‘YOU REALLY CAN AFFORD A NEW BIKE’
Paying less for more has never been easier thanks to Personal Contract Purchase, which offers you a more affordable route to a new bike ‘Being encouraged to buy a new bike every three years? We like the sound of that’
oney. When we’re not trying to earn it, we’re trying to spend it. And once we’ve spent it we always find something else to tug at our heart strings. And so the cycle continues. While bikes have never been better value than they are right now, we’ve also never had more things vying for our financial affection.
The Holy Grail for our hard-pressed wallets appears to be PCP, which is about as close to a win:win situation as you’ll ever get where motorcycles
Mand bank balances are involved – but it might not be right for you, so make sure you fully understand what it is, and how it works. The figures look crazy for some makes and models. Surely you can’t really get Honda’s brandnew-for-2016 CB500F for just £59 a month, or a Triumph Street Twin for £85 every four weeks? Or how about a fully-loaded BMW R1200RS Sport SE for £169? Sounds bonkers, doesn’t it?
Well, it’s not as crazy as it might seem. You can have these new bikes for less than you might ever have imagined – and what’s more you can have another new one in three years’ time, probably without increasing your monthly outlay, or having to find a fresh deposit – but the bike may never actually be yours.
Personal Contract Purchase has gone from being a rare oddity in our world to taking 20-30% of the new bike finance market, and it’s growing fast. If we follow the trend of the car market, over 90% of financed new bike purchases could be by PCP in five years.
The system works by making you pay for the bike’s depreciation (plus the interest), rather than the full retail price. Add in a decent deposit, and you’re only paying back a small chunk of the loan value, which is how you end up with such a temptingly low monthly
outlay. Suddenly, the budget you had for a great five-year-old slice of preowned loveliness has become enough to land you a brand new model instead.
So what’s the catch? Well, at the end of the contract period, a normal hire purchase or personal loan option would see you sitting pretty as the owner of your bike. But at the end of the PCP deal you don’t own anything, and instead have a decision to make: do you pay off the outstanding amount and keep the bike; give the bike back and walk away owing – and owning – nothing; or do you roll your PCP deal over – hopefully with enough equity to act as your deposit for the next dream machine?
You can guess what most people do, particularly as the depreciation calculations usually mean the bike is worth more than predicted (the Guaranteed Future Value – GFV), so you have a decent deposit built in to use for your next bike. If you like to change your bike every two or three years, and aren’t precious about who legally owns it, then it’s ideal. And even if you weren’t in the habit of thinking about ownership this way, PCP encourages you to do so, which is why manufacturers and dealers love it so much – it keeps customers coming back.
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 you check the interest rate is competitive and research the future values of similar bikes from other manufacturers, keep your bike serviced and in tip top condition, you can’t go far wrong. PCP also lets you keep your options open – so if your circumstances change you’ve still got options beyond financial penalties, or a stint in jail.
And the best bit is that when your contract ends, you are actively encouraged to go and look at a new bike to replace it. Being encouraged to buy a new bike? We like the sound of that.