How to Finance a Motorcycle

motorcyclist rounding a curve
••• Getty Images/WIN-Initiative

Even more than car owners and their cars, motorcycle enthusiasts tend to have a very strong emotional connection to their bikes. Non-riders can only imagine the visceral thrill and sense of freedom that comes with taking off down an open road on two wheels. For many, motorcycles are more than just part of a lifestyle, they are the center of life itself.

The problem with such devotion is that is can sometimes get the best of you, as when purchasing the bike of your dreams.

Putting out the money for a new or used machine is no time to abandon rational thought. So, before visiting your local dealer or checking the want ads, spend some time determining just how much you can realistically afford to spend and find out all you can on the best and most economical way to finance your motorcycle. 

Financing a Motorcycle is Similar to Financing a Car

If you've ever financed an automobile, you are going to recognize a lot of what you are about to read. There are some differences between financing a car and a motorcycle, but there are more similarities, which really shouldn't come as a surprise. In both cases, you are buying a vehicle to get you around. In both cases, it's pretty expensive proposition. And in both cases, loans are loans, which means that the lender is taking a risk with you. So they're going to want to know a few things about you, particularly your credit history.

Plan on a Credit Check

When's the last time you checked your credit score? You might want to do that before submitting your loan application. There may not be a whole lot that you can do if you have bad credit, but if there is, it will likely involve an error in your credit report. This is something you should definitely take care of before applying for your loan.

Also, if you are carrying a lot of credit card debt, consider waiting until you get it paid off or at least way down before getting your bike. As mentioned, lending money has a lot to do with taking a risk and that's especially true for motorcycle loans. Lenders know that riding a motorcycle is more dangerous, and therefore riskier than driving a car, so expect them to be a lot stricter on you than if you were purchasing an auto.

Shopping for the Best Motorcycle Loan is as Important as Shopping for the Best Bike

Cash is the way to go if you've got it, but I'm going to assume that you are reading this because paying cash is not an option. There are a number of motorcycle loan options, though. Some are better than others, and a few are pretty bad. Let's take a look:

The Dealership

Almost all motorcycle dealerships offer financing to their customers. The catch here, of course, is that you have to purchase your bike from the dealership. In other words, no used bike from a private seller. They will check your credit, as will be the case with all lenders, with the possible exception of your mother. But they may also be the most willing to work with you. Don't expect the best rates, however, and be sure that you read and understand completely the terms of your loan agreement.

The Manufacturer

Motorcycle manufacturers are another source of financing. They often offer special financing programs as part of their sales promotion efforts, particularly on newly introduced models or on models that are slow in selling. Always ask your dealer if there are any OEM (original equipment manufacturer) loans available on the models you are interested in. These options are, of course, for new bikes only.

Banks and Credit Unions

One of the best places to seek out a loan is through a local bank or credit union. The rates and terms available are almost always better than you will receive from other sources, particularly when it comes to credit unions. You normally don't have to be a current customer to get a bank loan, but you will need to be a member of a credit union to obtain financing there.

Given the better rates, joining a credit union is probably worth it.

Online Lenders

There are several lenders that operate primarily online, some with names you'll recognize from ads on television, others you may not. These lenders are definitely worth checking out, but be sure to do a little homework online to see how credible they are and how they rate with their customers.

What to Avoid

Taking out a loan that with your home as collateral is something you should consider very carefully.  This is again where the emotion of owning the bike of your dreams could cloud your reason. Do you really want to put your home at risk for a new motorcycle? Probably not. And think about it, if you can't get a regular motorcycle loan, there's probably a good reason why. It's the same reason that loaning yourself cash against your house is a bad idea.

Another bad idea: buying a bike on your credit card. If you have a high enough limit, the thought is tempting. It's easy to do, almost too easy. And there's no credit check if you already have the card. The factor that should stop you from doing it, though, is the sky-high interest rates you'll be paying and the nasty penalties you'll get stuck with if you get behind on your payments.