Finance Explained – What’s a PCP finance agreement?

Keep your monthly repayments lower by deferring a large proportion of credit into an optional final repayment.

Personal Contract Purchase (PCP) finance can help you buy your dream motorcycle with lower monthly repayments than a Hire Purchase (HP) product as a large proportion of the amount you repay is deferred into an optional final repayment.

You will pay more interest on a PCP agreement than a HP agreement for the same loan amount, term and APR* as your balance reduces more slowly due to the optional final repayment.

How it works

  • Agree an initial deposit and term with the us and decide how many miles you’ll travel each year.
  • We will then work out the monthly repayment amount and the optional final repayment amount, which is based on the anticipated value of the motorcycle or scooter at the end of the agreement.
  • At the end of your agreement, you can part exchange the motorcycle, return the motorcycle or scooter (return conditions apply) or pay the optional final repayment and own the motorcycle or scooter.
  • The finance company buys the motorcycle or scooter on your behalf and owns it for the duration of the finance agreement.
  • After you’ve made all the repayments including the optional final repayment and any interest, you will become the owner of the motorcycle or scooter.

*Annual percentage rate of charge – the is the total cost expressed as an annual percent of the total amount of credit. The APR is there to help you compare different offers.

At the end of the agreement you will have three choices

  • Part Exchange: Subject to paying off your existing agreement in full, you can part exchange the motorcycle or scooter at the end of the term or any time during the agreement. New credit agreements will be arranged subject to status. The motorcycle or scooter could be worth less than the optional final repayment leaving you with a shortfall to pay before starting a new agreement.
  • Return: You have the option to return the motorcycle or scooter to us (or finance company) at the end of the agreement. To avoid incurring charges, the motorcycle or scooter needs to be in good condition and within the permitted maximum mileage. Click here to see our ‘Good Condition Guide’.
  • Own: Own the motorcycle or scooter outright by paying the optional final repayment. A purchase fee of £10 is included.

What you will pay

  • Flexible deposit options – £0 deposit maybe available
  • Fixed interest rate & monthly repayments – You’ll make equal monthly repayments with a fixed interest rate, over your chosen period of between 2-4 years.
  • End of agreement – Choose to either part exchange, return the motorcycle or scooter, or pay the optional final repayment.

What you need to know

Ideal if…

  • You like to keep your options open at the end of your agreement.
  • You like to budget and know the exact repayment amount each month.
  • You’d like to keep your monthly repayments lower by deferring a large proportion of credit into an optional final repayment.

The choice is yours…

  • Choose any new or used motorcycle / scooter up to 7 years old at the end of the agreement. Some exceptions may apply.
  • Minimum and maximum finance amounts may apply.

Things to consider…

  • You must be at least 18 years old and a permanent UK resident.
  • You must have, at a minimum, third party, fire and theft insurance for the full replacement value.
  • You must have the relevant driving licence for the motorcycle.
  • The motorcycle is at risk of repossession if you do not maintain contractual repayments.
  • You do not own the motorcycle until the optional final repayment including interest has been made.
  • A significant proportion of the credit is deferred until the end of the contract so you should prepare for this.
  • Details of your credit agreement will be recorded with credit reference agencies.
  • All finance is subject to status, terms and conditions may apply – all of this can be discussed before and during the application process.

While the information inside this blog post is based on a agreement from Black Horse Finance we do occasionally use different finance providers in order to supply the customer with the lowest APR available.