PCP deals
Question
Hi, not strictly a legal question, but with the great popularity of PCP finance as a means to getting a shiny new bike, I was wondering about financial liability if something happens to the person that has taken out the deal. For example what would happen if somebody died or became permanently disabled mid-term in a three year PCP deal, not necessarily as a result of an accident. Also if a bike was written off where would the liability lie to settle the outstanding finance, especially of the insurance valuation didn’t meet the value of the outstanding finance.
Ian Ronald, by e-mail
Answer
PCP stands for Personal Contract Purchase/Plan. It is now a very common way of buying a bike or car. You pay a deposit then monthly payments for usually 3 or 4 years. At the end of the contract term you can either pay the agreed balloon payment and own the vehicle, walk away or trade it in for a new PCP vehicle. You can actually end a PCP deal once 50% of the balance payable under the contract has been paid so should someone die or become disabled then the vehicle can simply be handed back if the 50% rule has come into play. If someone dies earlier on into the term then that person’s Estate becomes liable for fulfilling the contract.
If a bike is written off, valuation arguments can be avoided by taking out “gap” insurance at the start of the PCP covering the difference between the two valuations.
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