7 Common Motorcycle Financing Pitfalls To Avoid
When you want to purchase a bike but want to make the payments easier on your wallet, you can opt to get a motorcycle loan. Financing your bike can help you get a model that’s a bit more spendy even if you don’t have a great credit score or just don’t want to make a lump sum payment. Lenders like us at BMW Motorcycles of Burbank have made motorcycle financing easy, quick and affordable so you can get the bike of your dreams!
To get the best out of your deal, read through our list of common errors you must avoid. When you’re ready to explore your motorcycle financing options in Burbank, CA, contact us and one of our friendly staff will help you out. We also provide financing options for BMW® motorcycle financing for our friends from Pasadena and Glendale!
1. Don’t Select a Bike Before You Select a Loan
You may have done some research and have a general idea about the kind of loan you can get, but you may just be way off! When you select a bike before finalizing a loan, you could end up having your heart set on a model you can’t afford. You might also underestimate the amount and select a lower-caliber bike than you can get. Different lenders also give different interest rates, which you need to take into account before you start shopping for a motorcycle. There’s a lot to consider when getting financing for a new motorcycle so take things one step at a time.
2. Don’t Carry Your Old Negative Equity Over
Negative equity is when you have to pay more for a motorcycle than its actual price tag. For example, if you paid $6,000 for your bike but it costs $5,000, your total negative equity is $1,000. If you haven’t paid off your old loan, it can be tempting to roll over the negative equity into the new loan. This is an unwise decision because you’ll be paying interest on this extra sum for the term of your new loan. If your new interest rate is higher, you might end up paying a lot more.
3. Choose Between Cash Rebate and Low Interest Rate
When you choose a motorcycle, you may get offers from the manufacturer for cash rebates or low interest rates. You have to decide which option is better for you by doing a little math. Oftentimes, taking the lower interest rate might be easier because you end up paying less in the long run. However, you’ll want to factor in how long you plan to keep the bike. If you don’t plan to keep it for many years, it might work in your favor to take the cash rebate because you won’t be paying the interest for too long.
4. Do Negotiate the Motorcycle Price
Many times, people will negotiate hard about the monthly payment options for their motorcycle but skip negotiating the cost of the bike. When you have a sum in hand, it’s not always the wisest decision to tell the salesperson the entire amount. This encourages them to give you higher sticker prices and a bunch of accessories or features you may not really need. Do your best to negotiate the price you want and then calculate to see if it fits into your budget. You want to get the best deal for your money, after all!
5. Don’t Completely Ignore Your Credit Score
Despite a low credit score, you can still get fast and easy motorcycle financing. That doesn’t mean you should ignore your credit score. Even if you can’t repair it completely, fix it as much as you can. Make sure the address on your financing application is the same as on your credit report, or it can get rejected by automated scoring. Paying what you can is also a good sign despite having a low credit score. Don’t submit several loan applications at once. Find one lender who can help you secure financing for your bike despite a bad score.
6. Don’t Borrow Too Much and Opt for Fixed Interest Rate
You can often get approved for a much bigger loan than you need to get a bike. If you end up taking the entire amount you’ve been approved for, you can put your financial future at risk. Remember that bikes depreciate very fast and you need to pay back everything you’re borrowing. You also want to ensure that you have a fixed interest rate that won’t suddenly increase. Sometimes manufacturers offer credit cards that can increase the interest rate and the payment after the end of a given promotional period.
7. Decide Whether You Want a Short or Long Term Loan
Since bikes can depreciate pretty fast, you’ll want to pay off your loan as quickly as possible so you can avoid accumulating negative equity. That doesn’t mean long term loans won’t have any advantages for you! Sometimes lenders will offer a low promotion rate on long term loans, which can work for you if there’s no prepayment penalty. You might have to whip out a calculator and strategize your payment options before you make this decision.
We hope this information helps you get the bike you’ve been dreaming of! To find out more or to check your motorcycle financing options, contact BMW Motorcycles of Burbank and have a chat with one of our expert staff members. We’re proud to be the preferred motorcycle loan company for our clients from Pasadena and Glendale!