If you are thinking about purchasing your new bike on a personal contact purchase (PCP) agreement, you will need to take note of the optional final payment amount.
This is the figure that reflects how much you will need to save up or find at the end of the lease term, should you wish to purchase the bike outright.
You don’t actually own the motorbike during your PCP term, it is owned by the company providing your finance but the OFP enables you to make a final balloon payment to the finance company and the bike becomes yours.
Why Are Optional Final Payments Important?
PCP finance works by enabling you to “lease” a proportion of the cars value for a specified amount of time. During that period you are making monthly payments to enjoy the benefit of your lovely new bike. This is usually anything from 12 to 48 months, with payments calculated based on your personal financial situation, credit score, affordability and the estimated residual value of the bike.
If at the end of the term, you have made all of your payments and you wish to keep you bike, you can make an optional final payment and treasure it forever.
Are Optional Final Payments A Realistic Reflection Of Value?
Even for lenders and automotive professionals, it is difficult to accurately ascertain the value of any one particular make and model as far as 4-5 years into the future.
They can, however, make pretty accurate calculations based on market trends, availability of certain makes and models, car performance and year on year depreciation.
Do I just Pay The Optional Final Payment And Walk Away?
Pretty much, yes. If you have paid up all the finance, and you have made the optional final payment the bike is yours to keep. You are free enjoy it for yourself, or sell it on – whatever works best for you.
Do be aware though, the optional final payment may look like a little lower than you would pay from a dealer or a private sale, but in reality, you have probably paid around 20% more than the list price over the course of your monthly payments, including interest.
Optional Final Payments are also sometimes referred to as balloon payments.