How to finance a motorcycle

You probably have had a dream motorcycle that you always wanted to buy. If you have now decided to go for it, then the big question that arises is how you would arrange the money for it.

If you have cash on hand, then no problem; but in case you have don’t have sufficient cash, you may have to look at options to finance your purchase.

Let’s take a look at how you could arrange finance for your motorcycle.

1. Get in touch with the manufacturer or dealer

Sometimes, the manufacturer would offer finance options for you to buy their bike. Generally, they provide financing options, only for those with a very good credit rating. So, make sure you have a good credit score. Contact the manufacturer or the dealer and find out if such a scheme exists. Usually financing offered directly by the manufacturer will have a lesser rate of interest. In case there is no scheme from the manufacturer, the dealer would definitely offer financing. The dealer usually would have tie-up with lenders who will offer you a loan for your motorcycle. But the interest rate at which the dealer offers financing would be slightly higher. So make sure you scout for the best deal before you sign up. Dealer financing may envisage hypothecation of the vehicle. So if you don’t pay your monthly instalments, the lender can seize your vehicle. Remember that the vehicle will be yours only after you pay the final monthly payment.

2. Bank loan

Banks offer vehicle loans to help you buy the motorcycle of your choice. You can get the loan very easily. If you approach the bank directly instead of going through a dealer, you may get a better deal. Also, if you have an account with the bank and are a long-standing customer, you can always expect a lower interest rate.

3. Private financiers

A number of private lenders are available in the market who would be willing to give you unsecured loans. But the downside is the interest rate would be very high, probably the highest. In case you don’t have a good credit score, private financiers would be a good option, else the higher monthly payments you have to make is a major disadvantage of going with private lenders.

4. Personal Contract Purchase (PCP)

Under PCP, you would need to pay an initial deposit (between 10-20% of the bike value). The advantage of this scheme is the monthly payments are lower. However, at the end of the contract period (usually three years), you have to pay a lumpsum amount. Once you pay the lumpsum, the bike is yours. However, you have an option of not paying the lumpsum and returning the bike back. This is possible because you are getting into a contract to use the bike. If you buy a bike with a high resale value, then you can get very low monthly payments. This is definitely an attractive finance option, if you are ready to live with the factthat the bike won’t be yours till the end of the contract period.

There are a number of financing options if you want to buy a new motorcycle. Compare the interest rates and check the fine print before you make a decision.