Eleven Used - Bike Selling Tips to Reduce Risk

March 12, 2013

Dealing with bicycle retailers every single day is a great way to observe, first-hand, the industry trends and changes. One thing many retailers are doing is selling used bikes. Although it seems like a good formula to increase sales, it also carries a lot of increased risk. Selling used bikes can be risky.

Most insurance carriers are not comfortable insuring retailers that sell a large percentage of used products under standard "retail" insurance rates due to the increased risk. They will often consider the retailer to have a "manufacturers" exposure when selling used bikes, and this carries with it increased premium rates. Consider:

  • Most bike manufacturers will not pay to defend you against a claim made related to a used bike you sold.
  • Most bikes manufactured by an overseas company are not covered by worldwide insurance protections.
  • If you're not an official dealer of a particular brand, selling that brand of used bicycle carries increased risk.

So what can be done to reduce the risk associated with selling used bikes? I asked a few industry folks, including Matt Moore from QBP, who in turn surveyed 20 different shops who sell used bikes. Some of the better suggestions are shown below.

  1. Inspect bikes before taking them on trade. This will help prevent re-selling a bicycle with major flaws, like a cracked frame, fork or headset. It would be easy for an attorney to argue negligence if a retailer were to re-sell a faulty bike without properly inspecting it.
  2. Only sell used bikes made by major-manufacturers. Statistically, if there is a claim or frame failure, they are more likely to help defend the claim. Major manufacturers should have the proper Products/Completed Operations Liability insurance coverage, and some brands offer trade-in incentives and will stand by frame failures/warranties. However, this does not guarantee that they would indemnify a retailer who re-sold their product.
  3. Do the same tune-up you do for a customer's bike. Consistency is key. One of the worst scenarios would be that the retailer used less-than-typical caution while tuning up a used bike and an accident occurred related to the bike's mechanical integrity.
  4. Check all nuts and bolts for tightness. This should go without saying, and not doing so puts the majority of risk on the retailer. Often a loose skewer or bolt can cause a catastrophic accident. Nuts and bolts loosen over time. We all know this.
  5. Fix anything that needs fixing. This seems obvious, but you never want to sell a bike "as is" when you know something is broken. Even if you disclose to the customer what is broken, it doesn't eliminate your liability or negligence.
  6. Use a checklist. Using and keeping a checklist are key in the defense of a claim and/or lawsuit. Often, this is the first thing an attorney or insurance adjuster will look for. Checklists are becoming more common in the bicycle industry. They are vital to making your case in the event something goes wrong with a bike you are repairing.
  7. Double check the work with another mechanic. This is an added step to help reduce risk. This, coupled with a checklist is super important.
  8. Test ride every bike. Visual inspections only can determine some of the potential problems a bicycle can have. Riding a bike is more effective. Generally, there is less of a need to do this with a new bike. You do not know the history of a used bike. How many times was it crashed, abused, etc? Test rides are key to helping determine the true shape of the bicycle.
  9. Use a different color sales tag indicating that bikes are used. Again, make it clear to the buyer they are not buying a new product.
  10. Offer a 30-day service warranty. This may provide an opportunity to fix any problems that were not immediately identified prior to sale.
  11. Clearly indicate that used bikes are sold AS IS and cannot be returned. You will need to check with state laws to see if this actually provides legitimate legal protection. Your attorney will be able to provide better guidance with this. This may be similar the auto industry's rules.

To learn more about the risk you may have, contact us. We'll help.