Should you take a deposit when selling a motorcycle?

There are a lot of things to consider before taking a deposit on a motorcycle, and there are dos and don’ts for both the buyer and the seller to consider. Below we will cover what a deposit is and help you understand if you should take one when selling a motorcycle.

What is a deposit

Deposits are commonly used to secure or reserve valuable items such as a house, car, motorcycle or boat. The deposit is usually taken at the same time as a contract is signed, and are used to show commitment until full payment is made. It is generally understood that if the buyer doesn’t go ahead with the deal for any reason the deposit is lost and the seller is entitled to keep the full deposit. This is a form of compensation for any time wasted and losses incurred.

So deposit isn’t really the correct word to use, part or initial payment would be a much better description and would save a lot of confusion. It’s a common misconception that a deposit would be refundable if the buyer pulls out of a deal. A deposit may be refundable, but is is highly unlikely a deposit will be refunded. 

In resent years both garages and dealers have allowed customers to pay holding deposits. This practice has lead to further misunderstanding that all deposits are refundable. A holding deposit is usually taken to secure a viewing on a car and isn’t connected to actually purchasing a motorcycle. In most cases this is because the potential purchasers has to travel a long distance to view the car and this deposit is payed to insure the car isn’t sold before they can make an arranged appointment. 

These deposits are not a part or initial payment as no deal has been struck and no contract has been signed. Deposits can and often will be refunded if a motorcycle either isn’t suitable or is not as described by the seller after inspection. It is sill common practise however for the seller to keep the deposit if the viewing is delayed significantly or the potential buyer fails to turn up at all. Again this is considered fair compensation for the sellers time and potential loss of business.

The myth that deposits are refundable may also be fuelled by salesman misleading customers in hopes to sign up more business. Obviously a dealer or sale executive could genuinely enter into an agreement where a deposit is fully refundable, however this agreement should be put into writing as it’s not common practice. 

When should you take a deposit?

A deposit should only be taken once a contract/invoice is signed and the buyer is one hundred percent certain they want to go ahead and buy a motorcycle. As once signed by both parties the contract is legally binding and the deposit will be none refundable, the contract can then only be broken if both parties agree to terminate the agreement.

We don’t recommend taking holding deposits or refundable deposits of any kind. A deposit should only be taken if the buyer is fully committed to buying the motorcycle, and it should be made absolutely clear to the buyer that they have bought the car once a contract is signed and the deposit is payed. 

Do I need to take a deposit?

Deposits are normally required if a you are purchasing or placing an order for a new motorcycle. So you should definitely take a deposit in this instance. Again you should make the purchaser full aware that signing a contract and putting down a deposit means they now own a motorcycle, and that any deposit will be forfeited if they choose to renege on the deal.

Taking a deposit on a used motorcycle is slightly more complicated subject. Firstly taking a deposit on a motorcycle that is going to be delivered within a short timeframe is largely unnecessary, in most cases you are best either taking full payment at the time of purchase or a the handover. An invoice will normally be enough and is still legally binding deposit or no deposit, so the purchaser is unlikely to pullout of the deal.

But even if they do you are best just finding another buyer and not forcing them to complete. Legally you would be within your rights to pursue the buyer to complete. But in reality the last thing you want to do is to sell anyone a car they don’t want. The potential hassle and comebacks this can cause just isn’t worth getting involved with, especially if you are a dealer. You are best just moving on and finding another buyer for the motorcycle.

The same applies if you are just flipping a cheap motorcycle. You may be offered a deposit but in most cases you are better just taking full payment up front at the time of purchase. If a potential buyer doesn’t want to pay in full again an invoice will normally be enough. Alternatively you can leave the motorcycle for sale and take payment and do the paperwork when they collect the motorcycle. This means you can continue to market the car and the pressure is on them to complete if they definitely want to buy the motorcycle.

If you are a dealer and garage it’s common practice to insist on a deposit once a contract or invoice is signed. At most larger franchise and dealer groups a salesman is not be able to mark a motorcycle as sold until these conditions are meet. The greater overheads of a larger garage need to be covered if a deal falls trough so this is understandable in most cases.

How much deposit should I take?

In most cases a seller would ask for a 10% deposit. But it’s not uncommon to ask for 20% or more on a less expensive vehicle. If a motorcycle is being sold for a significant amount of money then typically a few thousand is taken.

The general rule is that the amount should be enough to show commitment and be more than enough to compensate the seller if the buyer fails to complete. 

How should I take payment?

Payment should be taken via debit card, bank transfer or cash. If a deposit is payed in cash a receipt should be given or it should be clearly noted that it’s been payed on the invoice or contract.

So when is a deposit refundable?

As covered above a deposit is generally not refundable and if you have made that clear at the time of purchase you shouldn’t be asked to refund the deposit. In law there is no legal basis to cancel a purchase and receive a deposit back once a contract has been entered into.

The only times you should refund a deposit is when you are unable to complete the sale. For example if a new car was ordered in a custom spec that the factory was unable to comply with the request, or a motorcycle was damaged or written off before delivery, or if a finance application was declined.

Technically you could still hold onto the deposit and either offer a different spec, repair the motorcycle or insist the buyer finds other funds to complete the sale. But in most cases it would be unreasonable to not refund the deposit in full.

If you are a dealer, garage or flipper you should also refund a deposit if your business or reputation could be damaged. This is just good business practice and they’re are hundreds of situations where this could apply, it’s best to just use common sense in these situations and think of the bigger picture.

You could of course offer a partial refund if the deposit is significant. Just keeping enough to cover your costs and inconvenience and refund the rest. You should again use common sense in these situations and avoid any conflict. In most cases a buyer reneging on his promise will view this a reasonable in my experience.

Conclusion

Taking a deposit on a motorcycle is a good idea in most cases. It gives a level certainty to both the buyer and seller. But it shouldn’t be used as a means of trapping a buyer into purchasing a motorcycle or making additional money. The terms and conditions of any arrangement should clearly conveyed both verbally and in writing and common sense should alway prevail when things go wrong and both parties should give consideration to each others situations.