Motorcycle Finance & Loan Terms Explained

APR (Annual Percentage Rate);

A Standard method of calculating how much the loan will cost you over the term of the loan. The APR reflects the total cost for the credit and is different to a flat rate.

Flat rate:

The monthly interest rate charge. Be careful for flat rate deals rather than an APR. The flat rate is not the actual cost of the loan, it's usually approx. half the APR so it sounds cheaper.

Fixed rate:

The interest rate charged. The monthly payments are fixed throughout the term of the loan.

Secured loan:

The finance company can repossess the security of the loan, such as your house or bike (if this is what you used as security of the loan) if you fail to pay the amount(s) due.

Unsecured loan:

The finance company have no security against the loan.

PCP (Personal Contract Purchase);

A personal finance scheme which defers part of the payment for the motorcycle until the end of the loan, this applies usually when the bike is traded in.

A deposit is usually required up front and a final payment if you wish to own the bike at the end of the term. There are also often additional fees such as an 'option to purchase fee' to be paid before the motorbike is yours.

Residual value (or guaranteed minimum future value). Anticipated value of the bike at the end of the finance term (only applicable to PCPs).

HP (Hire Purchase):

The loan company owns the motorcycle and the customer buys it over an agreed period (the term of the loan). With HP, a deposit may be needed and the finance is usually secured against the bike. There may also be extra charges to be paid before the bike is legally yours.

GAP (Guaranteed Asset Protection;

GAP is designed to cover the unpaid balance of a motorcycle loan in the event that the bike is a total loss. It is supplementary to a bike insurance policy and covers losses not covered under your standard insurance policy.

Warranty Cover;

If your standard motorcycle manufacturer warranty is coming to an end or you would like warranty on an older biker, then you can buy dedicated cover. This has become more commonplace in the last few years.