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‘It means that you can ride these new bikes for less than you might ever have imagined’
The way we buy new bikes has changed dramatically over recent years, with PCP fast becoming one of the most popular ways to get that new metal into your garage.
The overall outlay is less with PCP; as long as you don’t pay the final balloon figure (which means you never actually own the bike). Equally, if you want to change machine during the contract period, or even swap brands during the process, that’s pretty easy, too. This flexibility and lower monthly outlay make PCP about as close to a win-win situation as you’re likely to get.
It means that you can ride these new bikes for less than you might have imagined. And what’s more, you can have another new one in three years’ time, possibly without increasing your monthly outlay, or having to find a fresh deposit. The catches are that you may never own the bike and there’s no guarantee you’ll have enough equity to use as a deposit when it’s time to upgrade.
The system works by letting you pay for the depreciation (plus interest), rather than the full retail price. Add in a deposit, and you’re only paying back a small chunk of the loan value, which is how you get such a low monthly figure.
Too good to be true?
At the end of the period, you don’t own anything. Now you have to decide whether to pay off the outstanding amount and keep the bike; give the bike back and walk away owing, and owning, nothing; or roll your PCP deal on to a new bike. Many use equity in the guaranteed final value (GFV) as a deposit, and roll over to a new PCP deal. But you might not have enough equity to do this, meaning more outlay.
What am I paying for?
You’re effectively entering into a long-term hire agreement, so if you run the bike into the ground you’ll end up having to pay more than the agreed value at the end. But if ownership doesn’t bother you, and you stick to the contract terms, you can’t go far wrong.