# How Do I Calculate the Cost of a Used Bicycle?

A man is shopping for bicycles.
Image Credit: Comstock/Stockbyte/Getty Images

To calculate the cost of a used bicycle, you must know what its depreciation is. Depreciation, according to the IRS, is "an annual allowance for the wear and tear, deterioration, or obsolescence of the property." Every item you own depreciates over its lifetime. The amount it depreciates depends on what method of depreciation you use. In accounting, the straight-line method of depreciation is the most common. It involves dividing the cost of the item by the number of years that it will last. For the purpose of this article, the straight-line method will be used.

Video of the Day

## Step 1

Find the original price of the bicycle.

## Step 2

Determine how many years you think the bike is usable. The number you get from this is the life of the bike. A reasonable number of years for a bike would be five to seven years.

## Step 3

Divide the original cost of the bike by its lifetime. For example, if the bicycle originally cost \$500 and the life expectancy is five years, then the depreciation expense would equal \$500 divided by five years. This would equal \$100 of depreciation per year.

## Step 4

Subtract the depreciation expense from the original purchase price of the bike. The result is how much the bike is worth. For example, if the bike in step 3 is three years old, then the used bicycle would be worth \$200. \$500/5 years = \$100 (depreciation expense) \$500 - \$300 = \$200 (value of the bike after depreciation).