Buying on PCP? Read this first!

Neil Murray makes a living buying & selling pre-loved metal – and he’s on your side

‘Buying on PCP? Read this first’

ersonal Contract Purchase sales are attractive because they bring your monthly repayments down to very low levels, so you can afford a more expensive bike than you could with an ordinary credit agreement. But you don’t own the vehicle until the end of the agreement: then you need to lob up a lump sum, or simply hand back the bike and start again, or hand back the bike and walk.

Right now, interest rates are about the lowest in history. A generation of buyers has known nothing but super-cheap credit. But rates can go up as well as down, and there is only one way they can go up from the present Bank of England rate of 0.5%.

Sales of new bikes are rising fast. In (say) three years’ time there will be a lot of used bikes available on the market. However, fewer brand new models are being launched. It may seem otherwise, but the Japanese are mostly recycling old models by tweaking existing engines and adding different bodywork and sometimes a new chassis. This is because the cost of building new engines is horrendous, thanks to environmental legislation.

All I’m saying is before signing a PCP, look three years into the future. Will interest rates have risen? Will there therefore be a constraint on your spending power (pricier mortgage, for example)? Will used bikes be (in real terms) cheaper, because of their ubiquity? Do you think more people will simply hand back the keys after three years of PCP?

If you score three or more Yes answers, I’d suggest you think again about PCP. The upside of the prevalence of PCP is that used bikes will be cheaper.

Words: Neil Murray