October 17 2011 by Jason Fogelson
Buying a motorcycle can be a significant investment. While generally less expensive than cars, the tab for a new, fully featured bike can easily approach figures that eclipse the price of a mid-size sedan. In the best of all possible worlds, you've got enough cash put aside so that you can buy your next bike outright. In the real world, that's not always the case. Does that mean that you have to put your dreams on hold? No, it does not. There are sensible ways to finance the purchase of a motorcycle.
Secured vs. Unsecured. A secured loan is a loan that is taken against the title of your bike. An unsecured loan is a personal loan, taken against your signature and credit. Unsecured loans are generally riskier for the lender, and so come with a higher interest rate. The lender usually holds the title to the bike during the term of a secured loan, and may require that you keep a certain level of insurance to protect the asset (your bike). You might choose an unsecured loan if you are buying from a used bike from a private party, or if you are ordering a bike from a custom builder. You might also have the option of borrowing money against an asset other than your bike, like your home or business. Each kind of loan has its plusses and negatives, depending on your financial situation. Check with an accountant before you decide which kind of loan to get.
Consider the Source. Motorcycle brands and dealers are not just in the bike business, they're also in the financing business. They make money helping you to finance your bike. Some brands have several ways of financing a bike. They can sign you up to a private label credit card, which is in essence an unsecured loan with revolving credit. Several manufacturers also offer secured financing, and they often advertise promotional rates in order to move inventory. Some dealers also have relationships with banks or finance companies, and can act as an intermediary to help get you financed.
Take It to the Bank. Before you sign up for any financing offer at a dealership, go to your personal bank and/or credit union and talk to your banker about a motorcycle loan. They'll let you know if they offer that service, and help you figure out what rate your could expect and how much money they'd require as a down payment. You may even be able to get preapproved for a motorcycle loan at your bank before you ever go shopping.
Balance Your Books. Just because you get approved for a big fat motorcycle loan doesn't mean that you should sign up for the full amount that you've been offered. Take a good, hard look at your finances, and make sure that you're not signing up for more motorcycle than you can afford. Most new bikes lose value as soon as you roll them off the lot. When you add in the interest and financing charges, as well as the insurance, tax and title fees that you're going to have to lay out, your bike is going to cost you money. Looking at a bike as a financial investment is a mistake -- a bike is an expense, not an investment. It has some value, but it is an ongoing obligation.
Keep your eyes clear, do your homework before buying, and be sure that your bike doesn't become a financial burden instead of a source of pleasure.