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What happens at the end of my motorbike PCP agreement?

All good things come to an end even though, when you sign your motorcycle PCP agreement, you’re probably only thinking of the good things that are about to get going.

When your PCP term finishes, you have three choices:

  • Pay the balloon payment and the bike becomes yours
  • Hand back the keys and walk away
  • Use any equity in the bike as a deposit against a new one

PCP agreements are usually set between 24 and 48 months, although they can run for as little as 12 months and for up to 60 months.

However long your term, you can guarantee your dealer will be in touch when there’s around a third of the term left – usually with 12 months left on your agreement. Why? Because they’ll want to sell you a new motorbike of course!

So let’s look at the three options:

1 – Pay the balloon, buy the bike (Retain)

At the start of your PCP contract, you’ll see a term called Guaranteed Future Value (GFV) – this what you agree the bike will be worth when your term ends. If you get to the end of your term and you and your bike have bonded and you have to have it, you can pay the GFV (often known as the balloon) and the bike is yours.

2 – Hand back the keys and walk away (Return)

Obviously, you’ll have to hand back the motorcycle along with the keys! However at the end of your PCP term if you don’t like the bike, can’t afford to buy it or you’ve simply got your eyes on a new one, then this is the option for you.

During your PCP agreement, you’re paying the difference between the bike’s showroom price and it’s value at the end of your term. Once you’re finished your set of monthly installments, you’re free to move on.

There is just one caveat to that and that’s the condition of the bike. If you’ve put galactic miles on it when your agreement asked you to stick to 3,000 miles a year, you’ll pay a pence-per-mile surcharge.

Or if you’ve forgotten to take the lockwire out of caliper bolts after two seasons of racing, the dealer might get the clipboard out and pick up every little issue.

This can cost you a small fortune and land you a hefty bill. If you were looking to trade your bike in for a new one, then any ‘equity’ in the bike will get eaten away if it’s in contravention of the agreement you signed up to.

3 – Trade the bike in for a new one (Renew)

This is the option the dealers would most like you to take as, in short, they make more money from you. You can see why people go for it too as they might not have another bike available or the cash to pay the balloon on the existing one.

More likely however, is that you’re chomping at the bit to get a shiny new bike. There’s nothing wrong with that but it’s likely the dealer will try and upsell you to a more expensive model with higher monthly repayments, or they will look to keep your repayments the same if they think you’re price conscious and in doing so, you might end up on a longer deal, paying more in the long run.

If the bike’s market value at the end of your contract is less than your GFV, then you won’t have any equity left in your agreement and thus no deposit to contribute towards your next PCP agreement.

So if you’re reliant on the bike being worth more than the GFV when you start the agreement, be careful as you may end up out of pocket.

What’s the mileage limit on a PCP deal?

This varies from manufacturer to manufacturer. It can be as low as 3,000 miles a year but around 8,000 is common. You can negotiate a mileage allowance with the dealer and you’ll be charged for any excess mileage.

Who decides what fair wear and tear is?

No matter how well you look after your motorcycles, it’s still being used and will be subject to wear and tear. A dealer doesn’t expect it to be returned in showroom condition but they will expect it to be within the parameters of fair wear and tear.

Most finance companies apply the BVRLA (British Vehicle Rental & Leasing Association) guide to Fair Wear and Tear. The guide provides an industry-wide standard for both parties to refer to.

PCP fair wear and tear guidelines:

On collection the vehicle should be in a safe and roadworthy condition with all the keys, paperwork and equipment (toolkit, seat hump etc).

The bike should have a current MO. If you ride it to the dealers on the day the MOT expires, you may get away with it but without an MOT the dealer can charge you for the time to get a new one. In most PCP cases, you’ll be returning your bike before its first MOT is due.

The bike (or scooter) should be services to the manufacturer’s schedule and by a main manufacturer-approved dealer. Check your agreement to see the fine print of where you can get the bike serviced.

Even though consumables by their very nature get worn out, if your chain is hanging off or if your brake pads are down to the metal a dealer may contest this.

How you can minimise the risk

Thoroughly clean the bike before handing it back. It pays to get a valet, to get the bike looking as best as possible and any small marks removed which could otherwise be recorded as damage. If nothing else, it shows willing and dealers hate having to waste time bring a bike back up to standard.

Replace any damaged parts with genuine parts rather than trying to repair them. If you’ve got a small scuff on your indicator from a driveway spill, it’ll be a far wiser idea to buy a genuine OEM second-hand set from eBay than have the dealer spot it and charge you list price for a new set.

Your next PCP finance deal

Even if you are dead set on another finance agreement, make sure you shop around.

The dealer who sold you your original bike won’t want to lose you and will be applying gentle pressure from as much as 12 months away from the end of your deal. They’ll dangle a few good-looking offers in front of you but remember: they’re motivated by hitting sales targets, no matter how much they tell you they’d like to look after you.

You can get stung in many ways. Your equity from the existing PCP deal can get swallowed up as a deposit on the new agreement. The monthly payments could be higher or if the payments are the same, the payment term could be longer, meaning you have to shell out more.

If the dealer gets you to agree to trade your existing bike for a new bike before the end of your term, they may advise you to use the Voluntary Termination (VT) clause, which allows you to end an agreement once you’ve paid off 50% of the Total Amount Payable (TAP) at the start of the agreement.

While a VT won’t directly affect your credit score, it will be recorded and may indirectly affect the interest rates you’re able to get offered as some lenders may opt-out from quoting for your business.

It always pays to shop around.