Common Motorcycle Financing Pitfalls To Avoid

Just like purchasing a car, there are many things to consider before buying a motorcycle. In fact, motorcycle buyers tend to make similar mistakes when financing a bike. Here are some of the most common motorcycle financing pitfalls to avoid when shopping for a motorcycle.

Shopping for a Bike Before Shopping for a Loan

When you decide to get a new motorcycle, the excitement may have you rushing to the nearest showroom before you shop around for a loan. Picking a bike before securing financing is one of the most common mistakes bike buyers make, but it can be a devastating one.

Even if you do cursory research or consult financial services to get a general idea of what type of loan you qualify for, choosing a bike before securing a loan can open you up to risk and disappointment. For instance, you might fall in love with a motorcycle that’s simply beyond what you can afford. Or conversely, land on a model that’s not as high-caliber as some of the other bikes you qualify for with particular financing. You want to stay within budget, but you don’t want to sell yourself short either.

Every lender offers different motorcycle loan rates and terms and determines your creditworthiness differently, so you must take everything into account before hastily choosing a bike or being pressured into a purchase. Understanding how much you qualify for before you shop for a motorcycle will ultimately help you negotiate a better deal.

Carrying Over Negative Equity

Another mistake you don’t want to make when financing your motorcycle is getting upside down on your loan.

Perhaps you’re moving onto your second motorcycle after riding your first bike for some time and realizing it’s not the right bike for you. If you haven’t paid off your old motorcycle loan, it can be enticing to trade it in and roll the negative equity into the new loan. However, this means you’ll have to pay interest on this additional debt for your new loan’s term, and if the new loan has higher interest rates, you could end up paying a lot more than you bargained for.

Each lender determines interest differently, so it’s important to understand whether they are using simple interest—only based on the principal loan amount—or some other form of interest. If you finance a bike with a loan that uses something other than simple interest, this could be problematic if you decide to trade again in a couple of years.

Not Negotiating Price

In addition to getting a good deal on your monthly payments, you should be sure not to skip negotiating your motorcycle’s price. Whether you’re buying from private sellers or dealerships like Harley Davidson, you should do your best to work out a fair price and then see how it fits into your budget.

You should also avoid letting the seller know how much you have been approved for. If you reveal the full amount, they may try to give you higher sticker prices or add on accessories you don’t want or need.

Ignoring Your Credit Score

Like auto loans, the better your credit, the better your motorcycle financing options will be. While lenders still offer loans when you have a low credit score, it doesn’t mean you should ignore it. Boosting your credit can help you get better rates and terms that will lower your loan payment.

There are several ways you can boost your credit score to ensure you get the best motorcycle financing. Some of these include avoiding credit card limits, limiting applications for new credit, and building your credit history. You can easily monitor and improve your credit health by taking advantage of free credit monitoring services.

Borrowing Too Much

Another financing pitfall to avoid when buying a motorcycle is borrowing more than you need. With good credit, you can typically get approved for amounts well above what you need to afford the bike you want. Taking the entire loan amount you’re approved for usually isn’t the smartest fiscal decision and can jeopardize your finances. Don’t forget that motorcycles depreciate quickly, and you will be expected to pay back the full amount you borrow.

Not Weighing Cash Rebate Vs. Low Interest

It’s common to be offered cash rebates or low interest rates when you shop for a motorcycle. While each has its benefits, you must weigh each option and determine which is best for you. For instance, opting for the lower interest rate may save your money in the long run, but it’s important to consider how long you intend to keep the bike. If you don’t plan on riding it for several years, taking advantage of the cash rebate may be more in your favor.

Whatever you decide, make sure you weigh both options and factor in how long you plan to keep the bike.

Not Weighing Short- and Long-term Loan Options

Given how quickly motorcycles can depreciate, it’s usually in your best interest to pay off your loan as fast as possible. However, long-term loans have their advantages as well, including lower interest rates with no repayment penalties. Consider both short- and long-term loans and decide which option works best for you.

Financing Pitfalls to Avoid

The Final Word

Before you can hit the open road on your new bike, there are several items you should consider to avoid common motorcycle financing pitfalls. Chief among these mistakes is shopping for a motorcycle before picking a loan, carrying over negative equity, and not negotiating on price. Additionally, avoid borrowing too much or ignore your credit score before finalizing a loan.

Whether you’re financing a new or used motorcycle, T&I Credit Union offers excellent motorcycle rates and terms. Call us at (248) 397-9345 to get started on your application today.

About Tammy Newcomb