Types of Motorbike Finance
Hire Purchase (HP)
Hire purchase means that you’re hiring the bike from the lender until you’ve paid for it in full. The loan is secured against the vehicle itself, and you won’t officially own it until the final payment has been made. It is one of the most commonly used forms of motorbike finance. If you take out a hire purchase agreement, you can choose whether to pay a deposit up front – followed by regular monthly payments over an agreed period of time.
Personal Contract Purchase (PCP)
A personal contract purchase (PCP) agreement is similar to a hire purchase agreement, in the sense that you’ll have the option to pay a deposit followed by fixed monthly repayments over a set period of time (typically 24-48 months).
However, at the end of the fixed term, you’ll have the option to either hand the bike back, use the equity as a deposit for your next vehicle, or obtain ownership of the vehicle by paying the Guaranteed Minimum Future Value (GMFV) (also known as a “balloon payment”).
A personal loan (also known as an unsecured loan) enables you to borrow an amount of money over a fixed amount of time.
If you choose to take out a personal loan to buy a motorbike, you will own the bike from the time that the dealer receives the money for it. This loan is not secured against the vehicle itself (unlike a PCP or hire purchase agreement), meaning that you can sell the bike at any time without needing permission from your finance company beforehand.
A guarantor loan is often suggested if the individual wanting to take out the agreement has a particularly poor credit rating.
This is because it involves a third party (usually a relative or friend) acting as a guarantor. If you fail to keep up with repayments, the guarantor will subsequently pay the monthly payments on your behalf.
What is motorbike finance?
Buying a motorbike in New Zealand is one of the few major purchases you’ll make in your life, so it’s important to do it right.
While the process of bike shopping can be a thrilling experience, you also need to be sensible and realistic about what you can afford. That’s where bike finance comes into the equation.
If you’re on the lookout for a new bike with a budget in mind, but you’re not quite sure how to pay for it – you’ve certainly come to the right place. Use Comparity to find you the best options for your bike finance.
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