The Complete Guide to Motorcycle Loans

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Motorcycle loans
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Zipping around mountain curves and opening the throttle on your motorcycle can make you feel like you’re flying — but financing that kind of freedom may make you feel like you’ve been tied down. Most people don’t have enough money to buy a motorcycle with cash, especially if they’re also paying for a four-wheel ride, so it’s important to get the best deal on a motorcycle loan.

To find the best motorcycle loan rates, you could look into motorcycle financing from your local credit union or bank, research motorcycle loan rates online and read the rest of this article. We break down where you should (and shouldn’t) look for a motorcycle lender and how to get the best motorcycle loan rate possible.

What lenders offer motorcycle loans?

Though the process of applying for a motorcycle loan is similar to that of an auto loan, they’re not interchangeable — auto loans and motorcycle loans are two different things. In fact, a lender that offers auto loans may not necessarily offer motorcycle loans.

Dealership lending partners

Perhaps the most common way to get a motorcycle loan is through a motorcycle dealership. Dealers partner with lenders, such as credit unions or banks, to offer loans to customers who want to buy one of the dealer’s motorcycles.

However, dealerships often get large kickbacks from lenders, so the dealer may be able to raise your APR and keep the markup as profit. They could tell you that you need to include add-ons and accessories in your loan. Or they may recommend a loan that isn’t the best for you, the customer, because it’s the best for them, the dealership.

The best way to avoid being ripped off on your motorcycle loan is to shop around for a loan. It does not hurt your credit to apply to multiple lenders anymore than it does to apply to one when you do all the applications with a 14-day window.

Dealerships

Dealerships themselves may offer to finance you. It may not be wise to take the offer though, as “buy here, pay here” places are well known for predatory lending practices. If this is your only option for motorcycle financing, reconsider whether you really need a motorcycle. It could be much better for you, and your wallet, if you cleaned up your credit and/or saved up enough money to buy a motorcycle outright instead of taking a sky-high interest loan.

Motorcycle manufacturers

Some motorcycle manufacturers, like Harley-Davidson and Kawasaki, have their own financing companies. You could apply to one directly, instead of through a dealership. They also may offer special deals and financing rates at certain times of the year: in January 2019, for example, Harley-Davidson offered a starting APR of 3.99% to high credit tier customers.

Tip: If you are buying from a private seller rather than a dealer, Harley-Davidson Financial Services offers a Rider-to-Rider program, which offers motorcycle financing to private buyers.

Credit unions

You may be able to get the best motorcycle loan rate from your local credit union. Credit unions generally are able to offer loan rates and fewer fees than banks. The catch? You have to meet membership requirements which may be lenient or strict, depending on the credit union. A one-time charitable donation or joining an eligible organization may count for PenFed Credit Union, but membership for many other credit unions — e.g. Altra and Golden1 — is based on where you live or your employer.

Banks

A bank with which you already have a checking account or other loan may be convenient for financing your motorcycle, and might even offer a discount for existing customers. Large banks are also able to offer better phone apps and 24-hour service that small credit unions may not be able to offer.

Online lenders

Online lenders may be able to offer you the best of both worlds: low rates and convenience. One of the lowest starting rates we found in early January 2019 was 4.69% APR at Lightstream, the online arm of SunTrust, a brick-and-mortar bank with branches throughout the southeastern United States.

How to apply for motorcycle financing

Though you can’t use an auto loan to purchase a motorcycle, the application process is similar to that of car financing. To apply, you fill out a credit application saying how much you want to borrow for what type of motorcycle, in addition to who you are, where you live, where you work, how much money you make and how much of it goes toward rent or a mortgage. The lender uses that information to pull your credit report, which tells them your credit score and your credit history.

What the lender looks at about you

Your credit score. It’s a number between 350 and 850, the higher the better. A top score means you’ve repaid loans and other bills on time and generally used credit wisely. You may not have a credit score if you’ve never taken out a loan before. You can read about loan options here if you have no credit or poor credit.

Your credit history. If you’ve paid other loans on time, like car loans or other motorcycle loans, that’s a very good thing. Lenders see that as a sign you will pay your potential new loan on time. But if you had a repossession or a bankruptcy recently, that’s not a good thing — lenders may consider that a sign you might not pay your potential new loan.

Your debt-to-income ratio. Your rent or mortgage, personal loan payment and other bills are considered debt. If your debt is low compared with your income, you probably have enough money to make payments on a motorcycle loan. If your debt is high compared with your income, you may not have the money to make payments on a motorcycle loan.

Your down payment. How much money are you putting down? Zero dollars or $1,000? This can show the lender how much you are willing to invest in the motorcycle and how well you manage and save your money.

What the lender looks at about the motorcycle

Is the motorcycle new or used? A new motorcycle is less risky — it is less likely to break down or require expensive repairs — it probably also has a higher price tag. A used motorcycle may be more risky, but costs less. The lender will consider the age and mileage of a motorcycle.

The price of the motorcycle. How much are you buying the motorcycle for — $3,000 or $100,000?

The value of the motorcycle. How much is the motorcycle actually worth? This compared with the price will tell you, and your potential lender, if you’re getting a good deal. To find out how much a motorcycle is actually worth, you can use a free, online industry guide, like Kelley Blue Book or NADAguides.

Trade-in information. If you have a motorcycle to trade in, the lender will take it into consideration. If you own the motorcycle outright or it is worth more than what you owe on it, it can act as a down payment.

What the lender looks at about the loan you want

How much you want to borrow. Overall, how much do you want to borrow for the motorcycle loan? Is this amount more or less than what the motorcycle is worth?

Tip: Don’t forget, you may want to finance more than just the motorcycle to include sales tax, government registration fees and dealer fees. That’s not including accessories like protective equipment (a helmet, for example), gloves or a jacket. Do you want to add any other motorcycle accessories, warranties or maintenance plans?

You can go here for questions to ask about an extended warranty.

How long you want to pay. The length of your motorcycle loan term is important — usually, the more money you borrow, the longer the loan term.

Credit tiers

Potential lenders use all of this information to determine your credit tier. Each lender has its own tier system, but the higher your tier, the more likely you are to get a loan with a favorable rate.

Tip: At the dealership, ask your salesperson if they can get you a tier bump. Reasons you might deserve one include a good credit history, low debt and a steady job.

Motorcycle loan rates and terms

Depending on which tier you are in, you’ll receive potential motorcycle loan offers. At time of publication, advertised motorcycle loan rates from major lenders ranged from 4.69% to 12.74%. The lowest APR we found was 3.99% on a new motorcycle financed through Harley Davidson Financial Services, if you meet all qualifications.

Depending on the lender, your loan amount may have to fall within a minimum and a maximum. The lowest minimum amount required for a motorcycle loan was $1,000. Terms ranged from 24 months (2 years) to 84 months (7 years).

Tip: Pay attention to the overall cost of a loan. Don’t focus on monthly payment — if you focus just on monthly payment, all types of fees, charges and accessories could be slipped into your loan. Focus on getting a good deal overall. If you get a good deal, you’ll get a good monthly payment.

Who motorcycle loans are best for

Motorcycle loans are best for people with credit scores of 720 and up. Why such a high score? Motorcycles are considered recreational vehicles, something you get for fun. They require more maintenance and depreciate more quickly than most cars. Motorcycle crash rates are also higher than regular car crash rates. All of this makes motorcycle loans riskier for lenders, and the greater the risk, the higher the APR. Ergo, the best way to balance out the risk of the motorcycle and get a lower APR is to have a high credit score.

Other ways you can make the loan less risky for the lender are to give a large down payment and/or have a cosigner who has great credit.

If you need a cheap way to get around and you don’t have the best credit score, consider a used car and check out the six best auto loans for used cars.

Motorcycle refinance

You may be able to refinance your motorcycle at a lower rate by switching lenders, especially if your credit score improved since you signed for the original loan and the motorcycle is worth more than what you owe. Potential motorcycle refinance lenders include your bank, credit union or online lender.

Motorcycle loan alternatives

Alternatives to motorcycle loans include the obvious: good ol’ cash, and some that may not be obvious, from leasing a motorcycle to paying for a motorcycle by using a home equity loan or a home equity line of credit (HELOC). You can read more leasing a motorcycle at LendingTree, which owns MagnifyMoney.

As advised by Eric McClain, CFP® at Birmingham, Ala.-based financial firm McClain Lovejoy, “consider your assets and credit sources and utilize the cheapest money available when possible.” If you can get a lower interest rate borrowing against another asset — keeping in mind that the asset in question may be your home — consider going with that type of loan instead and using the cash from it to pay for the motorcycle.

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Jenn Jones
Jenn Jones |

Jenn Jones is a writer at MagnifyMoney. You can email Jenn at [email protected]

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