Has PCP financing absolutely screwed the market for premium used bikes?

[SmallmanA]

I'd be very interested to know the experience of others on this.

I failed to sell, for perhaps ?1,500 to ?2,000 below the price dealers were charging, my top-spec S1000 XR. In the end, I swopped it for an S1000RR. So I'm a happy bunny.

In the course of not selling the bike - via eBay, MCN and Bike Trader - I had a fair few offers of swops. One guy, for example, wanted to swop his immaculate BMW 1600 GT. He too had failed to get any buyers.

It could be that the economy is truly woeful.

But I suspect it's PCP financing. And a couple of dealers tell me it's so.

My old chums at MCN have been running a 'Praise be for PCP' column promoting the joys of having what appears to be wonderfully cheap and fabulous motorcycle. And the latest sales stats (Click here for MCIA registration data) shows year-on-year motorcycle sales are up 8.4% compared with the same period a year previously. So champagne all round then.

But it feels that there are two big negatives. First, if you own a nearly new bike that you think should be worth north of, say, ?10,000, then you may find it isn't.

Second, I'm told that, now PCP has been running for around three years, machines with guaranteed values are washing up at dealers who can't make a profit on them. I've no idea who holds the responsibility for the difference - the manufacturer or the finance company? - but something has to give, no? Apparently when similar dynamics happened with the Cosworth Fords, the maker had to step in to buy up the stock so that its dealers didn't go bust.

Perhaps to the list of 'old-things-that-were-crap-then-but-are-dead-cool-now' (vinyl, David Hasselhoff, Spam) we can add bartering. How quaint.

 

[MacRR]

I think another problem is that punters are buying expensive new bikes on PCP that they wouldn't otherwise be able to afford so if they need to sell up a year or two down the line there's probably a distinct shortage of buyers who have 12-14 grand cash burning a hole in their pocket to fund a private purchase so the ability to pay dictates these bikes are going to be hard to shift unless you can find a win win deal somewhere.

 

[soofsayer]

pcp finance on cars and bikes has created a fake affordability so manufacturers can shift more units. low monthly payments are a hidden curse to buyers by making overall ownership more expensive by increasing interest charges and creating an unaffordable balloon. The result is effectively hiring a bike for a fixed period and then giving it back with little or no original deposit left to 'go again'. Everything seems to sell on pcp now. Recently I bought my wife a new car and every dealer I spoke to was only interested in how much my monthly budget was (I don't have one). I had a few arguments before I could get a straight answer on what my trade in was worth and how much the car I was buying was worth so as to do my own maths.

Its straight forward to arrange asset finance (on a bike) if a private buyer has good credit and is so inclined, so I don't agree it's a difficult market because you are relying on big lumps of cash being made available. You should also consider differences like dealer warranty and service which as a private seller is impossible to match.

 

[MacRR]

I didn't think it was that easy to arrange a PCP deal at a reasonable APR for a private bike purchase? Of course you can get a bank loan for the full amount with the much higher monthly payments that go with it v PCP

 

[soofsayer]

I didn't think it was that easy to arrange a PCP deal at a reasonable APR for a private bike purchase? Of course you can get a bank loan for the full amount with the much higher monthly payments that go with it v PCP

Ant should know all about this. as long as the asset is less than 5 years old most mainstream asset finance companies would look at it.

 

[Beavis]

I'm old school , I want to know how much for mine and how much for the new one then I'll decide. Pisses me off when sales people ask " what's your budget ?" Cant get my head round this PCP thing at all. I have guys at work and both car and bike sales people tell me about it. I want something that's mine at the end of it.

 

[Julestys]

I own a vehicle finance brokerage that is mainly based on cars and vans, and deal with PCP's all of the time.
When I purchased my S1000RR I looked at what BMW were offering and the rates were far too high, and this is probably how they offset the bike coming back in below what its really worth.
Plus you have the factor that when someone comes to pay the final payment or handback, they may love the bike that much and know its history, that they are happy to pay over the odds on the final payment.
My circumstances were owning a three year old Fireblade which I part ex'd for decent money with the BMW dealer and then had a bank loan for the remainder over three years.
Saved a load of money over the term.
Totally agree that it allows people to own a bike they probably could not afford beforehand though

 

[Loupe]

I bought mine so I could then slide it across a track and not worry about being penalised for little marks here and there when I handed it back :unconscious:

 

[andyf]

For reasons which current alllude me, I have a copy of this week's comic sat in front of me. Page 27 is a full page advert for the Fireblade

0-60
(mph in)
2.6
(seconds)
100+
(victories)
174
(mph top speed)
10,670
(rpm)
<picture of bike>
(But there's)
(only two)
(numbers that)
(matter)
(this summer)
?99
(at)
5.9%
(...)

On the face of it, ?99 for a "modern" sportsbike is the deal of the century, I'll take 100 (and flog them all on ebay).
No, don't be so silly, it's ?99 a month. I can afford that. Here's ?100, keep the change. Except that it doesn't work like that Sir, the first month's ?99 is actually ?2713.25. Which is a lot more than ?99. If you could borrow the deposit at the same 5% APR, the ?99 month repayment would be ?179, and at the end of 3 years, having spent ?6444, you can buy the bike outright if you happen to have another ?6340 lying around, you can walk away with nothing, or if the dealer is willing to value the bike at more than the final payment amount, you could use the difference towards the deposit for another bike on PCP from the same dealer.
And you're limited to 4000 miles a year.

The scheme only seems to make sense if you want a new bike from the same dealer every 3 years, and if there is enough 'equity' in the bike at the end of the 3 years to cover the deposit on the next one. Or if your the dealer. Makes a lot of sense to the dealer.

 

[jamesd]

Hi guys...

I have worked in car sales for 23 years and know the bloke that invented PCPs is an ex England Rugby union player called Steve Bainbridge. He was part of a team that were employed by Ford to come up with a way of increasing world wide sales and customer retention.

The team idea was PCPs....but a few of the older generation will remember it been called Ford Options.

The original name for the new finance product was "half a car". Because that's what you bought half the car, and the other half belonged to Ford and they had the right to it.

PCPs have hurt the second hand car business and give main agents a revolving stream of customers. So I would guess they have had similar effect in the motorbike trade.

Ask Steve if he would buy a car on PCP and he will answer no. Belter to pay more for a year or two and own it at the end of it.

However, they do give people a great chance to get in or on something nicer than they might of been able to afford...

 

[soofsayer]

For reasons which current alllude me, I have a copy of this week's comic sat in front of me. Page 27 is a full page advert for the Fireblade

0-60
(mph in)
2.6
(seconds)
100+
(victories)
174
(mph top speed)
10,670
(rpm)
<picture of bike>
(But there's)
(only two)
(numbers that)
(matter)
(this summer)
?99
(at)
5.9%
(...)

On the face of it, ?99 for a "modern" sportsbike is the deal of the century, I'll take 100 (and flog them all on ebay).
No, don't be so silly, it's ?99 a month. I can afford that. Here's ?100, keep the change. Except that it doesn't work like that Sir, the first month's ?99 is actually ?2713.25. Which is a lot more than ?99. If you could borrow the deposit at the same 5% APR, the ?99 month repayment would be ?179, and at the end of 3 years, having spent ?6444, you can buy the bike outright if you happen to have another ?6340 lying around, you can walk away with nothing, or if the dealer is willing to value the bike at more than the final payment amount, you could use the difference towards the deposit for another bike on PCP from the same dealer.
And you're limited to 4000 miles a year.

The scheme only seems to make sense if you want a new bike from the same dealer every 3 years, and if there is enough 'equity' in the bike at the end of the 3 years to cover the deposit on the next one. Or if your the dealer. Makes a lot of sense to the dealer.

Someone I know traded his fully paid off evoque for a RR sport, and the finance is something silly like ?150 a month. It's a 4 year pcp. The evoque was such a big deposit the payments were tiny. He will loose ?10k a year in depreciation but doesn't feel that, until the four years are up.

My BMW car main dealer sales guy openly told me that pcp was fantastic for them. They knew what the customer payments were and the system would screen for potential new car customers by comparing pcp monthly payments. The philosophy seemed to be pcp was a permanent conveyer belt for new car sales.

 

[JimmyMac]

I'm old school , I want to know how much for mine and how much for the new one then I'll decide. Pisses me off when sales people ask " what's your budget ?" Cant get my head round this PCP thing at all. I have guys at work and both car and bike sales people tell me about it. I want something that's mine at the end of it.

I'm with you Dunc, if I could afford it I'll buy it if I can't, I'll save up. I remember my first car, a MG Metro, lots of my pals had took big loans out to buy RS 2000's and 2.8 and 3 litre Capris and laughed at my little "Go-Cart". When we went for a run three of the big cars would get parked up and the drivers all clambered into one so they could share the petrol. No room for any girls......idiots.

Economics is mega simple, if you want it, work hard, save and buy it, if you can't you don't want it enough. Canny believe it, I'm turning into my Dad.

Moan over.

JimmyMac

 

[powders]

Wouldn't touch pcp with a barge poll
My budget has always been 15 for a bike and 35 for the wife's car
Since the celtic tiger I'd never buy new again

 

[Benny130]

Don't agree at all. Whether you finance or not a bike or car only costs you what you pay for it less what you get back for it. If you have the cash to pay upfront then you pay less than financing because of the interest on the money that you borrow. Other than this cost the numbers are the same. A pcp buyer will actually be better off than a cash customer if at the end of the term the bike is less than the guaranteed future value because you can just hand it back!!!???


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[andyf]

A PCP buyer would only be better off than a cash buyer at the end of the 'term' if the cash buyer sold his bike for less than the balloon payment, minus fees, penalties, interest and any discount the cash buyer might have gotten.

If the cash buyer had little to no interest in buying a new bike every 3 years, there would be no reason for him to pay the depreciation rates for new bikes. The same with a buyer who took out a straight loan, over whatever period suited his budget.

If for some inexplicable reason you want to buy a new bike every 3 years from the same dealer, PCP might well make sense. Otherwise, it is like a second hand made to measure suit.

 

[stuartb]

Its personal choice chaps, no criticism either way.

Mind Jimmy most punters are on low wages or have other commitments like me (huge), where your saving rather than financing is commendable it doesnt work for a lot of people.. ive PCP on my bike, ive one wage coming in and three mouths to feed, it works well enough for me...

stuarts phone

 

[MacRR]

Don't agree at all. Whether you finance or not a bike or car only costs you what you pay for it less what you get back for it. If you have the cash to pay upfront then you pay less than financing because of the interest on the money that you borrow. Other than this cost the numbers are the same. A pcp buyer will actually be better off than a cash customer if at the end of the term the bike is less than the guaranteed future value because you can just hand it back!!!???


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Don't follow your logic Benny, if you buy a bike cash with no loan you'll drive the best deal, with interest on savings is so low at the moment bank you are sacrificing little v leaving it in the bank where it's currently going to attract what 1% interest? But you save significantly v the interest a PCP scheme attracts (5-6% ish?) plus there are no ties or restrictions relating to how much you need to get to settle the balance on a PCP when you sell your bike on.

 

[Benny130]

Of course it's cheaper over the term not to borrow the money but some people don't have 15k in the bank. Same way as it would be cheaper to buy a house with no mortgage but not many of us are in a position to do that. You might actually get a better deal if you finance a bike as they get a kick back!!!


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[powders]

Very hard to get finance on a bike over here in Ireland
It's usually a personal loan from the bank which is a lot more expensive than a car loan

 

[fraser2]

Very hard to get finance on a bike over here in Ireland
It's usually a personal loan from the bank which is a lot more expensive than a car loan

Not so sure about that Powders, Kearys and Duffys Motorads are doing lots of PCPs this year