Learn more about our terminology

Administration Fee

Some finance lenders charge an Administration Fee – also known as a documentation fee, as part of the credit agreement. Some lenders include this in the total amount payable and it is taken into account when the Annual Percentage Rate (APR) is calculated. Some lenders that charge an administration fee charge it in a way that means it does not bear interest.

Agreement Term

The length of time over which you agree to repay the finance. This is also referred to as the Length of the Finance Agreement. Some lenders have minimum/maximum agreement terms. The team at MotoFinance will inform you of any exceptions upon approval.

Annual Percentage Rate (APR)

The APR shows the annual cost of a finance agreement over and above the amount you have borrowed. The APR will include interest rate charges and any other fees included in the agreement, such as administrative fees. By law, the APR must be shown on relevant documentation presented to customers. You can use the APR to compare the cost of different finance products.

Annual Mileage

In some finance agreements, such as Personal Contract Purchase, you will be asked to estimate your annual mileage at the beginning of the contract. This estimate helps the lender calculate the market value of the bike at the end of the agreement (also referred to as the Guaranteed Minimum Future Value). It’s important to be realistic because excess mileage is chargeable. The amount can vary depending on the finance lender who is issuing the acceptance.

Balance Financed

This is the amount you need to borrow – usually the selling price of the bike, less any deposit or part exchange allowance.

Balloon Payment

A balloon payment is the lump sum (also known as a Guaranteed Minimum Future Value) deferred to the end of a finance agreement in Personal Contract Purchase. It completes the finance agreement and allows you to take ownership of the bike. In a PCP agreement, repaying the balloon payment is one of three options you have at the end of the agreement.

CCJ

County Court Judgement is a legal decision handed down by the County Court. This legal action is usually a last resort when a borrower has failed to repay a debt. A CCJ will be visible on a customer’s credit file for a period of time.

Conditional Sale

Conditional Sale is a type of finance agreement where the sale of the vehicle is conditional on the customer completing the terms of the agreement – for example, making all of the repayments and paying other charges. These contracts are broadly similar to Hire Purchase agreements, except that the customer will automatically own the bike at the end of the agreement rather than paying an Option to Purchase fee, as in a Hire Purchase agreement.

Credit Agreement

A credit agreement is a legally binding contract between the customer and the finance company. It must include details of the loan amount, the term, rates of interest, other charges, and your rights and responsibilities for the duration of the agreement. You will receive a copy of the agreement you have entered into, along with an explanation of key facts by a member of the MotoFinance team.

Credit Rating

A part of the scoring system used by finance companies to help them decide how to price the risk of doing business with you and what interest rate to offer based on the information provided.

Credit Search

There are two types of Credit Search. A hard search which is visible on a customer’s credit file, and can cause the customer to drop some points depending on how many searches they have had. A soft search which will not show on a customer’s credit file and does not have any impact on their credit rating.

Depreciation

Depreciation refers to the extent and speed of the loss of value, and some bikes will depreciate much quicker than others.

Early Settlement

This is when a customer pays off a finance agreement before the agreed term is completed. By doing so the customer may save on the interest that would have been charged for the remainder of the agreement. Lenders may issue a rebate of the interest if a customer settles early. Lenders may also have charges if a customer was to do this. Lenders will make this clear on the credit agreement before you enter into the finance agreement.

Equity

Equity refers to the difference between the agreed market value of the bike and the loan balance left to pay. If the market value of the bike is higher than the outstanding finance, then the customer has equity in the bike. If it is lower, the term ‘negative equity’ is often used. Speak to one of the MotoFinance team is you are worried about negative equity affecting the potential of your new motorbike loan.

e-Sign

Electronic signature on documentation. Most finance lenders now use this method.

Final Payment

This is the last repayment to be made under a finance agreement and can include a voluntary option to purchase fee (under a hire purchase agreement) or a balloon payment (typically under a Personal Contract Purchase). The differences will be explained to you by our team.

Fixed Rate

This means the same interest rate is charged for the duration of the agreement and doesn’t vary.

Flat Rate

This is the base interest rate charged on the finance. This is not the same as the Annual Percentage Rate (APR), which more accurately describes the true cost of the finance. The flat interest rate does not include other charges like any administration fees.

GAP insurance (Guaranteed Asset Protection)

If your bike is involved in an accident, your insurer will only pay for its current market value. GAP insurance can help cover the difference between the market value of the bike and the amount of outstanding finance under your credit agreement (Finance GAP), or the original purchase price of the bike (Return to Invoice GAP). There are various types of GAP insurance on the market, so shop around and choose a product to suit your needs.

Gross Income

This refers to your income before tax and National Insurance have been deducted. You will be asked for this information when completing a finance application. You may also be asked for your net monthly income which is the monthly amount you receive after the taxes have been removed.

Guaranteed Minimum Future Value

This is where a percentage of the total cost of the bike is deferred until the end of the contract. The forecast value of the bike is assessed by the finance company at the beginning of the agreement. Each lender may forecast the future value differently, depending on what they use to make the calculation.

Hire Purchase

Hire purchase (HP) is a popular bike finance product. When taking out an HP agreement, you pay an initial deposit (Although zero deposit deals are available through MotoFinance), then a fixed monthly repayment over a set number of months. Although you become the ‘registered keeper’ of the bike, you are only hiring it and you don’t actually own it until you have made the final repayment including an 'Option to Purchase' fee.

Insurance

Bike insurance is a legal requirement in the UK for motorists, and it will normally be a condition of a finance agreement that your bike has comprehensive cover at all times. The team will discuss all requirements, as it can vary depending on which lender has issued the approval.

Interest Rate

When you borrow money as part of a finance agreement, the price you are charged for doing so is called the interest rate. The interest rate offered will be dependent on your individual credit profile.

Joint Hirer

In some circumstances, you may want to consider a joint application for bike finance. This can improve your chances of meeting a lender’s affordability calculations. A joint application is not to be confused with a guarantor loan, as with a joint hirer agreement, the agreement is in both hirers' names and both are jointly liable for the payments. Not all finance lenders offer an option of adding a joint hirer, and some lenders that do will insist on a parental joint hirer that reside in the same property.

Max Lend

When a bike is sent to a finance lender for approval they will use a valuation tool such as CAP, Glasses Guide, or CDL to indicate to them what amount they should be prepared to lend. Depending on the price of the bike submitted the lender may approve the customer but supply a max lend due to their valuation. This may mean more deposit is needed to continue with the deal on offer. A lender may also only lend a certain amount to a particular customer based on income or the customer's expenditure. The MotoFinance team deal with this regularly so are positioned well to guide you through the options.

Net Income

Your earnings after income tax and national insurance have been deducted.

NTU

This is a phrase that lenders use which means Not Taken Up. So the application is no longer proceeding.

On The Road Fee (OTR)

An On the Road fee is what a dealership can charge customers when purchasing a new Motorbike. The cost varies but it covers the registration cost of the vehicle.

Option To Purchase Fee

A payment at the end of some finance agreements (such as hire purchase) which, if paid, transfers ownership of the bike from the finance company to the customer.

Part Exchange

Part-exchange involves trading in your existing bike and using its value as part payment for your new bike.

Personal Contract Purchase (PCP)

Personal Contract Purchase (PCP) is a form of hire purchase agreement, which includes a voluntary “balloon” payment at the end. This final amount represents the future residual value of the bike, based on the age of the vehicle at the end of the agreement and the forecast mileage.

Monthly repayments are generally lower under a PCP agreement than a comparable HP agreement because of this deferred amount. With this type of agreement, payment of the future value of the bike is optional. It must be paid if you wish to own the bike outright, but you could decide to hand the bike back to the lender or look to part exchange the bike in and start another agreement for a different vehicle.

Proof of Registration

All new bikes need to be registered. Some lenders require sight of the proof of registration prior to payout as they want to ensure the bike is registered in the customer's name and that the Registration and VIN are correct.

Proofs

If a customer is looking to purchase a bike that is too powerful for the license they hold/age of customer, then they will need to have a restrictor kit put on the bike.

Term

This is the length of time over which you agree to repay the amount of finance you have borrowed.

Trade Value

This is how much the bike is worth if sold at auction or bought by a motor dealer. Most non-prime finance companies will only lend up to a maximum of a bike’s trade value.

Unsecured Loan

An unsecured loan is not secured against any asset, such as the bike you have financed. This means the risks to the finance company may be higher so there may be less flexibility in the terms and conditions of the agreement.

Unwind

If a customer’s finance agreement pays out, then they choose that they do not want to go ahead or if there is a problem with the bike, then the lender would need to ‘Unwind’ the finance.

Variable Rate

This means that the interest rate can go up or down depending on the Bank of England’s interest rate during the term of your finance agreement. This type of finance agreement is more common in the mortgage market.

VIN

VIN is the abbreviation for Vehicle Identification Number. This is a unique number that every bike has in order to track its identity and prevent fraud. A VIN cannot be changed, unlike a bike’s number plate.