How much Should I Put Down On A Motorcycle? (Is 40% Too Much?)

Do you want to buy a motorcycle but can’t afford to pay the full amount upfront? This is a dilemma that many people face. While a new bike is not as costly as a new car, it can still be unaffordable. This is especially if you pick a higher-end model.

But, not to worry. You can buy the bike of your dreams with a motorcycle loan. With rising costs of living, motorcycle financing is very popular today. 

Most lenders need you to put down 10 to 20% of the loan amount. You can explore various financing options for a motorcycle loan, depending on your credit history. 

The higher your down payment, the lower your interest rate will be. And it can mean a lower monthly payment. Putting down a larger down payment would also help if you have bad credit. 

What is a good down payment for a new motorcycle?

Wherever you a motorcycle loan from, a good rule of thumb is to put a 10 to 20% down payment on it. This means 10 to 20% of the bike’s out-of-door value. For example, if you’re looking at a bike that costs $9,000, your down payment will be between $900 and $1,800. 

If you have bad credit, putting more down can also make you a better risk for lenders. A larger down payment also means you typically finance less. This means smaller monthly payments.

However, if your down payment is less or even 0%, you will have to pay a higher interest rate. This means a higher monthly payment too.

What is a motorcycle loan?

Motorcycle loans are often secured loans. This means you need to have collateral. This is usually the motorcycle itself. So, if you fail to make your payments, the lender can take your bike. 

You can also apply for an unsecured personal loan to buy your bike. But lenders can view this as a greater risk. So they typically come with higher interest rates. 

You will need higher credit scores for loan approval and the best rates. Poor credit usually means higher rates of interest.

Where can you get a motorcycle loan?

There are four different financing options you can explore for an auto loan. They all have their pros and cons, some more than others.

Motorcycle loans from banks, credit unions, and online lenders 

Such loans and the amount you can get will depend on your credit history. If you have a good credit score, you have a higher chance of getting a higher loan amount. And also getting the lowest rates of interest or better rates of interest.

They can also give both secured and unsecured loans. But unsecured loans tend to have higher interest rates than secured ones. 

Motorcycle loans like these can also have restrictive loan terms. For example, they can say that you can buy only a new motorcycle with the money.

Manufacturer financing

This is an option that some motorcycle manufacturers, such as Harley-Davidson or BMW offer. Ducati, KTM, Kawasaki, Honda, and more also offer such services. 

In this case, you can buy, for example, Harley-Davidson motorcycles with a loan from the manufacturer itself. Then you don’t have to go through a third party (like a bank). This is possible for both new and used motorcycles. 

Manufacturer loans are secured by your bike. This means they can take your motorcycle if you do not make your regular payments. 

Personal loans

Local banks and other financial institutions also offer personal loans, depending on your credit score. They do not need collateral and you can get them quickly. Such loans are also not restrictive. You can use the loan for anything. 

But unsecured personal loans have higher interest rates. 

Getting a loan from a dealership

Some motorcycle dealers also offer motorcycle loans. They act as the go-between and submit your loan application to lenders on your behalf.

This can be more convenient at times. But do remember that the dealership will charge extra for the service. Plus, it can also stop you from comparison shopping at other locations.

Some dealerships also offer in-house financing. They offer the loan directly. But such loans tend to have much higher interest rates. 

Increase your chances of getting a good motorcycle loan

Review your credit

Your credit score and history can affect the terms you qualify for. This includes your interest rate and monthly payment. So, check your credit score and try to improve it. 

According to the credit bureau Equifax, good credit scores range between 670 and 850. You can still get a loan even if you have a low credit score. But the interest rate will be higher.

Comparison shop

Once you have decided on the bike you want, check around in different places for the best price. This can also get you the best deal on a loan, with the best interest rate. And it can save you money over time.

Determine what you can afford

You should figure out your budget before checking out motorcycle prices. This way you have fewer chances of falling in love with a bike that is way too costly. And accordingly, you can search for the most suitable loan.

It is best to choose a bike that you can afford to pay off monthly, without struggling too much. 

Ideally, your auto payments shouldn’t exceed 15% of your monthly net income. 

What you should check when you take a motorcycle loan

When you take a motorcycle loan, you should always keep a clear eye on the following. This way you know exactly what you are paying for. 

  • The total dollar amount you’re borrowing.
  • The monthly payment amount and repayment terms.
  • The interest rate.
  • Total finance charges (interest plus fees).
  • Any additional fees. This includes a late payment or a pre-payment penalty.
  • The total annual percentage rate, or APR. It should include your interest rate and certain fees in your loan agreement (like a loan application or origination fee).

Motorcycle loan calculator

If you are applying for a loan, there are many websites where you can check for an estimate of what you can get. It can help you see what you can afford.

A popular one is the Nadaguides loan calculator. The site also offers links to arrange loans. It also explains many terms related to motorcycle loans. And gives the APR rates.

The Harley-Davidson motorcycle company also has a motorcycle loan calculator. On the page, you can select which model you are interested in and the length of the loan period.

You also add in the APR, the down payment you are willing to pay, etc. Then it gives you an estimate of your loan. The website also helps you find a dealer nearby.

Other financial institutions that also offer bike loan calculators include Motorcyclelender and Nuvision credit union.

Loan for a used motorcycle

As mentioned some manufacturers only offer loans for new models. But others, like Harley-Davidson, have special financing for used motorcycles too. 

Financial institutions also offer motorcycle loans and personal loans for used bikes. But used bike loans are often unsecured. So, some lenders charge higher interest rates and the loan amount you get may not be as high.

What is the full cost of getting a new motorcycle?

When you buy a new motorcycle, you have to keep different expenses in mind. Sometimes, we forget and factor in only the sticker price. So, what are the different expenses to keep in mind?

  1. The motorcycle’s asking price or sticker price. The more features and the bigger the engine capacity it has, the costlier it will be. For this, you can save money by buying the bike during the off-season or during sales. Older-year models also often cost less than current-year models. Used bikes can also cost less.
  1. Riding gear for protection. An important item is a good quality helmet which can cost about $300 and above. You may also need eye goggles, good outerwear, gloves, and boots. All these together will cost upwards of $1000. 
  1. Motorcycle maintenance and fuel. You cannot neglect your bike after buying it. So, motorcycle owners tend to spend around $1,000 on maintenance each year. This cost can greatly vary based on the type and cost of your motorcycle. The cost of fuel is also an expense you always have to keep in mind.
  1. Cost of a motorcycle license, registration, and riding courses. When you buy a bike, used or new, you will have to register it. You will also need to apply for and pay for a license if you don’t have one yet. The cost can vary from state to state.

    I wrote about the process and fees for Maryland, Florida, Vermont, and California. Riding courses (if you need them) are also often not free. They are not very expensive but are an added cost.
  1. Insurance. Many states, like California, need riders to have motorcycle insurance. This cost can vary from $200 to $500 or even more.   
  1. Upgrades and accessories. You may want to upgrade your bike parts or change its look with accessories like vinyl wrapping. They will also add to your expense.

Conclusion

Loan financing is a good way to buy your dream bike. But don’t feel down if you can’t get a bike loan and don’t have the cash either.

In such cases, the best option is to wait.

Sooner or later, it will work out. Some impatient riders do make the mistake of using their credit card to buy a bike. But this is not a good idea. 

So, do your due diligence and be financially smart about buying your bike. That way, you can soon be out on the open road with your new bike and no hassles. 

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