How to Finance a Motorcycle
If you’re looking for a motorcycle, you could be spending anywhere from $1,500 to $55,000 or more. They can cost as much as a car, which is a hefty amount to finance when you consider some loans can carry APRs just shy of 15%. Furthermore, financing a motorcycle can be tricky as most lenders don’t consider it an auto loan. Don’t be worried though. Like auto loans, there are plenty of lending options.
In this guide, we’ll explain all the different ways you can finance a motorcycle purchase, and tell you the pros and cons of each.
When you shop online for financing before you look at bikes, you’ll have a better idea of what price range you should look at. And this way, you won’t worry about whether you’ll be able to get a loan for the motorcycle you fell in love with because you’ll already have a loan in hand. Once you do find the “iron horse” of your dreams, you can show the dealership the loan offer you have and see if they can offer you anything better. If they can’t, you’re already set. That’s why LendingTree always recommends shopping for your own financing before visiting a dealer.
How it works
You can find an online lender that offers loans for motorcycles, like LightStream, or a site that lets you apply to several online lenders and compare motorcycle loan offers all in one place, like LendingTree. It’s good to apply at more than one lender so you have different offers to compare.
To apply, you’ll need to know how much you want to borrow for how long and give personal information such as address, Social Security number, income and assets.
Once you have your offers in hand, it’s time to research which motorcycle you want (if you haven’t got the perfect wheels picked out already) and head to the dealership.
Bring those online loan offers with you. At the dealership, find your bike and negotiate the price. Then contact your online lender to tell them you know which motorcycle you want, and they’ll guide you from there. You could still apply at the dealer to see if they can beat the APR you already have from your online lender. You’re free to choose which loan you want until you sign the contract for it.
Before you apply for online financing, you can see what your rate and terms would look like based on a credit score and loan amount. Unlike at a dealership, you don’t have to know the exact motorcycle you want in order to apply. A lender may tell you if you qualify for a loan up to a certain amount. Some sites allow you to see several offers at once.
There aren’t many downsides here. It’s harder to include accessories, if they are allowed at all, depending on the loan, or extras like an extended warranty.
Financing a motorcycle through a bank or credit union
If you’d be more comfortable working with a lender you go to in person, banks and credit unions can be a great option as well. The financial institution you bank with already has your information and a relationship with you, and could offer competitive rates compared with other lenders in order to keep your business.
“From what I’ve seen, it’s probably worth a conversation with your bank,” said Jim Holtzman, CFP at Legend Financial in Pittsburgh. “The thing to explore is the interest rate.”
Many banks (both online and brick-and-mortar) offer rate discounts on motorcycle loans if you make automatic payments and have a qualifying relationship with them. For example, LightStream offers a 0.5% rate discount discount for clients who apply for the loan directly, rather than going through a dealer, and make automatic payments through their consumer checking account.
Not all banks offer motorcycle financing, however. Some banks that are huge players in the auto lending business, such as Capital One and Chase, don’t offer motorcycle financing at all, and others count motorcycle financing not as an auto loan, but rather as a secured personal loan.
How it works
Apply for bank financing directly through your bank and get offers from at least two or three other banks as well. Then head to the dealership with those offers in hand. When you arrive and speak with the financing manager, he or she will take a look at your best financing offer and likely turn to the dealership’s network of lenders to try to beat it. If not, you know you’ve got the best deal possible, which is the beauty of shopping for financing before you go to the dealer.
Banks and credit unions usually have brick-and-mortar branches you can visit and talk with someone in person. Some offer APR discounts if you qualify.
If your bank or credit union doesn’t offer motorcycle loans and you have to take out a personal loan instead, you’re usually looking at a higher rate. Personal loans, both secured and unsecured, normally have higher APRs than loans designed specifically for motorcycle financing.
Financing a motorcycle through the manufacturer
If you purchase from a dealer and have great credit, you may be able to score a loan directly from the motorcycle manufacturer. This can potentially be a pretty sweet deal. Depending on the time of year and the model of motorcycle, manufacturers offer APRs as low as 0% for 60 months and/or incentives like rebates. This is a deal many lenders will not offer, but there’s a catch — you typically need to meet strict credit requirements to get the best deals.
How it works
You can either go to a dealership, a dealership’s website or the manufacturer’s website to pick out a bike. You have to know exactly which motorcycle you want before you apply for a loan with the manufacturer. Once you’ve got your bike picked out, you can apply at the dealership or online. Again, it’s best to do your own research and get quotes from other lenders first in case you can’t qualify for the manufacturer’s offer.
Financing through a manufacturer is your best bet for the lowest loan APR. Manufacturers don’t have to make money on the loan. Instead, they see providing a low-interest loan as an incentive for customers to buy their motorcycles, which they do profit from. That’s why they offer such great financing deals. Additionally, you may be able to include accessories into the financing.
Manufacturer financing companies don’t offer pre-qualifications or preapprovals, so you have to know which motorcycle you want and apply to find out what your APR and terms are. Be aware the lowest APR advertised by a manufacturer financing company might not apply to the model you want and that you may get a better deal depending on the time of the year.
Dealership financing seems like the most convenient option. You’re going to purchase a motorcycle from the dealership, so why not kill two birds with one stone? Dealerships have relationships with a network of lenders already, so applying for a loan at the dealership may result in several loan offers.
However, the best way to ensure you’re getting the best possible deal on your loan is to bring in your own financing when you go to the dealership. The reason for this is that dealerships are usually able to increase your APR and get the money from doing so. If you don’t know what APR you can qualify for, you may end up signing up for a higher rate than you have to. Shop for motorcycle financing through other lenders first, get a few offers and bring them in with you. Unless you shop for loans on your own and bring in a better offer to make them compete, you may walk away with a much higher rate than necessary.
What to know about dealership ‘in-house financing’
In-house financing is usually extended to borrowers who don’t qualify for a loan elsewhere because their credit is poor. As a result, the APRs’ in-house financing offers don’t really need to be competitive. Some APRs go directly to the maximum legal interest, which can be up to 24.68% in some states.
If the dealership in-house financing is offered to you, it’s best to not take the deal and either get funding from an alternative source or improve your credit before seeking a loan.
How it works
At a dealership, you may be able to fill out an application for a specific motorcycle (with or without accessories). The dealer will then submit it to its network for financial institutions such as banks, credit unions, the manufacturer and in-house financing. If you’re approved for financing, they’ll let you know right away. But take it from us — you definitely want to get other offers first and have them in hand to compare.
You’re able to apply to a swath of lenders and see what they offer you all at once as the dealer submits your loan application to several financial institutions it partners with. You can usually add in accessories, appearance parts and service contracts into your financing package as well.
Like with manufacturer financing, you can’t get a pre-qualification or preapproval; you have to know the exact motorcycle you want. In order to make money, the dealership may offer you a higher APR than what you qualify for and may try to push you to add expensive add-ons into your loan, such as service contracts, extended warranty and GAP insurance.
Benefits of comparison shopping for a motorcycle loan
No matter how you end up financing your motorcycle, make sure you shop around for the best motorcycle loan. All light credit pulls done for one industry (auto, mortgage, student) within 14 days count only as one loan inquiry, so don’t be afraid to do a couple of applications when checking rates.
On LendingTree, you can shop several rates at once with one credit check and get the banks to compete for your business.
If you shop around for a rate before you go into a dealership, you have leverage to negotiate. You’ll already have an offer, so your rate can only get better.
To check out out what your monthly payment might be so you can plan your budget, use this motorcycle loan calculator and then read up on which lender might be best for you.