When spring and early summer provide for dry roads and beautiful weather, the motorcycle season begins – and at the same time, an intensive promotion of manufacturers to potential buyers. The incentive to fulfill the wishful dream on two wheels is great, but also associated with considerable costs. Often a high-quality motorcycle costs several thousand euros, and not every proud owner can pay the amount in cash. Therefore, in addition to the appearance and the technology, the motorcycle financing plays an important role in the purchase. But what financing options are available when buying a motorcycle?
1. Cash payment when buying a motorcycle
Those who have the means to pay for the motorcycle of their dreams in cash will save themselves an interest-bearing loan. Despite the currently low interest rates, this is still the cheapest solution. In this way you are immediately owner of the brand new motorcycle. The fact that the cash payment gives the customer a discount, but is a mistake, because the traders usually calculate income from their financing models in the prices, as well as the car loan. Therefore, it is worth a calculation and a comparison of suppliers, even if you have the purchase price at hand.
However, the cost of larger machines of the most famous brands is considerable, and so the customer has to dig deep into his pocket. There are also expenses for insurance and equipment. Anyone who wants to pay everything in cash may have completely consumed his liquid capital with acquisition and has no reserves for surprising cases. And anyone who thinks about liquidating a worthwhile investment to pay for the motorcycle in cash should offset the profits it spends with the cost of financing. A credit is in many cases a reasonable solution to realize the dream of owning a motorcycle with comparatively low risk and affordable rates.
Motorcycle finance – the models available
- dealer financing
- Motorcycle finance through a classic installment loan
- Assigned (auto) credit
- balloon financing
- 3-way financing
2. What is a motorcycle loan?
When banks offer a “motorbike loan”, this is usually a classic installment loan that is subject to a purpose limitation – just like a car loan. Also in this case, the vehicle serves as security. “The” real “motorcycle loan does not exist. Alternatively, a installment loan can be chosen without earmarking, the motorcycle financing through the dealer and alternatively the balloon financing or the so-called 3-way financing. The individual options will be presented here.
2.1 The same conditions for new and used machines
Usually motorcycles are easily financed via the so-called car loan of a bank. Most banks are set on this type of loan and offer good interest thanks to the given security. The details depend on the habits of each lender.
There is no distinction between new and used motorcycles in the financing, only a minimum performance of 125 cc is the rule. The application and the required securities or guarantees, including the comprehensive insurance, are similar to the transactions that occur when buying a car. Also, the age of the vehicle with a limit of ten years from the first registration is similar to the car loan with the motor loan.
The situation is different when the loan is to be taken for extensive repairs and not for a purchase. In this case, there is no earmarked loan, but a conventional installment loan, where the creditworthiness is primarily determined by the financial situation, namely regular income, and overall higher interest rates are to be expected.
Through the clear website of ING (formerly ING-DiBa) everyone will find the right product
2.2 Motorcycle financing by manufacturer or dealer
As is common in car buying, dealer financing is a widespread solution when purchasing a motorcycle. This applies to new, but also used models. Many traders are able to offer the potential client a tailor-made offer in the context of a financing consultation. The existing credit balance, the desired duration and installment amount and also special requests for repayment or final installment are taken into account.
Although some manufacturers now have their own bank to handle financing, the majority of traders work with an external financial service provider, who also has his work remunerated. Especially if the dealer offers zero-percent financing models or offers particularly favorable interest rates, it is obvious that some of the costs for motorcycle financing have already been included in the price of the vehicle. Therefore, you should always make a comparison of both offers and financing options and providers.
3. Three way motorcycle financing
The so-called 3-way financing is very popular with borrowers, because the mix of credit, purchase and leasing offers the buyer high flexibility. In this financing model, the borrower first makes a down payment. During the subsequent defined loan term, the loan amount will be deducted in fixed installments, this will end with a final payment. When this point is reached, the borrower has the choice between different options:
- Pay the final payment with available capital and finally own the motorcycle.
- Settle the closing rate through further funding and possibly benefit from good terms.
- Returning the motorcycle, provided that you have opted for a lease, the latter is of course only according to the agreed mileage, after careful treatment and accident-free possible.
The decision for a 3-way financing requires an accurate and realistic calculation of one’s own financial situation – for both the down payment and final installment as well as for the monthly burden. The advantage is obvious. The buyer can, according to his possibilities, settle the balance prematurely, choose a follow-up financing or, in case of a return, buy another, newer model.
4. The balloon financing for your own motorcycle
For a car or motorcycle purchase, balloon financing is a common model, because the monthly rates are lower in this form of motorcycle financing than with conventional installment loans. Here too, a down payment is possible, after which the loan is repaid over the term. The final installment in balloon financing financing is relatively high, so rates are lower during the term. An advantage of this type of motorcycle financing: thanks to the low rates, in addition to the repayment of the loan may even be saved new capital. The burden of the household can be reduced to a tolerable level. Particularly suitable is the balloon financing for buyers who have the maturity of a life insurance policy or a savings contract at the end of the repayment period in order to settle the final installment. As with the 3-way model, the buyer can then pay the closing rate entirely out of equity capital or alternatively opt for follow-up financing. However, not every financial service provider offers balloon financing.
5. Motorcycle finance: Leasing as an alternative
Motorcycle financing through leasing is one way in which one does not purchase the motorcycle, but pays for its use, after a down payment in fixed monthly amounts. You will not be a proud owner, but you should not exclude leasing from the outset. With the expensive machines it can be worthwhile, all the more, if one can deduct the amount for example by a company use for tax.
The advantage of this type of financing is that the hobby cyclist drives at fixed rates a sometimes high-priced motorcycle including warranty, which is returned to the dealer at the end of its useful life.
Of course leasing also has disadvantages – damages are charged to the user, so if you can not guarantee a careful treatment of the machine, you have to reckon on repair costs, which can sometimes be very high.
Leasing can be considered if the costs and, if necessary, repair costs for operational use can be declared as operating expenses. Nice for bikers also that after the leasing period a newer model can be leased. In addition, monthly installments are often lower than a loan. Although it is often mentioned as a disadvantage that the motorcycle does not go into this type of financing in their own possession, but who wants to buy his bike after the leasing, this can still do.
6. What to look for in terms of financing: interest and conditions
The choice of financing depends not only on the borrower’s financial capabilities, but also on the purpose. For a new motorcycle of a manufacturer of the upper class you may be advised with the balloon loan or the 3-way financing best. Even dealers or manufacturers offer good conditions in individual cases. Who wants to buy a used bike, gets probably better with a motorcycle loan of a branch or on-line bank.
Nevertheless one should calculate each offer well in the comparison. A favorable interest rate is not always a guarantee for the best offer. In comparison of bankers and motorbike financing by online banks, the latter often have significantly higher annual interest rates, but the borrower receives discounts for cash payments. Thus, the total cost of the loan and also the monthly installments to the dealer credit in individual cases reduced considerably.
Anyone who has an attractive loan offer from a bank can, moreover, go to the dealer of his choice and enter into bargaining as a bargaining agent – because the trader is more free in his decisions and accommodates customers in lending quite well, if the negotiation is still worthwhile in his view, The same applies to the purchase of older models – who does not necessarily have to drive a brand-new bike and can negotiate patiently, can count on discounts, which also affect the motorcycle loan.
6.1 What conditions should borrowers pay particular attention to when financing motorbikes?
- Are the lending rates credit-dependent or independent? The credit-independent fixed rate may be more favorable in case of low creditworthiness.
- What is the APR that is the total cost of the loan?
- Can free installment breaks be used in case of financial constraints, and how often per year?
- Is there a possibility of early repayment without prepayment penalty and are there any free special repayment options without upper limit?
- Does the borrower retain the vehicle registration document or is it retained by the lender?
- Is the borrower free to choose to take out comprehensive insurance or is he obliged to do so through the lender’s insurance partner?
7. Motorcycle Financing: The individual steps from the comparison to the disbursement
Once the decision for a particular bike has been made and the amount of credit required and the desired conditions are calculated, borrowers proceed as described below.
7.1 Provider comparison
A first step is to compare the providers. Online banks in particular can be quickly overlooked via loan calculators on comparison portals. After entering the desired amount of credit, determining term and installment level, online tools quickly create a list of providers, often ranked according to the borrowing rate and APR. Mostly you can reach a button directly to the application page of the selected provider by clicking on a button. However, since not all providers have an online presence – if you have, for example, offers of dealer financing available – you probably will not quite without the manual comparison.
7.2 The loan application
After selecting a provider, the next step is to complete the loan application. Especially with direct banks this is very fast via an input mask. Required are personal data, information about the financial situation and the desired loan amount. If you want to get cheaper interest rates, you may want to add a second person as a borrower who lives in the same household – the higher total income makes for better conditions.
The credit comparison shows that ING can certainly convince with its offers
7.3 Credit Check
Once the employment and income situation has been established, the lender checks it. The so-called credit check also includes a Private Credit query, which, however, is neutral and has no impact on the Private Credit score of the applicant.
7.4 Quotation and request for documents
If the credit check is well passed, the lender makes an offer. Anyone who chooses to make use of them must, together with the commitment, submit the documents requested by the bank, such as job references and current bank statements. Whoever teaches complete documents shortens the processing time, which normally takes two to five working days. Also part of the procedure is the legitimacy by PostIdent, ie by the presentation of a valid ID document at the counter of a branch of Deutsche Post, in online banks by VideoIdent – here runs the legitimization process from a video call, are also required personal papers, a webcam with good Resolution and a stable internet connection.
7.5 Purchase of the motorcycle and proof of purchase
After the payment of the loan amount the motorcycle can be bought. Barzahler can bargain on top of that for a discount. If the purchase is made, the lender requires a proof of purchase, in each case the motor vehicle letter and proof of comprehensive insurance.
8. Conclusion on the financing of the motorcycle
The choice of financing when buying a motorcycle ultimately depends on your own financial situation, your personal preferences, but also the liquidity and the amount of the required sum. So before deciding on a particular motorcycle financing, careful calculation should be made. In each case, a down payment is helpful to reduce the amount of the loan, or a high final payment to lower the amount of the installments.
Of course, the cash payment of the purchase of course brings benefits, but the tailor-made loan can be quite an alternative to the current low interest rates. It is advisable to compare the providers and the respective offers of banks and manufacturers or dealers, because sometimes an annual percentage rate is not the most important criterion for the total cost of the planned loan.
Also, leasing can be considered as a financing model, because after the deadline of the purchase of the motorcycle is still an option.