Bikes bought on PCP?

Author
Discussion

TinyMonster

171 posts

37 months

Wednesday 24th February 2021
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black-k1 said:
The guaranteed value is what the PCP company will guarantee the value to you at, not what the bike is actually worth on the open market. The potential for those two values to be different is the risk. If the PCP company get the guaranteed value wrong then they can lose money. If they estimate the "right way" then they do better than otherwise expected out of it. As a business model, getting it wrong too many times is not going to work so guess which way they're going to lean?
Ok, I'm out smile

black-k1

11,889 posts

228 months

Wednesday 24th February 2021
quotequote all
TinyMonster said:
black-k1 said:
The guaranteed value is what the PCP company will guarantee the value to you at, not what the bike is actually worth on the open market. The potential for those two values to be different is the risk. If the PCP company get the guaranteed value wrong then they can lose money. If they estimate the "right way" then they do better than otherwise expected out of it. As a business model, getting it wrong too many times is not going to work so guess which way they're going to lean?
Ok, I'm out smile
Fairy snuff!

podman

8,850 posts

239 months

Wednesday 24th February 2021
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PCP works for me, I have the BMW on it and to be honest, I dont want to own it outright.

While I fuss over my other bikes, with this I can ride it in all weathers, have the warranty back up, generally not be concerned about how or where I leave it, as long as its not damaged when I return it, it can be a corroded mess for all it matters, i can just hand it back and the monthly payments suit the pocket as opposed to buying it outright.

Mileage rates are negotiable and not fixed, the penalty isnt massive anyway for a bike.

I've not met anyone who has been left with negative equity at the end of the deal, I should be around £2000 up on mine .

If I get a good deal at the end, I may get another one, or chop it in on something else, having a new bike every few years is also part of the appeal...and it keeps the second hand market supplied with bikes as well..

black-k1

11,889 posts

228 months

Wednesday 24th February 2021
quotequote all
You won't get left with negative equity at the end of the deal unless you pay the balloon payment at the end and the assumption is that anyone doing that will be aware of the situation.

However, if there is a negative equity situation then someone in the deal is left with that negative equity as the bike is simply not worth the value of the balloon payment. The PCP company will effectively have to carry that cost. In general, the purchaser will be paying for that risk somewhere in the deal.

If it works for you then brilliant. If you can get a 0% deal then brilliant. (Spending someone else's money is always the best way to proceed.) although the purchase price of any deal, including a 0% deal, must always be compared with the real "cash up front" price, not the RRP. However, in the main, PCP deals MUST make the finance provider a profit (in addition to the dealer making a profit) otherwise the finance companies wouldn't stay in the business, and that profit has to come from you as the punter. There is no magic.

Jazoli

9,086 posts

249 months

Wednesday 24th February 2021
quotequote all
black-k1 said:
You won't get left with negative equity at the end of the deal unless you pay the balloon payment at the end and the assumption is that anyone doing that will be aware of the situation.

However, if there is a negative equity situation then someone in the deal is left with that negative equity as the bike is simply not worth the value of the balloon payment. The PCP company will effectively have to carry that cost. In general, the purchaser will be paying for that risk somewhere in the deal.

If it works for you then brilliant. If you can get a 0% deal then brilliant. (Spending someone else's money is always the best way to proceed.) although the purchase price of any deal, including a 0% deal, must always be compared with the real "cash up front" price, not the RRP. However, in the main, PCP deals MUST make the finance provider a profit (in addition to the dealer making a profit) otherwise the finance companies wouldn't stay in the business, and that profit has to come from you as the punter. There is no magic.
Nothing is free in life, its simply an easy way of getting a bike for a (much) lower monthly payment than HP or a loan would be, that is it, it obviously doesn't work for you and I think you are having difficulty understanding some of it (i.e the 'debt' you mentioned earlier) the finance companies make a calculated guess on the final value, they'll win on some and lose on others, it is that simple.

BroadsRS6

Original Poster:

785 posts

38 months

Wednesday 24th February 2021
quotequote all
Ok fair enough, fans and critics of PCP abound, predictably.
I am surprised though, that ''nobody pays cash any more''. I have bought almost every vehicle, be them 2 wheels, 3 and 4 via cash, or rather these days bank transfer, visa card, whatever. I was always told to buy outright to get the best possible deal and while there may be discounts on selling price around if you take out finance, overall i firmly believe you are better off buying with a straight payment. I accept that for some people, that isn't possible and in my early bike and car buying days i borrowed from the bank at the best rates i could find.
But it's interesting getting the different takes on PCP, it really is not for me.

black-k1

11,889 posts

228 months

Wednesday 24th February 2021
quotequote all
Jazoli said:
black-k1 said:
You won't get left with negative equity at the end of the deal unless you pay the balloon payment at the end and the assumption is that anyone doing that will be aware of the situation.

However, if there is a negative equity situation then someone in the deal is left with that negative equity as the bike is simply not worth the value of the balloon payment. The PCP company will effectively have to carry that cost. In general, the purchaser will be paying for that risk somewhere in the deal.

If it works for you then brilliant. If you can get a 0% deal then brilliant. (Spending someone else's money is always the best way to proceed.) although the purchase price of any deal, including a 0% deal, must always be compared with the real "cash up front" price, not the RRP. However, in the main, PCP deals MUST make the finance provider a profit (in addition to the dealer making a profit) otherwise the finance companies wouldn't stay in the business, and that profit has to come from you as the punter. There is no magic.
Nothing is free in life, its simply an easy way of getting a bike for a (much) lower monthly payment than HP or a loan would be, that is it, it obviously doesn't work for you and I think you are having difficulty understanding some of it (i.e the 'debt' you mentioned earlier) the finance companies make a calculated guess on the final value, they'll win on some and lose on others, it is that simple.
Which is almost exactly what I said in my first post ...

black-k1 said:
There is the basic rule that no-one is out there to give you, the punter, charity. Everyone is out there to make money and if you are the one "buying" the bike then it's you they are making money from. The more people involved in the process the more money that has to be made.

As a bike is depreciating asset, there is a gamble on the final value of the bike at the end of the PCP deal. The risk around that final value is generally on you but, very occasionally, there can be deals where the risk is more on the seller/PCP provider. Those don't happen to often as the seller/PCP provider would make a loss and that is not long term sustainable. That means that in addition to normal profit, your payments also have to allow for that risk to be covered.

That means you are almost always paying more for the PCP deal than you would for an outright purchase. However, you don't need the same amount of money up front so those who wight struggle to get the full purchase price up front can still get a nice shiny new bike.

It's not an approach for me but then I do understand that it may be an approach for some.
biggrinthumbup

Biker's Nemesis

38,536 posts

207 months

Wednesday 24th February 2021
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OK, who has the biggest willy/house/car and the supermodel wife and all children in university?

NS400R

463 posts

158 months

Wednesday 24th February 2021
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Biker's Nemesis said:
OK, who has the biggest willy/house/car and the supermodel wife and all children in university?
It's sad isn't it. The professional arguers always seem to come out on this forum. Tiresome tw@

Jazoli

9,086 posts

249 months

Wednesday 24th February 2021
quotequote all
black-k1 said:
Jazoli said:
black-k1 said:
Stuff
More stuff
Which is almost exactly what I said in my first post ...
black-k1 said:
Even more stuff
biggrinthumbup
Fair enough, I was confused by this bit

black-k1 said:
However, if the bike is actually only worth £4000 then you end up either paying more for the bike than it's worth, or carrying over a larger debt to your next purchase, thus getting a lesser deal, than you would if you simply turned up with £5000 in cash.
But I'll leave it there as people are complaining biggrinthumbup

NS400R said:
It's sad isn't it. The professional arguers always seem to come out on this forum. Tiresome tw@
moan

Biker's Nemesis said:
OK, who has the biggest willy/house/car and the supermodel wife and all children in university?
Me obviously biggrin



Edited by Jazoli on Wednesday 24th February 18:27

Prof Prolapse

16,160 posts

189 months

Wednesday 24th February 2021
quotequote all
BroadsRS6 said:
Ok fair enough, fans and critics of PCP abound, predictably.
I am surprised though, that ''nobody pays cash any more''. I have bought almost every vehicle, be them 2 wheels, 3 and 4 via cash, or rather these days bank transfer, visa card, whatever. I was always told to buy outright to get the best possible deal and while there may be discounts on selling price around if you take out finance, overall i firmly believe you are better off buying with a straight payment. I accept that for some people, that isn't possible and in my early bike and car buying days i borrowed from the bank at the best rates i could find.
But it's interesting getting the different takes on PCP, it really is not for me.
In the old days that was true.

With respect, nowadays people who evangelise about everyone should pay in cash, are either not spending much due to their modest requirements, or have little concept of the finances of the modern world.

For instance, how many folk in the UK can get an unsecured loan for £15,000? Of those who have the same in cash, how many can afford not to invest that in a property which would yield far more than the cost of a PCP deal? Or how many people can wait six years to save the cash to save a few hundred quid?

PCP deals come in good and bad varieties, but as with any form of credit, the concept is not inherently flawed or wrong. You pay a bit more, you get it a bit sooner. That could even be the financially better option, if it gets you to work, or it lets you invest the money in a house etc.

I'm not pointing the finger at you, but it's the classic "all credit is evil" nonsense really isn't it? At the risk of derailing, I should point out as well, that the very currency in our economy is so bizarre, that every time you borrow money, with almost no regulator oversight, it is created, and when you pay it off, it disappears. Far from being evil, credit is absolutely critical to keeping our economy moving, if everyone paid off their debts, the United Kingdom's finances would collapse. As a global economy, we have built quite a house on sand... Best keep borrowing so we can pour more around us I say. Until the flood comes of course.
























TinyMonster

171 posts

37 months

Wednesday 24th February 2021
quotequote all
BroadsRS6 said:
overall i firmly believe you are better off buying with a straight payment
You missed a 'because' statement after that smile

MDUBZ

833 posts

99 months

Wednesday 24th February 2021
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I always finance whether that be a loan or pcp regardless of whether i have the cash available.There seems to be an assumption that using finance means you can't afford it, and whilst that may be the case for some who stretch their finances, It can be used to work in your favour.

1) I'd rather have the cash in my pocket to invest or spend (mainly spend) if required and
2) If I can get an interest free deal through finance or by buying on a credit card and then moving the balance to a new card, then it effectively works like a discount as the £100 a month at the end of the deal is worth less in real terms than the £100 i'm paying at the start of the deal.

My current bike was bought on PCP. I had some share options maturing that I expected would cover the final payment so i was quite happy paying a low monthly fee and then paying the balloon payment with the shares and if it all went to st I could hand the bike back. If that hadn't have been an option i would have looked at credit card and then transferred or personal loan options. The shares fortunately grew over the 3 year period so there was a bit left over so it actually worked out really well and was much better than paying cash up front or getting a personal loan. There is no one right answer it really depends on the individuals situation.

The interest rate on the PCP generally covers the finance companies risk against the market value volatility - but as long as you are happy with the monthly costs of ownership you always have options at the end of the term:

If the bike is worth less that the balloon payment you could give it back or pay the ballon if you like the bike and the financial value isn't a concern.
If the bike is worth the agreed value you could trade it in, pay the balloon, or walk away
if the bike is worth more than the guaranteed value, you could work out a trade in value with the dealer, or pay the ballon and then keep it, or sell it and reclaim some of your money back.

Olza23

99 posts

134 months

Wednesday 24th February 2021
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I've got my current bike on PCP, haggled as hard as I could for the price, ride the depreciation curve and with the way bike prices are going I will probably pay off the balloon payment.

I do think that these PCP deals whilst getting people into higher priced toys, has probably driven the price of such toys up.

I agree with the comment a few posts up, not many people could obtain a £15,000 unsecured loan.

It is a bit of a credit circle though; I "rent" my bike for 36 months, then refinance the GFV for another 36 months, I'm 6 years paying for a bike - sounds crazy when you write it down!

I mean this in no way of a willy waving statement, and I did buy my bike second hand but the base price for my bike for the first owner was over 20k + the Termignoni exhaust easily added another £2.5k. I wouldn't and couldn't to spend that on a bike!


black-k1

11,889 posts

228 months

Wednesday 24th February 2021
quotequote all
NS400R said:
Biker's Nemesis said:
OK, who has the biggest willy/house/car and the supermodel wife and all children in university?
It's sad isn't it. The professional arguers always seem to come out on this forum. Tiresome tw@
thumbup

Drezza

1,415 posts

53 months

Wednesday 24th February 2021
quotequote all
Personally I never would, I don't like that it forces you to maintain dealer servicing which I prefer to do myself as it costs a fortune and if I drop it I can live with a cracked fairing whereas I'd have to fix it or take the hit on PCP. Although my Fazer is only worth a grand, I want a 765 Street Triple next, I'll just buy one a few years old for 6k, it's already done most of it's depreciation, can service it myself, seems a no brainer in my circumstances.

Iminquarantine

2,168 posts

43 months

Wednesday 24th February 2021
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anonymous said:
[redacted]
WTF?!? That is a phenomenal deal.

Is there anything else like that going?

BroadsRS6

Original Poster:

785 posts

38 months

Thursday 25th February 2021
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TinyMonster said:
You missed a 'because' statement after that smile
Because every time i have done the maths it has cost me less money overall to buy the vehicle, basically. Simples!
I'm not apologising for getting the best deal for me and my hard earned money!
However. I did say earlier i accepted that not everyone is able to pay cash. The point being that if you can, you should, in my view and from the calculations i have made each time a new car or motorcycle has been bought, that's simple numbers.
Re-reading the entire thread again a few people need to get a bit less fussy/miserable/precious about other peoples' choices. I also said that if PCP suits some people then go for it. It doesn't bother me a jot!
In fact, like someone else said the people who buy brand new on PCP create vehicles people like me can get for a song a few years later, so happy days.
I almost always buy used (and don't often insist on FSH either if the price is right). The exception being the Speed Triple 1200 on order because it floats my boat in a way i could not resist. I've managed to get a small but useful discount of 5% and will be paying with actual money, once more. I looked at PCP and it was instantly a NO, for me.
Calm down 1 or 2 of you, we're discussing how to buy a freaking bike, not gender fluidity in schools!!!

BroadsRS6

Original Poster:

785 posts

38 months

Thursday 25th February 2021
quotequote all
Drezza said:
Personally I never would, I don't like that it forces you to maintain dealer servicing which I prefer to do myself as it costs a fortune and if I drop it I can live with a cracked fairing whereas I'd have to fix it or take the hit on PCP. Although my Fazer is only worth a grand, I want a 765 Street Triple next, I'll just buy one a few years old for 6k, it's already done most of it's depreciation, can service it myself, seems a no brainer in my circumstances.
Absolutely right Drezza. A friend has the 765 and i loved riding it when he was abroad on business. I was tempted to get one, say 2 years old, but then Triumph went and updated their Speed Triple into an absolute raging monster and i was instantly canon fodder for a sale once i'd read the spec.
Buying once most of the depreciation has been done is also a great idea. I recently picked up a one owner 2017 KTM 690 Duke for £3,600, without service history. Nearer £5,000 from a dealer with FSH at a guess.
Sometimes credit can be a royal nightmare also. A young lad near us has a GSXR 750 he's bought on finance. The price was £9,000 but he'll pay over £12,000 in total. (His insurance of £2,500 a year is pretty frightening as well).

TinyMonster

171 posts

37 months

Thursday 25th February 2021
quotequote all
BroadsRS6 said:
Because every time i have done the maths it has cost me less money overall to buy the vehicle, basically. Simples!
I'm not apologising for getting the best deal for me and my hard earned money!
However. I did say earlier i accepted that not everyone is able to pay cash. The point being that if you can, you should, in my view and from the calculations i have made each time a new car or motorcycle has been bought, that's simple numbers.
I've removed the new/used stuff as we shouldn't be conflating that with the purchase method of anything.

I guess I take the other road to you, in that I'm in a position where I can pay cash but it has never made sense to do so but then, I've always used 0% finance. The big hammer blow to the decision is usually opportunity cost, which is something a cash purchase can never compete with. Even if someone is purchasing with low-rate finance, the opportunity cost is not a factor to be dismissed. If you have to pay a couple of hundred quid over 3 years to have fluidity of a 5-figure sum, why wouldn't you?

As with your friend who's paying £3,000 to borrow £9,000, well, he's an idiot. By my rough maths and assuming a 3-year term, he's signed up to a deal with an APR of about 21.5%? Even over a 4-year term, it's 16%, which is totally mental. With that level of thinking, I'd probably go and check he's bought a GSX-R and not some magic beans.

Regardless, funding is not as simple as saying one method is better than another. Would cash have been better than the deal your friend got? Yes, absolutely, but that's an extreme example of where someone has been totally bummed on a deal that they were otherwise happy to sign up to. Would cash have been better than a 0% PCP with nil deposit on a workhorse? Absolutely not.