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Should I Get a Loan for My New Powersport Vehicle?

Taking on a loan for a new all-terrain vehicle (ATV), jet ski, snowmobile or other powersport vehicle may seem like a splurge, especially if you’re already making car or house payments — or both. Credit requirements and/or interest rates may be higher, too, as lenders consider powersport vehicles to be luxuries rather than necessities like a home or transportation.

Cash may be your best bet, particularly if your credit isn’t strong, but if the time is now and you don’t want to wait to save up, you have several options for financing a powersport vehicle. Here’s what you should know before you decide.

What is a powersport vehicle?

Powersport vehicles may include motorcycles, ATVs, utility terrain vehicles, snowmobiles and personal watercraft. A powersport vehicle is generally defined as being controlled by a handlebar, and the fact that the user rides on the vehicle, as opposed to riding in it, as in a car. They are used on almost every surface, from public roads and racetracks to off-road, in the snow or on water. But definitions often vary by lender — one may consider a motorcycle to be a powersport vehicle, for example, while another has a standalone motorcycle loan or folds it under auto lending.

How much does a powersport vehicle cost?

You can find powersport vehicles that cost as much as a new car or those going for as little as $2,000. Most powersport users, however, spend something in the following ranges for vehicles:

  • Motorcycles. Of Popular Mechanics’ best motorcycle buys for 2019, the most expensive is the Indian FTR 1200, with a base price of $12,999. The least expensive model was the 2019 Honda CB300R, base price $4,649. A Harley-Davidson motorcycle or other high-end ride can cost $40,000 or so. Used prices are far less: according to Motorcyclist magazine, you could get a Triumph Bonneville starting at $1,500, or a Honda Hawk for $2,000 to $3,000.
  • ATVs. The average cost of a new all-terrain vehicle is about $10,000, though that figure may vary depending on engine size, brand and add-ons. If you are willing to buy used, you can save half or more of the new price.
  • Snowmobiles. A new snowmobile can cost you $10,000 or more. Used snowmobiles, on the other hand, can be had for as little as $2,000.
  • PWCs. New personal watercraft range from about $5,500 for “rec-lite” models to more than $17,000 for high-powered models capable of seating multiple people.

Don’t forget to budget for the additional costs of owning a powersport vehicle. You may need to pay some or all the following expenses:

  • License and registration. While a license may not be required for adults to drive a powersport vehicle like an ATV, you may be required to register it with your state. Many states will require motorcycle drivers to have a special endorsement on their driver’s license; however, the laws vary, so check with your state’s Department of Motor Vehicles for details.
  • Insurance. Insurance requirements also vary by state and costs will depend on the type, year, make and model of your powersport vehicle. The average annual cost of personal watercraft (PWC) coverage is from $150 to $500 per year, according to Trusted Choice, a national association of independent insurance agents and brokers. Motorcycle insurance costs vary widely by state, with the average U.S. rider paying $519, according to ValuePenguin (note: ValuePenguin is owned by LendingTree).
  • Vehicle or trailer. You may need a way to transport your PWC to the lake or slopes. PWC trailers often cost between about $250 and $1,500. A trailer not only helps you get the PWC to the lake, but it makes it easier to get your craft into the water once you’re there.
  • Repairs and maintenance. Everything with an engine requires maintenance. Seasonal vehicles need to be winterized. Plan on spending about $100 per year to maintain a jet ski.
  • Fuel. Powersport vehicles tend to be fuel efficient, able to be used multiple times without refueling; still, it’s important to budget for fuel when you plan how much it costs to own and operate any vehicle.
  • Special clothing and gear. Most powersports require special clothing, and some require helmets. For example, if you take up snowmobiling, you’ll need about $250 for clothing and boots, plus another $100 for a helmet. Motorcycle helmets can cost from around $150 to over $500. You’d also need life jackets to use personal watercraft.

Is financing a powersport vehicle right for you?

Financing a powersport vehicle is not a good decision for everyone, in every situation. “These vehicles aren’t viewed as being necessary,” says Matthew Wood, associate editor of Powersports Finance magazine. “They’re considered toys.”

Before financing one ask yourself these questions:

  • How much does the vehicle cost? “There are certain motorcycles, like the Harley-Davidson, that can cost up to $40,000, that you should probably consider financing,” says Wood.
  • How’s my credit? If you are considered to be creditworthy, you should be able to get a loan that won’t cost you too much in interest. If your credit score needs work, you may need to work on it for at least a few months first, so you can get a good deal. Don’t forget that successfully repaying different types of loans can actually improve your credit mix, and thus your credit score, over time.
  • Can I afford the payments and other expenses? First, if you don’t have a budget for your personal income and expenses, now’s the time to make one. Once you know how much leeway you have in your spending plan, use an online calculator like our motorcycle calculator or ATV calculator to see what your payments would be on various powersport vehicle purchases. If you can comfortably make the vehicle and insurance payments, and pay for all the other expenses associated with your sport, it may be a “go.”
  • Am I comfortable going into debt? “Nobody needs a powersport vehicle like you need a car,” says Wood. If you or a person you share finances with are not comfortable with taking out a loan, perhaps this isn’t a good time to buy.
  • Should I pay cash instead? If you can save up for a new powersport vehicle, or perhaps just get a used vehicle, you can avoid interest expense or limit the expense by borrowing for a short time. On the other hand, you may still choose to finance if you have better uses for your money, such as investments or keeping an emergency fund.

Which lenders offer powersport loans?

If you’ve decided to finance a powersport vehicle, getting a loan for one isn’t much different from financing a car, Wood says: “All the steps, and what you need to do to get a loan, are essentially the same.” Your next step is to figure out where to finance it — but don’t just settle for the first place you look, or the most convenient. By shopping for a loan before shopping for a powersport vehicle, you then have an offer in hand for the seller to beat. Search from among the following lenders for your best deal:

Dealership or manufacturer financing

It’s convenient to get a powersport vehicle and powersport loan in the same place. Dealers may have a network of lenders, but they also might pick the lender that offers them the greatest incentive, instead of the best one for you.

“Do your due diligence,” says Wood. After obtaining a quote at the first dealership, “Then go to a different dealership and see who has what’s best for you. Dealership B may work with a different lender.”

It’s also possible that the dealer may offer financing through the manufacturer. “Some manufacturers will run promotions with no money down or with 0% financing,” Wood says. “I’ve seen things like that.” Those deals may not be typical, however, or be offered on the powersport vehicle you want to buy.

Online lenders

Online lenders may offer low rates in exchange for low overhead. Without physical branches like a bank, for example, they are able to pass the savings on to customers. The downsides are a lack of in-person customer service and potentially high credit requirements.

Lightstream, the online arm of brick-and-mortar SunTrust Bank, offers personal watercraft loans starting at 4.29% (as of August 27, 2019), but looks for borrowers with good credit. You may also find online lenders offering personal loans suitable for nearly any use, including powersport vehicles. The downside is likely higher rates and lower amounts — personal loans typically lack collateral, unlike a car or home loan which are backed by a vehicle or house, respectively.

You could fill out a single form at LendingTree and receive several loan offers from online lenders as well as brick-and-mortar ones, depending on your creditworthiness.

Credit unions

Credit unions are a lot like banks, except they are owned by the participants, not operated for profit. They often have lower fees than banks, competitive rates and, sometimes, more lenient credit requirements. Some credit unions are only open to certain groups of people, such as employees of a particular company, or residents of a state.

For example, Golden 1 Credit Union in California offers loans for motorcycles, ATVs and jet skis starting at 7.24% (as of August 27, 2019) while New York-based Meridia Credit Union has rates starting at 5.09%, as of publication.

If you already belong to a credit union, be sure to check out its rates. If you don’t belong to a credit union, consider looking for a credit union where you live. Be aware, however, that some credit unions have fewer branches than major banks. They usually belong to credit union networks, however, that make ATMs available wherever you go.

Banks

You can always apply for a loan from a traditional bank, especially a bank you already have one or more accounts with.

“I recommend seeing if whoever you bank with has any kind of powersport vehicle loan program that you can get from them,” says Wood. “Your dealership may be a partner with your bank, but as a member you may get a more attractive rate.”

Wells Fargo, for example, offers a discount to existing customers who set up automatic payments for their powersport vehicle loans.

Choose the lowest term possible

No matter if you choose an online lender or brick-and-mortar bank or even dealership financing, compare offers and take the best deal for you. That includes the rate and terms, which may stretch as long as an auto loan. This can get expensive quickly — a borrower with fair credit in Charlotte, N.C. would pay nearly $2,700 in interest for a $5,000 jet ski by the end of a 60-month personal loan with an APR of 18.49%.

Other ways to finance powersport vehicles

Depending on your situation, you may have other financing options:

  • Person-to-person loans. You can borrow from another person, such as Mom or Dad, or a friend. This can be a good solution, especially if you offer the person a competitive interest rate, you’re not risking the financial security of the lender, and you are absolutely sure you can pay it back as promised.
  • Home equity line of credit. A HELOC can be a convenient, and often lower interest, way to borrow money if you have equity in your home. HELOC rates may be as low as 4.24%, but you won’t see any tax benefits of using a HELOC unless it’s used to buy, build or substantially improve your home. Plus, if you default, you put your home at risk.
  • Credit cards. Using a credit card can help you rack up rewards points, and you might even save interest expense if you use a card with a low- or no-interest introductory period. However, if the interest rates go up after the intro time, or if they are high already, the cost may be prohibitive. For 2018, the average interest rate on credit cards that charge interest was 15.32%, according to ValuePenguin.

The bottom line

If you’re buying a powersport vehicle, and you’ve made sure the payments fit into your budget, financing the vehicle can be an option. Do your research and get the best terms for your situation, and you could be tearing along on roads, trails, or across the water sooner than you think.

 

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