It's exciting buying a motorcycle. Because of the range of road machines, dirt bikes and scooters on the market, consumers have the freedom to choose the ride that best suits their style and their bank account. A loan with a troublesome interest rate, however, can ruin your fun for years. That's why it's as important to spend as much time scrutinizing loan offers as you would in reading the specs on the motorbike.
Competitive Shopping for the Motorcycle Loan, then the Bike
First things first: qualify for a loan. Getting a pre-qualification loan establishes the total amount you can spend, leveling the playing field of bikes to choices you can afford. Consumers that walk into a bike showroom without a loan in-pocket are prey to sales staff pressure, glittery offers, and impulse extras. It's wiser to negotiate on the total price, not the amount of the monthly payment.
Consumers can shop ahead for financing offers via lender-made installment loans or they may have to fall back on manufacturer/dealer credit cards. The first type of financing is provided through a secured installment loan by a commercial lender, bank, or member association. The purchased motorcycle becomes the collateral against the loan, and interest rates are generally pegged to the borrower's credit.
Sample rates on secured motorcycle loans from $10,000-$15,000 (Nov. 28):
- Excellent credit (720+): 5.99% on 24, 36, 48 months
- Good credit: 6.75% on 24, 36, 48 months
- Fair credit: 7.99% on 24, 36, 48 months
- Dealership Loans and Private Label Credit Cards
In seeking competitive offers on motorcycle loans, consumers should round up the name of the motorcycle and model, their social security number, and the total estimated price of the bike, helmet, tax and registration.
Private Label Credit Options
In comparison, motorcycle financing or credit card offers arranged through dealer/manufacturers may look attractive at first. Consumers beware. Interest rates may climb dramatically after the initial offer period. Dealers are allowed to assess points on their revolving-credit financing, piling up profits and commissions at the buyer's expense. The credit card plans charge interest on the existing balance, including late fees. A 2014 survey by CreditCards.com found that the average APR on retailer's private label cards leapt 8 percentage points above the national interest rate on general purpose credit cards.
What to Look for in a Motorcycle Loan
In working with a lender or dealer, the borrower needs to know if the loan comes with a fixed or variable interest rate. Fixed-rate loans are usually the best long-term bargain for motorcycle owners. Consumers should also know about penalties for paying off the loan ahead of schedule, if there's a required down payment and if the rate can go up if there are delinquent payments. LendingTree's Loan Payment Calculator allows borrowers to plug in the loan amount, interest rate, and term to get an idea of how much they can afford. Borrowing too much on a high-performance sport bike can make for lean months when you add in insurance, accessories, repairs, and parking.
Because motorcycles and off-road bikes depreciate, borrowers should take the shortest rate that they can afford. Homeowners are not the only borrowers that find their loans underwater.