure and add fuel, insurance and maintenance costs, plus residents’ (but not destination) parking in the case of the car, and come up with annual costs of (a generous) £665/yr for their e-cargo bike compared to (a conservative) £2,000 for a car. However, these costs include depreciation figures based on the costs of the two vehicles (and these might be different in different cases). Remove that, and the difference is £165/yr versus £1,000 a year. So, roughly a quarter of the annual costs with depreciation of the specific vehicles, involving less than half the initial outlay, or a fifth of the running costs generally.

A second car replacement?

Would this satisfy our participant? Well, in their interview they talked of capital expenditure – which presumably meant the outlay for purchasing an e-cargo bike on top of their existing car costs, but several (16%) of our participants stressed that they were thinking of an e-cargo bike to replace their household’s second car (see Box 2). Indeed, for several households in all three of our cities, the main motivation for participation in our project was to see if they could avoid getting a second car (see Box 3).

Other participants could see this as the main inspiration for others too: “I think trying to convince people that it is going to completely switch out the car … I don’t know if that’s really going to be the way…

It’s more like it could replace up to 90% of the journeys that you do by car… families who have two cars… it could replace the second car . which is another car off the road or not needed to be made new… More like ‘reduced cars’ rather than just completely, yeah.” (L323) In total, more than one in 5 (22%) of our households specifically stated that the e-(cargo)bike could help families avoid needing a second car.

Helping with purchase costs

However, it was still pointed out that the purchase cost is prohibitive for many people, even with the (limited) accessibility provided by Cycle To Work, which benefits the higher paid more: “What would you want [people in power] to do, in order to make it easier for more people to … do what you’ve done, which is avoid a second car and make it a regular part of your transport? I guess it’s ultimately I think it’s the cost of the bike isn’t it? I think in terms of the Cycle2Work scheme, as long as … you need more really, basic, higher rate, you know, whatever taxpayer… Of course, like you know, if it could be cheaper and plus Cycle2Work scheme, still a lot of people just wouldn’t be able to afford it” (L329B)

This participant was referring to the fact that as a salary sacrifice scheme, people in higher tax brackets benefit more from tax avoided, but organisations including the Association of Cycle Traders and the C2WA have highlighted” that people on minimum wage could not opt for salary sacrifice.

They have also pointed out that the CTW scheme is not available to self-employed people, which provided a further barrier for at least one of our participants:

“Would you go for Cycle to Work scheme, do you have that at your work? Ah, I’m self-employed, so no. I don’t know actually if my husband has a Cycle to Work scheme.

I’m not sure. Would you consider that option, for instance, getting it on monthly payments? Um, maybe.

Yeah, maybe.. Yes, it depends on the price. It depends on where our kids end up going to school and how our life works. If they go to a secondary school that isn’t on a bus route, then we might consider it a really good investment to get an e-Cargo bike.” (O595)

Leasing as a model and Total Cost of Ownership

This participant also suggested that they might hire an e-cargo bike if it was charged by the mile, and not by the hour; the usual hire bike payment regimes weren’t suitable for her occasional needs.

This hints at the viability of a leasing model that we asked several participants about, which appealed to some as a ‘try-before-you-buy’ option: “I think… as a short term thing until you’ve decided whether it’s for you or not without having to do the outlay of buying one, I think that’s a good idea. I don’t know about a long-term kind of continuous leasing, it just sounds like it would be more expensive in the long run.”

(L323A). Leasing was also pointed out to be a familiar and increasingly normal way for people to afford and own cars: “it’s the same isn’t it, you can … If you can buy it in the same way because nobody buys cars anymore, everybody … You know, you’re leasing an electric car or you’re paying off a monthly fee” (O11)

If leasing e-bikes and e-cargo bikes were to be a way for e.g. non-CTW households to replace a second car and pay for it in a way that both replicates many households’ way of paying for a car, and avoids the ‘hit’ of a heavy initial payment, can leasing arrangements be made both reassuring and competitive in terms of price?

The main things that would make it cheaper and appealing to this household were all-in warranty or maintenance costs: “I was thinking about warranty… 2 years free maintenance or whatever. I don’t know, like you do with a car. That would be more appealing because … if I buy it and the motor goes after like a year I’m not going to want to be liable for however many thousand pounds to get a new eBike. But… that is the benefit of renting something rather than owning it… if it’s included in the terms like with reasonable use … that they’ll maintain it, you know, I’d be up for that” (L323B). They also pointed out that leasing in this way would make ‘Total Costs of Ownership’ more visible, given that “we’re already doing that with a car … we’re already surrendering our God knows how much, like a literally unknown amount of money per year often to keep a car on the road” (L323B).

This suggests that the intuitive and straightforward purchase price comparisons that households often make between e-(cargo)bikes and cheap second-hand cars are comparing apples to pears, because of the false economy of buying cheap (see Box 4). Another ‘hidden cost’ of motoring – parking, was also key in this participant’s decision to use their e-cargo bike for some trips: “it was the second means of transport, when the car was being used, so … say I’m going for a swim now, and because it’s £3.10 an hour parking, I’m not going to drive down, I’m going to cycle down, and I would have always cycled on the eBike, because [on a bike]… the return journey is – I’m knackered.” (B107)

Depreciation is another ‘hidden’ aspect of vehicle ownership, which different participants raised as a concern stopping them considering buying (second-hand) e-(cargo)bikes that might be more affordable to them. It also made the leasing model more attractive: “if you’re talking about a £4,000 eBike and that’s going to be, if you bought it that’s going to be … pretty much worthless in, you know, 6/7 years, especially if the battery goes or the motor goes … you’re talking quite a short period if you pay upfront for it… you ‘re gambling a bit if you buy one.” (L323B)

One of our car-free households cited an understanding of true TCO as part of their reasoning for not owning, but using a car club: “because we don’t have a car, and we’ve been through the process of looking at the actual, the true cost of owning a car, I think we see that, I think other people who are more used to driving cars, they see a purchase cost but they don’t see the ongoing running costs, they don’t necessarily view the cost of a car the same way.” (O11)

Financially viable? A ‘no brainer’?

When asked how much they would be willing to pay to lease an e-cargo bike, participants sometimes compared to bus and train costs or even streaming services to get a handle on affordability. They appreciated that depreciation might raise what leasers want to charge: “taking that into account you ‘re going to have to be in the hundreds to be worth it… for the people selling the bike, renting the bike out?” (L323B) Doing the ‘man maths’ in their heads, figures of £80 for longterm up to £480 per month for short-term leasing were cited as being ‘reasonable’ or acceptable, one suggesting they it could perhaps be free at first to encourage long-term take up. In fact, delivery-rider leasing schemes are lower than this, e.g. £50 to £75/month'” for all-in costs, probably viable due to economies of scale.

If those sorts of prices were to be offered at scale to domestic customers for ownership with the convenience and security that leasing offers, packaging up the Total Cost of Ownership, our research evidence suggests that there might be a willing market, particularly for households seek to avoid the costs of second car ownership and getting health and environmental benefits.

¹ https://www.youtube.com/watch?v=M1cXnrqNJfw

^N https://cyclingindustry.news/act-joins-forces-with-cycle-to-work-alliance-to-reform-c2w/ ^m https://hurrecane.bike/