With PCP, you’ll make an initial deposit of around 10% of the bike’s value before paying fixed instalments over a 12-48 month period. You’re paying off the depreciation value, which is the difference between the sale price and the pre-agreed Guaranteed Minimum Future Value (GMFV). At the end of the agreement you have three options. You can either pay the GMFV and own the bike outright, return it with no further payments, or trade it in for an upgraded model.
PCP agreements are an affordable way to finance your motorcycle. The payments are typically lower than those on other plans, and you benefit from a range of options when the agreement ends, meaning you can decide during the term whether you’d like to keep the bike or return it.
At the beginning of your PCP contract, you’ll need to estimate your annual mileage and any additional miles covered during the term will be charged. Although you won’t own the bike during the agreement, you’ll still be required to cover maintenance, tax and insurance costs.
To settle your PCP agreement early, you’ll need to obtain the settlement figure from your provider. This is the difference between what the motorcycle is worth and what you still owe. As such, early settlement can result in negative equity.
With Hire Purchase, you’ll make a deposit of around 10% of the motorcycle’s value, then pay off the balance over a period of 12-60 months. After making the final payment, you’ll be required to pay an ‘Option to Purchase’ fee, which is usually around £100-£200, and then the bike is yours.
Hire Purchase is ideal for those who want to own their bike at the end of the agreement without having to pay a lump sum. Another key benefit is that there are no mileage restrictions, so if you typically ride over long distances, it won’t cost you extra.
Monthly repayments on Hire Purchase plans are normally higher than those on PCP or PCH plans, since you are covering the motorcycle’s full value rather than the depreciation value. It’s also worth remembering that you don’t own the bike until the final payment and Option to Purchase fee are paid. That means if you want to sell, you’ll need to settle your finance first.
To settle an HP agreement, you’ll need to obtain a settlement figure - which includes the outstanding balance and interest - from your lender.
PCH agreements usually require a deposit of three months’ rental to be paid, after which you lease the bike with fixed monthly payments. The contract lasts between 24-60 months, and can include a maintenance package if you choose, meaning that servicing and hire costs are taken care of in one package. When the agreement ends, you simply return the vehicle.
PCH agreements are a great option for those who want the freedom to change their motorcycle every few years. They also enable you to enjoy a vehicle that you may not be able to afford to buy outright, since monthly payments are usually less than those made on Hire Purchase agreements.
PCH contracts are subject to mileage restrictions, so it’s worth trying to accurately estimate your annual mileage to avoid being charged for any excess miles. In addition, although you won’t own the bike, you’ll still be responsible for insurance, tax and maintenance. You won’t have the option to purchase the motorcycle as part of the agreement.
While a PCH contract can be cancelled early, this will likely incur charges, so check with your lender before making a decision.