It seems strange to compare the investment return on riding a bike with the return on buying a stock or acquiring a real estate. You are right, the comparison is strange and that makes it more effective! We often forget to talk about the investments that are so easily reachable and rush to talk about investments that are difficult to handle and obtain knowledge about. Lets start the unusual comparison and answer ourselves, whether we should invest in bike first!
According to Credit Suisse global investment returns yearbook, stock market return in United Kingdom from 1900 to 2011 equaled to an annual real rate of 5.2%.
According to historical Halifax UK house prices since 1983 to 2012, the prices adjusted for inflation have risen 101% in UK and 124% in London, meaning that annual rate of return is 2.4% for UK and 2.8% for London.
I bought my bike for £57 from ebay.co.uk on May 2012. It was a retro style 30 years second hand bike with a usage of few times, since the owner could not find time to ride more often and was using a car intensively. I then got discount of £10 due to rust marks that were not shown and noted on the ad. In fact, I came to pick up the bike late in the evening, so I did not notice the marks and only the next morning I did thorough inspection and could see that while the bike was with little millage, it had rusty spots due to probably not very good storage conditions. The seller was so kind to reimburse a little discount to paypal account.
I was moderately happy with my purchase due to the same rust marks. I was about to use the bike quite intensively and rust meant that bike parts are deemed to break faster. The purchase went from bad to moderate with a friendly reimbursement and apology gesture by the seller.
In almost two years my bike had a total additional investment of £86.58. Most of the investments were great purchases that should serve several years. One of the investments had to be replaced instantly – too short and thin bike lock (cost of £2.99) was changed by more solid, longer and better quality lock for £8.47. In the first year I also bought lights for £9, mobile holder on the steering wheel for GPS usage – £2.55 and a helmet for £26. In the second year investments were made into batteries for £1, pair of cotter pins to fix unstable pedal £2.29, multi bike tool kit for £24.99, rear brake cable £2.99 and had to replace broken (dropped from hands) front and rear light pack for £6.30.
In total the investment into transportation vehicle is worth £137.28. Lets calculate now the returns. The alternative investment is to buy a £120.6/month or £1256/year travel card adult ticket for Tube, DLR and London Overground for 1-2 zones. Other option is to buy bus and tram pass for £77.6/month or £808/year.
What is the financial return of the bike investment in terms of saving on public transportation? Lets take the cheapest transportation alternative – yearly bus travel card. In this case, already from day 2 return equals to 16.2 times the investment (formula (£808 bus travelcard – £47 initial investment) / £47 initial investment). Later throughout the year I had to spend additional £49 for extra parts, thus, the return decreased to 15.1 time. After the year 1 I would need to purchase another bus travelcard, so my return immediately doubles to 32.3 times. Again it drops to 31.5 after the extra purchases. In order to calculate the overall return, I need to make two assumptions: bike life expectancy and average extra costs per year for the future years to come. For the one, I make assumption that my bike will have a life of 4 years, since I use it very intensively. For the two, assumption of £49 yearly expenses seems to be reasonable given last two years. Finally, after 4 years expected savings could equal £3000, which is 63 times the initial investment!
And that is not all. Financial return is not the only return that you get by riding the bike. To begin with, you do so much sport, which translates into health. Cycling one hour at the speed of around 13 mph for a 80 kg person means burning 560 calories. In comparison, walking from a house to a car or bus for 1h burns 120 calories. However, it would take 15 to 30 min to walk to the bus stop, so we need to compare with only 60 calories, which is a 8.3 daily return.
Another advantage is a better geographical orientation. When I moved to London and was mostly taking undergrounds, my understanding of the city map grew quite slowly. Even taking the bus did not help to progress rapidly, since I did not know the routes. Once I started to cycle, I had to look at the map, memorize the routes and most importantly experience myself all the roads. Soon I knew very much more about the city and I did not need maps on the routes I have been before.
Riding a bike means you sightseeing everything around you while traveling. Less than walking, but definitely more than driving a car or bus, not to mention underground. Once you are interested in something on the way, no problem to stop and watch or even participate, or visit. Personally, I tend to stop on cultural events, flash mobs.
Footprint. Biking usually means lower pollution. You suddenly become environmentally responsible. That brings happiness inside. According to one research, bicycle emits 21 gCO2 per km traveled, while passenger car and bus respectively emits 271 and 101 gCO2 per km traveled. Emission also depends on what type of food you eat and in this article you could find that carbon footprint powered by cheeseburger is by 4 times higher than bananas :). These differences are nicely visualized in Shrink That Footprint blog – meat lover has double footprint comparing to a vegetarian person.
Flexibility. It is especially relevant at night, when public transportation runs on a much lower scale or even stops. It is such a relief to have a bike besides and be at home in half an hour from the friend or place you have just stayed longer at night. That is invaluable. Flexibility is also relevant in terms of when you have to leave and come to the place. If the bus in your area comes in half an hour, with bike you could already be in place in that time. This means I do not need to place a large time space before a meeting to make sure you are not late. There is very little volatility in arrival times, because you can avoid the traffic congestion.
Speed. It definitely depends on how fast you cycle, but even slow cycling is very similar to the trip with the bus. For one, you go out of the house and jump straight to the bike, you don’t need to go to the bus stop. If your bus or underground stop is 15 min away, you could make in this time already 3 miles at 13 miles per hour speed. Buses or underground also have to stop in the intermediary stops. Another very important aspect is traffic congestion. Since you have no traffic congestion, at least in London, you could be almost always faster than a car at daytime.
Lets discuss now the negative sides. First and main issue is safety. London and many other cities are definitely far away from having a good biking infrastructure, meaning that most often bikes need to cycle on the same roads as cars. This is the primary reason of accidents. In 2007 there were 147 thousand cyclists in Greater London, 2953 reported injuries, of which 446 resulted in serious injuries and 15 died. Another report shows that biking is more dangerous comparing to a car or walking.
It is more difficult to cycle on poor weather conditions. It is colder and more difficult to drive in windy or rainy conditions. You could also need special clothes to protect from the rain, which might be not suitable for office work, where there is no changing room.
Another disadvantage is long distances. One can sustain regular commuting of 1 or 2 hours per day, but it is quite difficult to go above this ladder.
Invest in bike first, since it brings measurable and unmeasurable, financial and non-financial value!