Motorcycle loans are similar to car loans, however many banks view them a little differently. Motorcycles are considered by most banks to be recreational only, so they aren’t a primary means of transportation. That means if you are going to default on any payment, it will be your motorcycle payment first. This could mean less leniency in terms of credit, however, motorcycle dealerships and manufacturers know this is a road block for their customers and they have ways to get around it.
A motorcycle loan simply gives you the money to purchase a motorcycle without having all of the cash to buy it outright. It works just like a car loan. You make a down payment (in some cases) of perhaps 5 percent or 10 percent. The bank pays the rest of the cost of the motorcycle to the dealership and then you make payments to the bank every month to pay off the money you borrowed, plus interest.
A motorcycle loan is a way for those who don’t have the cash on hand to buy outright, to drive away on a motorcycle from a dealership. Loans provide more people the ability to buy a bike as a second means of transportation, and give dealers and bike manufacturers a larger market in which to sell their machines.
A motorcycle loan includes an interest rate, which is the annual cost of the money you borrow. The loan comes with terms, which specifies the time frame in which it must be repaid. In addition, a motorcycle loan will have GAP insurance, which pays any difference in the principal remaining on the loan and the value of the bike (usually paid by insurance) if it is stolen or totaled. Many motorcycle loans also require insurance for the rider and bike.
Motorcycle loans are not hard to get. In fact, a motorcycle dealer will work hard to get you one by connecting with the right banks, ones that are willing to finance motorcycles. They also offer dealer financing, which offers competitive rates. Dealer financing was started to allow more people to buy bikes. It’s how dealers and bike makers help themselves and the consumer at the same time.
When getting a motorcycle loan it is best to consider the rate and terms first and foremost. A higher interest rate means more paid from your pocket each month, and less principal or equity gained. This is especially crucial in motorcycle loans because the bikes lose so much value after you drive them off the lot. If you only pay down a few hundred dollars off your original balance over the course of a year or two, you will owe money when you trade the bike in.