Motorbike financing: What are the options?

Owning a motorbike in Australia is about more than just transportation. For some, it’s about exploring the scenery that Australia has to offer. For others, it’s about excitement and adventure.

But, that freedom comes at a cost, and many cannot afford the upfront money that’s required to realise their petrol-laden dreams. In this article, we will explore the different types of financing options available for motorbikes, and how best to navigate this potential minefield.

What types of financing options are there?

There are a few ways to make your ambition of owning a motorbike – or upgrading a current one – come true.  Here are the most popular forms of motorbike finance Australia. But, if you’re looking for a faster way specific to your situation, automated tools to find the best offers are available.

Personal Loans

Personal loans aren’t really motorcycle loans, they’re used for anything and obtained through places like banks. They’re either secured, meaning they require collateral, or unsecured, meaning no personal assets need to be put forward for collateral. Generally, you are very much liable for a personal loan, and they usually offer fixed repayment terms. Personal loans can range anywhere from 4-20%.

Dealership Financing

Dealership financing is usually a loan provided directly by the motorbike dealer. This is convenient, as it will be the same place you buy the motorbike, and they will also provide fixed repayment terms. But, they’re never going to be the cheapest option, and the APR can range anywhere from 5-15%.

Manufacturer Financing

Manufacture financing is a bit like the previous option, only the manufacturer is now the lender i.e. Harley-Davidson financing. However, they are more likely going to have some special incentives or more unique terms. Whether it’s KTM financing or Suzuki, APR can vary wildly, but it’s often cheaper than dealership financing. However, you’re more likely buying a more expensive, brand-new motorbike unlike second-hand options at a dealership.

Alternative Methods

There are a handful of alternatives. Online lenders, which are currently gaining popularity due to their fast streamlined process of approving applications and quickly handing out funds. They’re often easier to obtain than a personal bank loan, but can cost anywhere from 4-20% APR. The average, however, is certainly under 10%.

Beyond that, there are some options to use credit cards (expensive), P2P lending (expensive), or simply lease a motorbike.

What factors affect the cost of a motorbike?

The main factors that determine the price of a motorbike are its performance, age, and model. Premium features and add-ons can quickly rack up the price, too. However, what motorbike you’re looking at can also affect the cost of the financing. 

For example, used car loans are typically more expensive (in terms of APR) than brand-new car loans. This is no different with motorbikes either, as highlighted by the fact that manufacturer financing is cheaper than dealership financing.

But that’s far from the only reason. Generally, people look after new vehicles better than older ones, which may be banged up already. It can sometimes be an incentive too, to spend more money on a newer bike, but equally it can be down to used motorbikes sometimes having shorter loan terms. Shorter terms mean that repayments need to be higher.

Pros and cons of each financing method

Personal Loans

Pros

• Flexible in its use (can agree on more than the bike’s value i.e. for upgrades, future maintenance, personal use etc)
• Competitive APR rates compared to many other methods
• Fixed repayment schedule makes it easier to budget

Cons

• Often have high credit requirements
• Long approval process 

Dealership Financing

Pros

• It’s convenient to get financing from where you purchase the motorbike itself
• Scope for promotions either on the vehicle or the financing terms
• Negotiable, unlike a bank loan

Cons

• Often a higher APR
• Limited options

Manufacturer Financing

Pros

• Brand-specific support that can help down the line
• Often more streamlined and cheaper than dealership loans
• Even larger scope for incentives and promotions

Cons

• Limited in many ways (i.e. the model, loan options, etc.)
• Less scope for negotiation compared to a dealership

Online Lenders

Pros

• Online lenders are a very fast option and often have higher approval rates
• Large range of options with many lenders and terms
• The most flexible option

Cons

• It can be challenging to find a trustworthy lender compared to a bank loan
• Limited personal interaction regarding negotiation or understanding the terms

What’s the best option for you? How to pick

There is no “best option” objectively speaking, but that doesn’t mean there isn’t the right decision to be made according to your needs. The first thing to do is figure out exactly your situation and options available.

Credit history

Off the bat, a personal loan from a bank will seem like the cheapest option. It may not always be the case, but it often is. However, it may not even be on the table depending on your credit history. 

Banks have the highest standards when it comes to creditworthiness, whilst bad credit motorcycle loans are more possible at online lenders and other alternatives. However, if your motorbike is used as security on a loan from a dealership, for example, you may be in with a better chance than a bank for approval.

Income

Again, banks sometimes require evidence that you’re on a consistent, and sometimes high, income to prove that you can afford the repayments. This is where an alternative like credit unions and online lenders can be helpful, as they often have greater flexibility. P2P is also an option for low earners, but you will pay the price for that.

Furthermore, a dealership may negotiate a more significant downpayment in order to make up for a lack of income.

How quickly do you need it?

Online lenders are the fastest of the bunch when it comes to approval, whilst bank loans are typically the slowest. If you’re not in a rush, it might be worth applying for the cheaper option at a bank, but be prepared to wait up to several weeks for an answer.

Where would you like to buy your motorbike from?

Finally, it’s important to consider who you want to buy from. Some options are completely ruled out unless you’re buying from them directly, whilst other landing options are more universal. And, if you’re looking for extra cash for maintenance or immediate upgrades, a flexible personal loan is the best option.

The very alternative financing

If nothing above ticks all the boxes for you, there are some more far-out alternatives. We have already touched on peer-to-peer lending, which is a pricey but highly accepting option. It can also be quick too as P2P lending is done online. 

Credit cards certainly are on the table too, as a convenient option. They do have some unique benefits, such as rewards and introductory offers. But, for the most part, you won’t be able to borrow the entire cost of a motorbike and the APR will be high. Also, be careful not to worsen your credit score when using these.

Whilst motorbike leasing is an option for those that don’t want to bear as many upfront costs – or monthly costs for that matter – we will try to stay focused on financing to buy. Plus, leasing isn’t economical if you’re looking to buy at the end of it, anyway.

This leaves us with what sounds like a dramatic option, but it could make sense: home equity motorbike finance. Releasing some equity can mean obtaining a fairly cheap form of financing. After all, you already have the mortgage if you’re considering this option. But, some hefty additional fees can sometimes occur, and it can be a heavy application process. The real selling point here is that it has a large borrowing capacity at a fairly low cost.