Buying a motorbike on an ‘assume balance’ basis? Take note of these things

The practice is often referred to as ‘pasalo’
by Aris Ilagan | Jan 11, 2021
PHOTO: Leandre Grecia

If you’ve been looking into buying secondhand motorcycles, you might have encountered some sellers or ads that use the term ‘pasalo.’ These pertain to units that have been purchased via financing and are now being sold before the loan has been fully paid off. In other words, the buyer assumes the balance.

Some questions you might have: Is it legal to sell a motorcycle way? What are the implications to the buyer and the seller? What do motorcycle dealerships think of such arrangements?

We’ve consulted a number of stakeholders, including a number of motorcycle dealerships, to find answers to these questions. Check them out below:

1) The seller usually disregards the down payment he had made upon purchasing the unit.

In most cases, the first owner would rather sell the motorcycle as soon as possible, thus forgoing any attempt to recoup the down payment he had forked out. The buyer then assumes the responsibility of paying for the monthly amortizations.

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2) Ownership of the unit cannot be transferred to the buyer immediately.

Motorcycle dealerships require that the loan must be fully paid off first before the registration documents are transferred to the buyer’s name. This is why in pasalo arrangements, the seller would prefer to have a relative or a friend as the buyer—it’s easier to make an internal agreement as to the terms of the sale.

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3) Making insurance claims won’t be straightforward.

A motorcycle purchased via financing will include a mandatory comprehensive insurance package. There’s a big possibility that the new owner will encounter difficulties in making insurance claims should the motorcycle be involved in an accident.

4) This type of arrangement isn’t illegal.

The original owner of the motorcycle may sell the unit if he so wishes, provided the arrangement has the consent of the loan provider and is supported by a deed of sale. The potential issue here is if the pasalo buyer misses monthly payments; if the original buyer cannot present the aforementioned requirements, by default, he is held accountable for the missed payments.

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5) Not everyone who sells pasalo is in urgent need of money.

According to the motorcycle dealerships we’ve spoken with, some owners who opt to sell their bikes under this arrangement just want to upgrade to a newer and better unit.

6) The warranty agreement should not be affected.

If the new owner of the motorcycle brings the unit to the dealership, the latter will likely honor the warranty agreement, provided no modifications or aftermarket installations have been made to the unit.

7) There’s a risk of running afoul of the ‘doble plaka’ law.

This is probably the biggest consideration you have to make if you have plans to enter into a pasalo arrangement as a buyer. Republic Act No. 11235, otherwise known as the Motorcycle Crime Prevention Act or the ‘doble plaka’ law, mandates that anyone who acquires a motorcycle must notify the Land Transportation Ownership and have the ownership of the unit transferred to his name within five days of acquisition. The corresponding fine for transgressors ranges from P20,000 to P50,000.

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Would you purchase a motorcycle on a pasalo or assume-balance basis? Why or why not? Let us know in the comments.

NOTE: This article first appeared on TopBikes.ph. It has been translated to English by TopGear.com.ph editors. Minor edits have been made.

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PHOTO: Leandre Grecia
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