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Motorcycle Financing Guide

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Every way to finance your new motorcycle

Twenty-five years ago, pretty much the only way you could buy a motorcycle was with cold-hard-cash. A lot has changed and now more motorcycles are bought with finance than any other method.

In the 90s, the likes of Carnells and Motorcycle City came on the scene and finance became a new and popular option for bikers. Sales of new motorcycles sky-rocketed; Carnells and City were selling motorbikes to financed-up punters cheaper than local dealers could buy them from the manufacturers. Sales were booming but local dealers were losing cash purchases to the finance-fiend.

A decade ago, second-hand motorbikes became commonly available to buy with the help of finance and more recently, the PCP whirlwind has sent the industry into another spin and with all the mention of PCP on dealer windows and manufacturer adverts, you might think there’s no other way to buy a motorbike.

This guide quashes that myth and explains all the ways you can finance a new ride.

Paying in cash

Cash may still be king in many ways, but making a large purchase using cash can come with its own problems.  For example, cash payments are not covered under Section 75 of the Consumer Credit Act, which will help you get your money back should your dealer go bust before your bike is delivered.  Likewise, you will have no recourse from the Financial Ombudsman Service (FOS) should your bike prove to be an absolute wrong’un and suffer from a fundamental fault. 

It may sound completely mental but most dealers don’t want to deal with cash. They’ll make more money from the sale of a bike on finance than by taking cash.

Cash purchases are very rarely protected in any way, so while you may be able to do a deal based on upfront payment, there are more risks attached. Also, if you do decide to sink all of your hard earned cash into your new bike, don’t risk a brown envelope full of notes; ask the seller to accept a bank transfer instead.

Enter into a PCP agreement

Personal Contract Purchase (PCP) makes owning your new bike incredibly affordable and allows you to upgrade every couple of years if you want to.  On the downside, you will never actually own your bike outright and if you default on the payments, the lender will repossess your bike (and slash your credit rating at the same time).

You can check out our motorcycle PCP calculator here to get an idea of how PCP works.

By paying an affordable initial deposit, followed by monthly payments over a period of 2,3,4 or even 5 years, you can probably stretch to a better make or model than your bank balance alone would allow you to.  At the end of the term, there will be a pre-agreed Guaranteed Future Value (GFV) that your bike should be worth provided you haven’t ragged it to death, damaged it or exceeded the mileage limitations of your agreement.  You can hand the bike back to the dealer and walk away, or start a new PCP agreement for next bike.

Buy it on HP

Hire Purchase (HP) is a loan that is secured against your motorbike.  You decide how much you want to borrow, and make monthly repayments over a 1,2,3,4 or even 5 year period.  You will also be required to pay an initial deposit yourself, and then the loan money will cover the remainder of the purchase price for you.

The monthly HP payments will be more than the same bike on PCP but unlike PCP, when you have finished making all of the repayments, the bike will be yours to keep (or sell, or part exchange, or whatever).

Part exchange your current bike

Part Exchanging your bike can be a convenient way of off-loading it while putting some money towards your next purchase.  Most dealers will be happy to take second-hand bikes in as part exchange, but they may not offer you the best market value. 

Dealers need to make a profit from selling your old bike on, so they will usually offer you a lower price than you would get if you sold it privately. You’ll get a lot more for your old motorcycle if you’re part-exing it with a dealer that sells that brand. If you walk into a Ducati dealership and want to part-ex your Honda, you’re not going to get the best price.

However, when you weigh up the convenience of part-exing it against having to find a private buyer and deal with the hassle of a private sale, this could be a more attractive option for you.

Use your credit card

If you are savvy enough and well disciplined, using your credit card to purchase your bike can save you a ton in interest over an HP agreement or loan.  If you use your current card to buy your bike outright, simply apply for a new card with a 0% rate on balance transfers, and transfer the balance over straight away. 

Credit card companies love to offer interest-free periods on new accounts, so if you are organized enough, and have a good credit rating, take out a new card every 6 months or so to allow you to finance your bike without paying a penny in interest. Just watch out for cards that charge high fees for balance transfer – this would ultimately defeat the object of switching cards to save cash.

Lease your next bike

If you need a bike for work, or something just for the short term, it might be worth considering leasing.  Simply find the bike you are looking for, pay a low deposit (usually between 1- 3 months hire fees) and make regular repayments for the duration of the lease.

When you lease a bike, once you’ve made the initial upfront payment, you are literally only paying for the amount the bike depreciates during the time you have it, which does mean that you may be able to ride a better bike than you would if you were buying outright. At the end of the lease, simply hand it back and begin the process again.

Ride a company motorcycle

If your employer has furnished you with a company motorcycle, you may think you are riding this around for free!  Sadly, this is not quite the way it works.  Your employer (or his accountant) will be very aware of the potential tax breaks available for providing employees with vehicles to carry out their every day duties.

However a company vehicle is a taxable benefit, so it’s often not the most efficient way to extract surplus money from your company’s bank balance.

If you are an employee (rather than a director) and have a company motorcycle you will usually be responsible for keeping it in a roadworthy condition and filling it with fuel.  However, you can usually make claims against your employer for any expenses you incur when you use it for work.  This could include business mileage rates for fuel, insurance, parking, breakdown cover and other incidentals.

Take out a bank loan

If you are in receipt of a regular income, and your credit score is pretty decent, you could ask your bank for a loan to cover the cost of your bike. 

An unsecured bank loan is exactly that, not tied to your property or any other assets, and is based purely on how attractive a proposition you are according to the bank’s criteria. 

One of the major benefits of a traditional bank loan is that they’re often very cheap, with low interest on the lump sum and if you want to change the bike at any time, it’s yours to do what you want with.

Your only obligation is to meet the monthly repayments. Should you default on your payments, your bank will start proceedings to repossess the bike as collateral.

However, unlike a PCP or HP agreement, you have the flexibility to sell the bike or part-ex it at any time. Bank loans offer finance with flexibility and you own the bike the moment you purchase it, which is why they are a popular choice for a lot of bikers.