When you are financing a motorcycle, you should consider several potential pitfalls that some motorcycle buyers are unaware of when they go out to make their purchase. First-time buyers may think a motorcycle is like any other vehicle they’ve purchased, but this is often not the case with specialty vehicles like motorcycles. So check out these three important things to consider when buying a motorcycle.
Higher Interest Rates
Motorcycle loans are often issued as unsecured debt. This makes your loan much more dependent on your credit history, and as such your credit score and other financial factors will determine if you are approved and your interest rate.
Even with the best credit, you should expect to pay a higher interest rate on a motorcycle versus a car, because the bank sees this type of purchase as riskier. Before you visit a dealer or talk to a bank about your loan, you may want to run your credit report, and make sure everything is in order.
Long Loan Terms
You can often lower your loan payment by increasing the years or months that you take to pay it off. This can be helpful if you know what you’re getting yourself into, but it can also be problematic if you like to upgrade your motorcycle every few years. If you get a five year (60-month) loan, and you decide to upgrade to a new model in two or three years, you’ll still owe money on your motorcycle.
Hopefully, your motorcycle will be worth more than you owe, and you can use that equity towards your new purchase. All too often this is not the case, and you end up upside-down, and you have to pay down the loan before you can sell or trade-in that bike. Also keep in mind new motorcycles, just like cars, lose value as soon as you drive them off the lot, and motorcycles get about 50% more wear as you ride. For example, driving a car for 15 miles is about the same as riding a motorcycle for 10 miles, in terms of relative wear and tear.
Accepting the First Offer
Loan offers can vary wildly from one dealership to the next, and from one bank to the next. You should get at least two or three offers before making your final decision, but you should get the offers all around the same time.
Like with a mortgage, every time you apply for a loan, your credit score may go down a few points. However, if you apply for a few loans within a few days, the credit agencies will realize you are shopping around for the same purchase, and not trying to buy several different motorcycles.