Motorcycles are becoming more popular today more than ever. Part of the reason is its fuel efficiency and the fact that it costs lesser to maintain than cars. It costs around $36,270 to buy a new car while a new motorcycle is just under $5,000 according.
Motorcycles are and have always been a budget-friendly option for transportation. However, finding a loan for a motorcycle can prove to be difficult. You may even need to pursue alternatives such as financing.
What are is the Difference between an Auto Loan and a Motorcycle Loan?
The process of buying a car is just the same as that of a motorcycle but the options for financing are different. In most cases, financial institutions won’t allow you to take an auto loan to be used for purchasing a motorcycle, Unless you working with a Buy Here Pay here dealership that finances the loan themselves.
There is a loan that is specifically intended for motorcycles, specialty, and as well as recreational vehicles.
Loans designed to finance a motorcycle purchase belong to the ‘specialty loans’ category and most of the time, it has a different interest rate and periods for repayment. For instance, you can qualify for a 3.09% rate for an auto loan from SunTrust as of April 6, 2018.
SunTrust considers motorcycles as a type of recreational vehicle and places it in the same category as motor homes and boats. A motorcycle loan from them has a 4.44% interest rate and that’s the lowest one!
4 Options for Motorcycle Loans
Motorcycle loans are different from car loans so it is always a good idea to look for different options in financing your purchase to make sure that you are getting only the best deal available.
Whether your intent is to use it as your main mode transportation or getting one to ride during the weekends, here are four financing options that you can choose from.
- Dealership Financing (or In-house Buy Here Pay here solutions)
One of the options is getting your motorcycle financed by the dealership, whether its a regular (or traditional dealership) or a Buy Here pay here Dealer. There are dealers who offer loans from the motorcycle manufacturer and there are also those who partner with lenders. Most of these third-party lenders standards that are less rigorous compared to manufacturers so it would be easier for you to get a loan even with a ‘not so good’ credit score.
Just remember that this type of loan can be more expensive compared to the other financing options in this list. You might find yourself paying more in the end so be sure to do a research and compute the cost before getting your financing from the dealership.
- Manufacturer Financing
There are manufacturers who offer financing to buyers. For instance, Harley-Davidson offers loans through their partner Eaglemark Savings Bank. You can qualify for a loan with rates as low as 3.99% depending on your income and credit score. There are even cases that you would no longer need to place a downpayment.
It is important to remember that the low rates on loans offered by manufacturers are reserved specific models or the repayment terms may be short. If you are planning to get a model that has a lower price or you’re planning to get a repayment period of more than 36 months, the interest rates will surely be higher.
- Loans from Banks or Credit Unions
It is possible to save money from your dealer of choice if you secure financing ahead of time. There are credit unions and banks that offer motorcycle loans with low interest rates compared to what dealerships offer.
If you have a low credit score or don’t have a credit history yet then you can choose to get a motorcycle loan from a credit union. Credit unions are nonprofit organizations and they often have less stringent requirements for different loans. If you’re not yet a member of a credit union, you can find one that you can join from MyCreditUnion.gov.
- Personal Loan
Lastly, you can finance your motorcycle purchase using a personal loan. Depending on your credit history and income, you can qualify for this type of loan at rates that are as low as 4.98%. If your credit score is excellent and you’re financeable able to do monthly payments, you can save money by choosing a personal loan instead.
If your credit score isn’t that good, there’s a bigger chance of qualifying for a personal loan than a motorcycle loan. There are lenders who are willing to work with people having credit scores of 580 or a bit lower.
But a less stringent credit standard means that a personal loan would have higher interest rates compared to the other forms of financing already given above. You may qualify for a personal loan but in the end, you might find yourself paying interest rates that are as high as 35.99%!
There’s always the temptation of thinking that the high interest rate is worth it because it helps you get your dream ride anyway. For instance, if you were approved for a 60-month loan for $10,000 from Harley-Davidson at an interest rate of 3.99%, the total amount that you need to pay back is $11,047.
In contrast, if you took a personal loan qualifying for the same amount of $10,000 on a 60-month repayment period at an interest rate of 35.99%, you will end up paying back $21,676!
Personal loans would mostly have shorter repayment periods compared to motorcycle loans. With the latter, you can choose a repayment term of up to 84 months while with personal loan, you will often find 60 months as the longest repayment term.
It is always a good idea to compare different lenders and see which one offers personal loans with the lowest rate.
Time to Buy a New Motorcycle!
Motorcycles are a great form of transportation. Aside from being cost-effective and fuel-efficient, it’s also a great way to travel and a perfect form of recreation. With good research and comparison, you will surely be able to find the best financing option for your new motorcycle of choice!