Do the maths
MCN investigates the best way to buy a new bike
PCP deals have been in the news recently. In the last few weeks the papers have been talking about how the sale of car PCP plans to sub-prime customers who then default could hasten another financial crisis.
While that may well be a long way off, there is no getting away from the fact that PCP (which stands for Personal Contract Plan) allows people to ride motorcycles that they thought were out of their price bracket and their common three-year cycle of replacement is great for the bike industry, too. It also gifts dealers with lots of well-cared-for used stock for people who don’t want to buy new. For all these reasons we like PCP.
You put down a deposit on the machine and then ‘lease’ it from the finance company at a monthly amount. After the lease period is up you either make a large final payment to actually own the bike or trade it in, hoping that the value is enough for the deposit on your next machine. It’s ever-more popular – 90% of new cars are ‘bought’ this way and PCP is growing fast with new and used bikes too.
However, it’s not for everyone. If you want to keep your bike for longer than three years or you clock up high mileages (some policies are restricted to 5000 miles or below), you may be better looking at other alternatives.
There are two main other options here – the first is old-fashioned hire purchase, secured on the value of the bike, which is owned by the finance company. You put down a deposit and then pay off the value of the bike, plus interest. Once you’ve paid off the full amount, you own the bike and are free to keep it or sell it and buy a new bike.
The other route is a personal loan – this isn’t secured on the bike itself and if you shop around you can acquire some favourable rates. Many dealers offer loan facilities, although it does pay to shop around for the lowest rate.
It’s possible to secure a lower interest rate than with some PCP deals, but because you are paying off the full value of the machine, monthly repayments are higher. The advantages are that there are no final payments and you own the bike from the word go. Many bank loans offer the flexibility of allowing you to make extra payments.
To see which is cheaper, we compared buying a Yamaha on PCP and with a personal loan to see which was the cheaper, both in the short and the long term. The deposits come from our buyer trading in a bike worth £2000 and using that for the new bike – it’s hard to compare with higher deposits as PCP deals normally only allow a deposit of 25%. The figures come from example rates for Yamaha’s yamahafinance.com scheme and from running an anonymous search on moneysupermarket. com for the best rate personal loan, which was with TSB.
One thing is for certain: You have plenty of buying options
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