If you’re on the hunt for a new bike and looking for the best way to fund it, you might want to have a read of this. Alan Dowds explores the smartest, cheapest, and best ways to finance a new bike…
For most of us, a bike is one of the biggest things we buy. After a house and a car, a proper motorcycle will be the thing that soaks up most cash. Times are hard for lots of people, but we still need our bikes, don’t we? And being a little bit smarter can mean getting the bike we want, while still having money for those little luxuries like food, electricity and school shoes for the kids. Bless them.
Picking the right way to get the cash together is essential though. No matter what you’re buying, or how – superbike or scooter, new or used, dealer or private sale – there are loads of ways of getting the finances right. Now, I’m not any sort of financial advisor, obviously, so don’t take any decisions on this stuff without making sure you know what you’re doing and asking a grown-up, if required.
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The simplest way to buy a bike is, of course, with hard cash. And for private bike sales, that’s the way most folk still like to work. In these days of credit card fraud, fake PayPal payments, banker’s drafts from faraway princes and the like, having a pile of crisp £50 notes on the kitchen table is simple, easy, and straightforward. It’s not without risk, of course – carrying £15k in cash around in a Tesco carrier bag is a nervy situation, and there’s no comeback once cash has been handed over, unlike with other financial transactions. Dealers can also be less keen on cash; it brings security worries for them, they have to get it to the bank, or keep it on the premises, plus they have to think about mad stuff like money-laundering regulations and Proceeds of Crime actions. Where to get said cash though?
Unleash equity…
Your granny would tell you to save up, and while it’s deeply uncool, sticking some money away each month in an ISA or another savings account can quickly build up in the background. At the other end of the sensible scale, renting a front-loader from HSS Hire and liberating the cashpoint from the Tesco Metro next to the pub is a quick way of getting hold of a load of used £20 notes. But there’s not much use for a GS Adventure inside HMP Strangeways, sadly.
Back on the right side of the tracks, if you’re a homeowner, with equity in your house, releasing some as part of a remortgage can be the cheapest way of getting a chunk of cash – although remember your house is at risk if you can’t make mortgage repayments. And it’s hard to sleep inside an S1000XR top box if it all goes wrong. If you’re coming to the end of a fixed-rate mortgage, or you haven’t changed mortgage provider in a while, you might be able to switch to a better interest rate at the same time – and the savings could even cancel out the cost of your bike. Even the sternest spouse couldn’t disagree with that, could they? Especially if you don’t tell them anything about it.
One other possible way to access ready money is from your pension pot. That there George Osborne, Tory Chancellor in David Cameron’s government, changed the rules so that people could take a load of cash out of their pension savings pot. The rules have changed since, but it’s still possible to get some money out, within certain parameters. Now, again, like with the mortgage deal, you have to tread carefully here. Selling your gold-plated final-salary civil service pension for a handful of magic beans and/or a brand-new Harley-Davidson trike might seem like a grand plan at the time. But your kids won’t thank you for it when you have to live out your final years in their garden shed because you have no money. Pension rules change all the time and, joking aside, it is a really serious matter, so definitely take professional advice before you jump in. If it’s right for you though, you could release enough cash for a sweeeet set of wheels (probably not that metal-flake trike though, eh?).
The credit route…
If you don’t fancy any of these routes, then it’s maybe time to think about some ‘normal’ finance. A credit arrangement – or, as my old granny would say: “it’s no credit, son, it’s debtttt!!!!” She’s right, of course, but if you go carefully, you can pick up the Benjamins fairly cheaply. If you’re in work and have decent credit, you’ll be able to pick up an unsecured personal loan at around four per cent interest – five minutes online will reveal a load of options. All you need is a quick online application with a simple credit check, the money can be in your bank within a few days, and you can wheelie your £10k right into a ditch before the weekend’s out. Yay.
They might sound a bit worthy and communist-y (not that there’s anything wrong with that), but credit unions might be worth investigating. Community-based non-profit financial organisations, they’re generally set up to help people with ‘unconventional’ credit histories but are essentially open to all. They’re normally based around a geographical area, or a type of work, and can be linked to certain industries. They can give decent rates and might well be worth a look. Check out https://www.moneysavingexpert.com/loans/credit-unions/ for more details and links.
Another left-field option nowadays is so-called ‘peer-to-peer lending’. The scoop here is putting people with spare cash in touch with people who need a loan, in a semi-formal way, with a peer-to-peer ‘platform’ as the middleman. So rather than borrowing from a big financial institution, you’re borrowing from a person who’s got a spare lump sum. They can get a slightly higher savings interest return than they might get from a bank, and you can get a loan with slightly lower interest charges – so you both win.
Again, there’s lots of info on this online – but one thing to make sure is that the platform you’re using is a proper member of the industry body: https://www.p2pfa.org.uk. More info from the Government’s money advice site: www.moneyadviceservice.org.uk/en/articles/peer-to-peer-loans
Get your cards out…
Finally, we’re at the dealership now. And, of course, there are a load of finance options here. That makes sense, of course. The dealer wants to make things easy for you, and they’d also quite like to get a little cut off any finance deal you do sign up with. So, they all have very slick options – often branded schemes which are backed by the manufacturers, like Ducati Trioptions or Triumph’s Tristar scheme. Honda, BMW, Yamaha, Suzuki, Kawasaki – they all have their own set ups, which cover new (and sometimes approved used) bike sales. They’re tailored towards the bike industry, and some can be extended to cover accessories and new riding kit, or even rider training costs if you’re a novice rider (BMW’s finance scheme offers this).
Before we get into those though, there’s one more interesting route – using a credit card. Now, normally this is a bad plan – credit cards usually have very high interest rates. But there are loads of deals out there these days, where the card issuers offer cheap or even zero per cent interest periods to tempt you into signing up for a new card. Their plan is to get you to sign up, then not pay off the amounts you spend in the allotted timescale, so you end up paying the high interest charges. One other possible credit card scheme is where you get cashback, or air miles, or some other benefit, based on how much you spend. Also, you get some additional consumer protection if you buy things on a credit card, so you may be able to get your money back easier if the bike turns out to be a lemon.
If you’re certain – 100 per cent – that you’ll be able to pay off the balance in the timescale required, using a credit card can be a smart way of getting on to a bike without paying the full amount up front. Beware though – missing any of the payment deadlines can mean suddenly being charged a load of interest, cancelling out any savings you might have made. In addition, dealers have to pay higher bank charges on credit card payments, so they might be unwilling to give you a really good deal on the purchase price. Be aware of the swings and roundabouts here.
Down at the dealers…
Back on the dealer finance route, and there are a few main options: a normal loan-type finance deal where you borrow the money and buy the bike with that; an HP deal, where you don’t own the bike till the final payment; a lease deal where you’re simply renting the bike and will never own it; and a personal contract purchase or PCP deal.
The loan is simple enough – you might not get as good a deal as you could with a bank or building society loan, but the dealer may give you a better purchase price, since you’re arranging the loan through them rather than just turning up with cash. HP deals are like a loan, but it’s secured on the bike itself, so may be a better option if you don’t have a great credit rating. The idea is if you default on the payments the bike can be seized, so you don’t really own it until the final payment is made.
Leasing is more common in the car world but can be an option for bikes. If you need a bike for work, and have no interest in owning it, it might make sense – the servicing will also be built into the costs. But there are limits on mileage, any damage has to be paid for, and it’s an expensive, poor value way to get on two wheels.
PCP deals have become much more popular in bikes over the past five years. Some dealers we spoke to are making half their finance deals via PCP, and it’s given the new bike trade a massive boost. The idea is simple enough. You get a new (or used) bike for an affordable deposit and a small monthly payment over a period of a few years. The amount you pay isn’t enough to pay for the bike, so at the end of the deal you can either keep the bike and pay the difference (a so-called balloon payment), or hand the bike back to the dealer. Assuming the mileage has been kept within limits and there’s no damage, the dealer gets a bike to sell which pays for the difference between what you paid and the purchase price.
The advantages of PCP are simple enough – potentially a small deposit and low monthly payments. So, you can ride a bike which you couldn’t really afford to buy. You don’t own it until you pay that extra cash though, so it’s a bit like leasing. Some folk are happy to do this – even ‘rolling over’ a PCP deal at the end of the period into another, new bike and signing up for another payment scheme. If this suits you, fair enough, but it’s not the best way to get good value in terms of metal for your money in the long run, and we’d avoid it ourselves.
Deal or no deal?
The final thing to work on at the dealers is the, er, deal itself. Now, it’s not always just about the price you’re paying. Indeed, a couple of bike shops we spoke to don’t like to cut the ticket price much at all. That’s because big headline price drops can affect secondhand bike prices – and if the guy who paid £15k for that new litre superbike last week hears you bought one for £13k, he’ll not be best pleased. Instead, look for ‘hidden’ deals – an Akrapovic exhaust system or a spare set of tyres thrown in on the side. Maybe you can get a new Arai lid or a Spidi suit with 75 per cent off. The dealer can give you a better deal, while keeping the pounds and pence price which you’ve ‘paid’ for the bike up, and everyone’s a winner.
One thing to watch for here though, is ‘free servicing’. This sounds good, but with bike service intervals extending all the time, it’s not as good a deal as it used to be. The first few services nowadays are generally just oil and filter changes plus checks, and you’re often charged for parts and materials anyway. So, unless they’re offering you free tyres and all parts and materials, free servicing isn’t necessarily a big deal-maker. Unless you’re planning on doing laps of the world? Whatever your plans, hopefully you’ve seen there’s more than one way.
Never buy a bike using…
No matter how desperate you are for a new Gold Wing or an RSV4, there are a few things you should never do to get a bike:
*Payday lenders
They’ve been brought to heel by government regulations and aren’t as wild as they used to be. But short-term, high-interest loans from so-called ‘payday lenders’ are a bad plan. You can end up owing much more than you borrow and can find yourself paying the sums back for an indefinite time.
*Buy at normal credit card terms
Credit cards have much higher interest rates than personal loans or finance deals. Avoid unless there’s a very good reason to do so – like a zero-per-cent deal, or a cashback scheme. Even then, make sure you pay the balance off in time to avoid any charges!
*Trade in your current bike
Okay, it’s quick and easy to just do a trade-in with the dealer who’s selling you the new bike. But you’ll generally get more for your present machine by selling it privately beforehand. Make sure it’s clean, has an MoT, and is in good order, and get it advertised online. Take off any sweet add-on parts like pipes, Power Commanders and the like, and sell them separately for the best returns.
