There’s nothing quite like the feeling of freedom you get from hitting the open road on a motorcycle. And with summer near, many more people are starting to dream of buying a new or used bike. However, the cost can be tens of thousands of dollars. Most people don’t have that kind of extra cash sitting around in a savings or checking account and will need to use financing to buy one.
Whether you’re considering upgrading your current ride or are in the market for your first motorcycle, understanding the financing options available is an important step in the buying process. Several avenues exist to finance motorcycle purchases, but each option has benefits and caveats, just as traditional vehicle financing does.
Here are three of the most common ways to finance an ATV, cruiser, roadster, sport, off-road, scooter, moped, dual-purpose, trike, or another electric or gas-powered motorcycle from a dealer or private seller.
1. Finance a Motorcycle Using a Personal Loan
One of the most common methods for financing a motorcycle purchase is a personal loan from a bank, credit union, or online lender. Personal loans give you flexibility in how much money you borrow, how long you extend repayment of the loan, and the lender with which you work.
Also, most personal loans are not tied to the bike in terms of collateral. If you lose your job or something else and can no longer make payments, the lender can’t take the motorcycle from you.
Several lenders offer unsecured personal loans to individuals with credit ranging from fair to excellent, and the total cost of the personal loan – the interest rate and any upfront funding fees – will depend on how well you’ve maintained your credit history over time.
Another benefit of using a personal loan to fund your motorcycle purchase is that you will likely have a fixed monthly payment rather than a variable one, which makes budgeting a breeze.
2. Obtain a Motorcycle Loan from a Manufacturer, Dealer, Bank, or Credit Union
Motorcycle financing may also be available through certain manufacturers, dealerships, traditional lenders, and online platforms offering specialty vehicle loans. Like car loans, motorcycle loans offered through these lenders generally use the bike as collateral to secure financing, potentially bringing down the interest rate for you when compared to unsecured personal loans.
The overall cost of financing a bike purchase could be less than a personal loan using this method. However, you may need to bring a 10-20% down payment, and if you default on the loan payment, the lender can recoup some of its costs by repossessing the motorcycle and canceling the loan.
Specialty vehicle loans secured by the bike will require proof of motorcycle insurance and will be limited in how much funding you can receive, typically based on the value of the bike to be bought. Unlike a personal loan, where you can apply for more money than the motorcycle costs to be used on other gear, such as bike equipment, clothing, parts, and pretty much anything else.
Loans from these institutions specific to motorcycles typically require good credit, especially if you want to take advantage of a great promotional rate offer. So, this may not be the best choice for borrowers with a bad credit history.
3. Use Home Equity to Finance a Motorcycle
For homeowners, tapping into the equity of residential property through a home equity loan or equity line of credit may offer an alternative solution to financing a motorcycle purchase. Home equity loans and lines of credit often carry low interest rates when compared to other financial products. However, the costs and time associated with originating each of them could outweigh the interest rate reduction.
Homeowners must first have enough equity in a piece of real estate to take advantage of home equity products to make a significant purchase like a motorcycle. If you don’t own your home outright, you will generally need your remaining mortgage loan balance to be 80% or less of your home’s worth at the time of the request.
Home equity lenders will check your credit report and score before approving you for a new home equity loan (HEL) or home equity line of credit (HELOC), and an appraisal of the property is usually necessary for approval, too. Then there may be additional closing costs and other fees added to the total loan amount, which increase its final annual percentage rate (APR).
One of the main benefits of using a HEL or HELOC is the ability to extend repayment for more years than you would a typical motorcycle loan or personal loan. Rather than paying the money back over 1-7 years, you could extend repayment up to 30 years. That will also reduce your monthly payment but will likely increase the total interest you pay.
Final Thoughts on Financing a Motorcycle
If you’re ready to fulfill your dream of owning a motorcycle, hopefully, I’ve helped you figure out how to finance the purchase. When buying a Honda, Indian, Yamaha, BMW, Kawasaki, Suzuki, Harley-Davidson, Triumph, Ducati, KTM, Husqvarna, Victory, or another name-brand motorcycle, you have plenty of options for financing. Some without requiring a down payment.
Personal loans offer the most flexibility, while specialty motorcycle loans provide a straightforward option for those with exemplary credit.
A home equity loan or equity line of credit might be the best choice for someone with a poor credit score or who needs lower monthly payments. You can use home equity to buy your new ride, but only when there’s enough equity available in your home or other properties.
I hope you found this article discussing the “best ways to finance a motorcycle” helpful. If you have a question, personal tip, or another comment, please don’t hesitate to message us using the contact form. Happy riding!