Deciding on a financing option for your new motorcycle can be difficult, especially if you have bad credit. Even when traditional lending sources are not available, you may still be able to find a reasonable interest rate from an independent bank or online lender. Motorcycle riders with good credit have far more options at their disposal, possibly even qualifying for no-interest financing from the dealership.
Financing your motorcycle purchase at the dealership is convenient, but may cost significantly more over the term of the loan because of high interest rates. Unless you have outstanding credit, do not be swayed by advertisements promising zero-percent financing or a low interest rate. These programs are rarely available for buyers with average or bad credit.
Manufacturer Financing Programs
The best option for purchasers with good credit may be a manufacturer-sponsored financing program. All of the major manufacturers have their own in-house credit programs that can be used to purchase one of their motorcycles. This includes well-known brand names such as Suzuki, Honda, Yamaha, Kawasaki, BMW and Harley-Davidson. These financing programs usually have a lower interest rate than loans available from the dealership.
Home Equity Loans
If you own a home, it may be more economical to use funds from a home equity loan to purchase the motorcycle outright. You can usually get a lower interest rate on a home equity loan because your home is used as collateral instead of the motorcycle. Because a home equity loan is spread out over 15 or 30 years, the monthly payment will be far lower than that of a five-year motorcycle loan.
Unsecured loans are usually the worst option because of the high interest rates most lenders charge. Because there is no collateral involved with this type of financing, the lender must charge more to offset the increased risk of default. Choose an unsecured loan only if you have no other way of financing your motorcycle purchase.
Instead of financing your bike from the dealership, prequalify for a loan from an independent lender. This gives you more bargaining power when discussing financing options. You may get a reduced interest rate if the salesman knows you have a better alternative. There may also be a discount for purchasing the motorcycle with cash, allowing you to save even more money by obtaining the funds from an independent bank ahead of time. Besides the traditional brick-and-mortar banks, there are often online lenders that offer motorcycle loans.