There’s nothing quite like the feeling of freedom you get from cruising the open road on a motorcycle. And with summer still here, many people continue to dream of buying a new or used bike. However, the cost to purchase a motorcycle can be tens of thousands of dollars.
Most of us don’t have that kind of extra cash sitting around or in a checking or savings account, and will need to use financing to buy a bike.
Whether you’re considering upgrading your current ride or are in the market for your first motorcycle, understanding the financing options available to you 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 a traditional motorcycle, cruiser, roadster, sport bike, dirt bike, scooter, moped, 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 to take out 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 as collateral. If you lose your job or something else comes up, and you can no longer make payments, the lender can’t repossess the motorcycle.
Several lenders offer unsecured personal loans to individuals with fair to excellent credit scores, and the total cost of the loan – the interest rate and any upfront funding fees – will depend on the lender, as well as your credit, income, and amount financed.
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 for your new bike 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. This can reduce the interest rate when compared to unsecured personal loans.
The overall cost of financing a bike purchase with this method can sometimes be lower than that of a personal loan.
However, you may need to make a 10-20% down payment, and if you default on the loan, the lender can recoup some of its costs by repossessing the motorcycle, selling it, then sending the difference between what they get and what you still owe to collections. That may include fees associated with the repossession process.
Specialty vehicle loans secured by the bike require proof of motorcycle insurance and limit how much funding you can receive, typically based on the value of the motorbike; unlike a personal loan, where you can apply for more money than it costs. The extra funding can be used to buy accessories, clothing, parts, and other gear.
Loans from these institutions for 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 rough credit history.
3. Use home equity to finance a motorcycle
For some homeowners, tapping the equity in their residential property through a home equity loan or equity line of credit (HELOC) can provide an alternative way to finance a motorcycle purchase.
Home equity loans and lines of credit often carry lower interest rates than other financial products. However, the total costs and time required to originate each of them could outweigh the interest rate reduction.
Homeowners must first have sufficient home equity to use one of these lending solutions to buy a motorcycle. If you don’t own your home outright, you will generally need your remaining mortgage loan balance to be at least 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 or home equity line of credit, and an appraisal of the property is usually necessary for approval.
Then there may be additional closing costs and other fees added to the total loan amount, which increase its annual percentage rate (APR).
One of the main benefits of using a home equity loan or a HELOC to finance a motorcycle purchase is the ability to extend repayment terms beyond those of other options. Rather than paying the money back over the typical 1-7 years, you might be able to extend repayment up to 30 years.
That will also reduce your monthly payment but will likely increase the total interest you pay if you take the full 30 years to repay the loan.
Final thoughts on financing a motorcycle
Hopefully, I’ve helped you figure out how to fulfill your dream of owning a motorcycle. When buying a Honda, Indian, Yamaha, BMW, Kawasaki, Suzuki, Harley-Davidson, Triumph, Ducati, KTM, Husqvarna, Victory, or another motorcycle brand, you will have a few financing options to choose from.
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 only choice for someone with a less-than-perfect 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 real estate you own.
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!