Should I get a used-motorcycle loan?

If you want to experience the thrill of the open road but don’t want to pay for a brand-new bike, financing a used motorcycle might make a lot of sense.

First, you’ll need to set a budget and decide how much you’re willing to pay before you go shopping. You’ll also need to decide if you want to buy a bike that you can pay for in cash or if you need to get a used-motorcycle loan.

Don’t take out a loan without doing your research first. Start by comparing different motorcycles and loan options. Here’s what you should know before putting your money and credit on the line.

• Where to shop for a used motorcycle
• Where to shop for a used-motorcycle loan
• Should I get a used-motorcycle loan?
• Tips for buying a used motorcycle

Where to shop for a used motorcycle

Whether you’re unsure what kind of motorcycle you want or you’ve got your heart set on a certain bike, comparison shopping can help you get the best deal. Here are a few places to shop.

Dealerships

When you start your motorcycle search, it’s easy to gravitate to motorcycle dealers. You may be able to browse a variety of pre-owned bikes with them — sometimes you can even search online from the comfort of your couch.

Some dealerships will even let you schedule test drives through their websites. Searching online inventories can help you compare a wide number of bikes and prices, without the pressure and time investment of speaking to a salesperson. You may even be able to apply online to see if you prequalify for a loan — but until you complete a formal application, you won’t be guaranteed approval or specific loan terms.

Buying from a dealership may mean getting a bike that’s in better condition than one you’d find somewhere else. Unlike private sellers, dealerships have to worry about their reputations. So they may be more likely to buy and sell well-maintained motorcycles and provide upfront disclosures about the history and condition of their bikes.

Private sellers

If you don’t want to go through the dealer, you could also try to buy from an individual, or private party. Private sellers probably have more intimate knowledge of the history of their bikes and may be willing to help you understand the finer points of operation.

Of course, it’s not safe to assume a seller will tell you everything. The U.S. Department of Justice strongly recommends that you get a vehicle history report before making your purchase.

Check the motorcycle’s vehicle identification number to see if it’s been stolen or has other issues like an unresolved recall. You can usually locate the VIN on the bike’s frame near the handlebars or by the engine block or cylinders.

Like dealerships, many private sellers list their motorcycles online. Some popular websites for private sellers include Autotrader, Craigslist, Cycle Trader and eBay.

The Motorcycle Industry Council recommends completing these steps before finalizing a private party purchase.

• Verify you’re covered by insurance
• Confirm that the seller has a current title and registration
• Check service records
• Get an owner’s manual
• Ask for any spare keys or parts

Where to shop for a used-motorcycle loan

Not all lenders offer financing for motorcycles, even if they finance other vehicles. But that doesn’t mean you’ll be short on options. Shopping for loan offers through multiple lenders can help you find the best deal for you. Here are a few places to shop for a used-motorcycle loan.

Banks and credit unions

Even if you’re buying your motorcycle from a dealership, you can get financing separately through a bank or credit union — and it might mean getting a better deal for your situation.

Going through a bank or credit union may allow you to get preapproved for a certain loan amount and terms. Unlike dealer financing, you can use your preapproval offer to shop around  to find the best used bike your offer covers. Note that you need to complete a full application with the bank or credit union before you’re formally approved for a loan, and you may be offered different terms than what you were preapproved for.

While borrowing from a bank or credit union can save you money, it can also take more time. If you opt for dealer financing instead, you’ll be applying for a loan and buying your bike in one place.

On top of that, each bank and credit union has its own process for declining or approving motorcycle loans.

Other lenders allow you to apply for a used-motorcycle loan directly through their websites. But forget getting approved for the best rates — you may not even be able to apply at all if you’re not already a member of the credit union.

Online lenders

Online lenders offer loans for used motorcycles without you having to visit a bank branch or become a credit union member.

You can use comparison sites to shop potential terms for used-motorcycle loans before you apply.

Try not to rush the process. Borrowing online can be attractive because of the convenience, but you’ll still need to put in time to read and compare offers. Be sure to review the fine print for unexpected fees and costs, like penalties for paying off your loan early or fluctuating interest rates.

Dealers

Dealer financing allows you to take care of both your financing and your purchase in one place. With this option, you can apply for your loan directly through the dealer.

But that convenience may come at a price. Dealer financing can be more expensive and can deter you from comparison shopping.

For instance, a loan through Yamaha may be available only for certain Yamaha models.

If you want to avoid visiting multiple locations, but you still want to go through a dealer for your financing, consider applying online or by phone. Many dealers now offer the option to apply for financing before visiting their showrooms.

Should I get a used-motorcycle loan?

Buying a used motorcycle with cash can help you avoid finance charges and other hassles, but if you aren’t in a position to buy a motorcycle outright, consider this information first.

Pros of a used-motorcycle loan

• Used vehicles depreciate more slowly than new vehicles. Financing a used motorcycle can be a smart move. New vehicles depreciate, or lose value, rapidly in their first few years. This can leave an owner owing more on a loan than a vehicle is worth.
• Motorcycles retain value. Motorcycles may be a good bet for financing since they don’t necessarily lose value as quickly as cars. A well-kept or rare motorcycle may even retain value or increase in value over time.
• Taking out a loan will help you get access to transportation. Taking out a loan can be a good option when you need to secure transportation and don’t have the luxury of waiting to save money. Financing will allow you to buy a bike now and repay what you borrowed over time.
• Build your credit. Like an auto loan, repaying a used-motorcycle loan can also help you build your credit. As long as you make your payments as scheduled, your used-motorcycle loan can help you build a positive payment history and a fuller credit profile, both of which can help boost your credit health.

Cons of a used-motorcycle loan

• A loan can be expensive. Borrowing money usually means paying interest and fees to your lender, making it more costly than if you had purchased your bike with cash.
• Used-motorcycle loans will come with higher interest rates than new-motorcycle loans. Used-motorcycle loans usually have higher annual percentage rates, or APRs, than loans for new bikes. Your APR will include the interest rate and any fees.
• Risk of default: High interest rates make it more costly to borrow money. High rates usually mean higher monthly payments, and potentially more difficulty repaying your loan. Missing a loan payment could mean damaging your credit.

Tips for buying a used motorcycle

Before you buy your next bike, make sure you take some time to prepare. Following these tips can help you find and finance a bike you’ll be happy with in the long term.

• Check your credit: Making improvements to your credit could help you qualify for better loan terms.
• Calculate affordability: Examine your budget to see how much you can realistically pay toward a loan each month. Consider motorcycle insurance, registration and ongoing maintenance costs, too.
• Research prices: Explore the market to be sure you’re getting the best price available for the bike you want.
• Go for test drives: Test drive multiple makes and models and be sure to drive a bike in various road conditions before buying.
• Negotiate: You can negotiate both loan terms and purchase price to get the best deal upfront and make loan repayment more affordable.
• Take it to a mechanic: Get your own inspection, regardless of seller guarantees.
• Get maintenance and accident records: Even if you have to pay for its records, it’s better to understand a motorcycle’s history upfront.