How to Finance a Motorcycle
Be sure you can afford the terms before taking out a loan
Motorcycle enthusiasts tend to have a solid emotional connection to their bikes, maybe even more than car owners. The problem with such devotion is that it can sometimes cloud your better judgment. While shopping for the bike of your dreams, your emotions could get the better of you.
Before visiting your local dealer or checking the want ads, spend some time determining just how much you can realistically afford to pay. This process should involve exploring the best ways to finance your motorcycle.
Financing a Motorcycle Is Similar to Financing a Car
There are some differences between financing a car and a motorcycle, but there are more similarities than differences. This shouldn't come as a surprise—in both cases, you are buying a vehicle to get you around. Whether you're buying a car or a motorcycle, the purchase is likely to be an expensive one.
Also, in both cases, the lender will check your credit. If you currently have a lot of credit card debt, consider waiting until you get it paid down before shopping for a new bike. Excessive debt can reduce your credit score, increase your riskiness in the eyes of lenders, and ultimately force you to accept a more expensive loan.
One difference between shopping for a car and a motorcycle is that motorcycles are inherently more dangerous. That means there's more risk with motorcycles, and you can expect those risks to be priced into the cost of owning a motorcycle.
Where to Get a Motorcycle Loan
The best-case scenario when buying a motorcycle (or making any large purchase) is to wait until you have saved up the cash to do so. If you're determined to take out a line of credit to purchase a motorcycle, take the same care you would with any other big-ticket item; ensure you understand the terms and can handle the payments.
Almost all motorcycle dealerships offer financing options to their customers. They may be the most willing to work with you, since they may be eager to make a sale, but don't expect the best rates. Take extra precautions while reading the terms of your loan agreement.
Motorcycle manufacturers are another potential source of financing. They may offer special financing programs as part of their sales promotion efforts, particularly on unpopular or newly introduced models. Always ask your dealer if there are any OEM (original equipment manufacturer) loans available on the models you are interested in.
OEM loan options apply to new bikes only. You can't use these loans for a used bike.
One of the most cost-effective places to seek out a loan is through a local bank or credit union. The rates and terms available are almost always better than those you would receive from other sources.
In addition to traditional banks and credit unions, there are online lending options. These can be viable options, but you must do your homework. Research the lender to determine how credible they are. Seek out reviews from past customers.
Bad Options for Financing a Motorcycle
You shouldn't go into this process with the mindset that you will buy the bike at any cost and with any form of financing. For instance, using your home as collateral for a loan is something you should consider very carefully. Do you want to put your home at risk for a new motorcycle?
Another bad idea is buying a bike with your credit card. If you have a high enough limit, this can be a tempting option—it's easy to do, and there's no credit check or extra paperwork. However, credit card debt usually comes with high interest rates compared to other forms of debt. If you get behind on those high-interest payments, you could face terrible penalties.
The Bottom Line
No matter how strongly that new shiny bike is calling your name, you should never give in to temptation unless you can truly afford it. The motorcycle of your dreams probably isn't your only option when it comes to transportation. Remember that you have other options as you shop.
When you think you've found an affordable way to purchase a bike, carefully consider key aspects of the loan such as the rates, the down payment, and the monthly payment. Can you realistically expect to meet these costs without impacting your financial future?
Conducting your due diligence before committing to financing will pay off in the end—and get you one step closer to the bike of your dreams.
Financial Industry Regulatory Authority. "How Your Credit Score Impacts Your Financial Future." Accessed May 4, 2020.
Experian. "How Is Your Credit Score Determined?" Accessed May 4, 2020.
Insurance Information Institute. "Facts + Statistics: Motorcycle Crashes." Accessed May 4, 2020.