Can I buy a used motorcycle on finance?

How do I buy a used bike with Hire Purchase (HP) finance?

Most finance packages require you to make a deposit and then you’ll pay back the amount you borrow in monthly installments. You’ll follow a similar process whether you’re buying new or used.

You’ll set the timeframe of the loan, usually between 12 and 60 months and agree the APR (interest rate) which will give you a fixed monthly payment you agree to meet.

With Hire Purchase, your payments are calculated so that when you make your last payment you’ll have cleared the debt and you’ll own the vehicle.

The larger the deposit, for a given term, the lower your monthly payments will be. Equally, the longer the term of the loan, the lower your monthly payments will be but you’ll end up paying more, the longer the duration of the agreement.

The bike will belong to the company financing your purchase all the way through the term of the contract until you’ve finished paying it off.

It’s unlikely that you’ll be able to finance a bike or scooter that’s more than 5 years old and keep an eye on the contract as there may be annual mileage limits on the bike.

Hire Purchase is essentially like a straight-forward bank loan. You borrow the money and pay it all off. The only problem with HP over an ordinary loan is that the finance is connected to the bike. That means you don’t own the bike until your last finance payment is made (either by reaching the end of your agreement or paying it off in a lump sum). This means it’s harder to sell a bike halfway through your term.

That’s why some people prefer to get a loan from a bank or a reputable provider like the AA Loans for example. This type of loan isn’t secured against the bike; you borrow the money, walk into the dealer, buy your bike and then pay off the loan. You own the bike from day one and can sell your bike at any time, hassle free. 

Most of the time, the interest rates on a standard loan are far more competitive and beat any other finance hands down. For example, if you were to borrow £7,500 over 3 years, with a typical loan you’ll pay back £7880, which is a great rate.

How do I buy a used bike with Personal Contract Purchase (PCP) finance?

If you’re familiar with the world of finance, you’ll know that PCP finance is often cheaper than HP finance. This is because you’re not paying off the entire value of the vehicle. The monthly finance payments are calculated so that you cover the depreciation (difference between new price and the predicted price at the end of your PCP contract) and interest-only on the cash price (total loan amount). With PCP you only pay off a set amount of the vehicle, usually around 50% and then at the end of the term, you have three options:

• You give the vehicle back to the dealer you bought it from and walk away
• You pay the final payment (often referred to as the balloon) and keep the vehicle
• If you are not in negative equity, you can use the equity you have in the vehicle to use as a deposit towards a new motorbike

PCP finance agreements will almost always specify a mileage allowance and if your bike is your sole means of transport, you may find these restrictive.

Because PCP is designed around you handing the keys back at the end of the term, you may get penalised if the bike’s in poor condition or if you exceed the mileage limits.

Can I finance a used bike with a bank loan?

Absolutely. In many ways a bank loan is the best option as it allows you to buy the bike outright and pay off the loan.

This is called an unsecured loan, i.e. the loan isn’t secured on the vehicle. The beauty of buying a used motorcycle with a loan outside of HP or PCP is that you’ll be more flexible should your circumstances change. If you want to sell the bike, you can – and used the money to pay down the loan or buy another motorcycle.

That’s why for most people buying a secondhand motorbike with finance, they prefer to get a loan from a bank or a reputable provider like the AA Loans. As a typical example, if you borrowed £7,500 over 3 years, you’d pay back £7880.

Smaller dealers may have a better range of bikes in a lower price bracket and may not have access to PCP or HP finance deals for these low asking prices, meaning that with a loan you’re not just restricted to main or larger dealers with newer bikes.

The things to look out for

If you buy a used bike with HP or PCP through a dealer, in many ways you’re on the treadmill.

The dealer will no doubt see you as an opportunity to sell to again. So your used bike on finance might be great but the dealer could have you in their sights for a new bike, offering you ‘a great upgrade’ or a newer bike for a slightly larger monthly payment when you come close to the end of your finance package.

• Be wary, stick to your guns and don’t inadvertently slide into a finance deal you never wanted in the first place.
• Keep an eye on any mileage restrictions on the finance agreements as exceeding these could cost you a pretty penny.
• Your agreement may stipulate you get the bike serviced at an official dealer, meaning servicing prices might be more expensive than at an independent garage or doing it yourself.
• Often new bikes come with manufacturer incentives, as they want to push a new model or clear out stock. Sometimes it’s possible to pick up a brand new, end of line model with a large manufacturer-backed deposit contribution for not a lot more than a low-mileage used model. Don’t always assume a used bike offers the best deal.

Remember, you’re borrowing money and you’ll pay back more than you borrowed. Do your research and ask yourself if you can really afford a bike on finance before you sign on the dotted line.

If you do need to borrow money to finance a new bike, check out your local bank or a reputable provider like the AA Loans to get an idea on what’s available to you.