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Buying a motorbike with outstanding finance

Q64 yamaha - Buying a motorbike with outstanding finance

When buying a motorcycle privately, there’s more risk than buying from a dealer. One of the risks when buying a bike privately is that there’s outstanding finance on the vehicle.

However if you take the right steps, buying a motorcycle with outstanding finance needn’t be an issue.

Even if a motorcycle is advertised with no finance outstanding, it’s important you get it checked out. The seller may not be aware that there is outstanding finance or they may just be trying to avoid the issue.

If the motorcycle or scooter has been bought with PCP or HP finance then there’s a very high likelihood that the loan is secured against the vehicle – that means, the bike belongs to the finance company not the person trying to sell it.

Motorcycle HPI check

You can read our full motorcycle HPI check guide here.

One of the best ways to get a view on the bike’s financial status is to run an HPI Check. Sure, at £19.99 an HPI check seems expensive but they do a package of 3 checks for £29.99 which could be handy if you’re looking at a few bikes before you purchase.

The HPI check will show you the details of any finance agreement including the date, agreement type, finance company, and its contact information.

Without sounding like we work for HPI (we don’t!) watch out for discount motorbike checks and checks that claim to be HPI as a lot of these are next to useless. Most only show the information you can get for free (MOT history, whether it is taxed, etc) and they won’t show you any finance records. 

What do you do if there’s finance on the motorcycle?

The seller might disclose that the vehicle is financed but most of the time, you’ll have to do your own homework. If your HPI check reveals finance, it will let you know who the finance is with. Call that company and they will be able to tell you whether or not there is finance outstanding.

If there is finance outstanding, you’ll need the seller to provide you with a settlement figure in writing. You won’t be able to get the amount owing from the finance company yourself as it is covered by the Data Protection Act.

It should be easy for the seller to get hold of this info and you can then double-check it with the finance company.

Option 1: Ask the seller to settle the outstanding finance

You can agree a price for the bike and ask the seller to settle the finance before you exchange money for the vehicle. The seller may take you up on this but don’t be surprised if they need the money raised from selling the bike to settle the finance, so it’s a case of the seller needing to settle the finance and you need to see the paperwork from the finance company.

Option 2: You settle the finance

Let’s say the bike is advertised for £5,000 and there’s £1,500 of finance outstanding. You could write the seller a cheque made out to the finance company for the settlement amount and then pay the seller the remaining amount. If the finance amount isn’t huge you could probably settle this over the phone.

However this does carry a few risks.  The seller isn’t allowed to sell the bike with finance as it’s owned by the finance company. If you give the seller the cheque, they may not post it off. The seller might also be wary that your cheque will bounce. It’s a bit of a catch-22 and requires trust from both parties.

Ideally, you won’t end up in this situation.

Option 3: Walk away

If a bike is on finance, the chances are it’s a common model and not a one-off ex-race bike or show special you couldn’t buy anywhere else. If the outstanding finance is proving to be a bit of a hurdle, then just walk away.

Never do this

Never, under any circumstances take the seller on their word when they say they’ll settle the outstanding finance with the cash you’re giving them for the bike. If it has finance owning, the bike doesn’t belong to them, it belongs to the finance company – until the finance is settled the bike belongs to them.

Specialist motorcycle solicitors, White Dalton say: “If you buy a motorcycle which is still subject to hire purchase or conditional sale agreements, then it belongs to the finance company until they have been paid off and the company is entitled to take it back.

“If you were not aware of the outstanding agreement and bought the motorcycle in good faith you can sue the seller, if you can find them. You may also be able to keep the bike but this is not the case if the bike was stolen.“

In many cases the finance company will look to repossess the bike and you’ll lose out, big time. Just think of the hassle involved in all the paperwork and chasing the former owner – nightmare.

Watch out for dodgy advice

We’ve read all sorts of nonsense on forums regarding buying and selling a bike with outstanding finance and this reply by user RyanGarside on the MCN forum to the question ‘Bought a bike with outstanding finance’ is advice that we would call dangerous at best:

Ryan says: “been in this situation before, he can agree with the finance company to continue paying the finance monthly, and you get to keep your bike that you honestly payed for. not sure exactly how it works between the fnance company and the previous owner, but no the bike is technically yours. the bike was also his, the finance company dont own it, they have effectively loaned him the money to buy it with, although they can try to recover it, and will do if they get the chance, it is LEGALLY your bike for now… if he sorts it with the company he can keep paying them monthly. worst case scenario, hide the bike well (not just in your garage…) and tell them it has been dismantled for parts and refuse to give it them until the problem is resolved 🙂 worked for me.”

Truly, honestly, this is terrible advice.

How about if a bike has been bought with a bank loan?

If the seller has borrowed money from a bank in order to finance the bike, then it won’t show up on an HPI check. A bank loan is an unsecured loan and unlike PCP or HP, it isn’t recorded against the vehicle.

If you buy a bike from a seller who has used a bank loan to finance it and the seller doesn’t pay off the loan, you won’t be at risk – the bank will chase the seller for the loan repayment – what they used the loan for is not connected in any way to the loan itself.

Can I transfer the finance to the buyer?

While this sounds like a good idea, the finance company probably won’t allow it.

When you took out finance on the vehicle, the finance company ran a set of checks to minimise their risks and ensure you passed their lending criteria. So even if you only have a handful of monthly installments to make and the bike’s new owner could easily afford them, you probably won’t be able to transfer the agreement.

Similarly, if you’re a buyer and the seller suggested you give them the money and they’ll settle the finance or you pay them the money each month and they’ll use it to settle the finance, don’t do it. This is a terrible idea as the bike still remains the property of the finance company and may result in you finding it hard to insure the motorbike and if the former keeper doesn’t pay off the finance, the finance company will trace you and try and repossess the vehicle.