A guide to motorcycle finance options

Arranging motorcycle financing can be complicated, because there are a lot of choices available and sometimes it’s not easy to get your head around the details of each finance option. When you spot a motorcycle you want to buy it’s easy to get caught up in the excitement of sealing the deal as quickly as possible, which can cause you to make poor financial decisions. In this article we’ll look at the different types of motorcycle finance that are available, so that you can weigh up the pros and cons before you make a big decision.

Personal loans – probably the most common way of buying a motorcycle, and if you need to raise cash to buy from a private seller this is pretty much your only option for used motorcycle financing. Depending on your credit status, the interest rate will vary, so make sure you shop around.

You might think that having ready cash will enable you to negotiate a better price with a motorbike dealer, but since they often earn a hefty commission on any financing they arrange for you, that might not always be the case. Make sure you do the sums – compare the dealer’s cash price to the overall cost of any deal they can offer on a financed bike.

Alternative motorcycle financing plans

Hire purchase – a popular option when buying from a dealer, which involves them arranging finance on the bike through a specialist third party company. Alternatively, you could contact the financing company yourself and try to arrange the deal directly with them, although most people prefer to let the dealer take care of this.

The interest rate may be quite competitive, especially on a new bike, as dealers or manufacturers often subsidise the loan in order to sell more motorcycles. You will often need to put down a cash deposit, but in many cases the amount will be negotiable. The motorcycle financing will be secured on the bike itself, so if you miss a few payments the chances are that the company will want to repossess it.

Personal Contract Plans (PCPs) – a less common option which can often be arranged with a specialist third party company, or sometimes through a plan offered by the manufacturers. Essentially, you put down a deposit on the motorcycle and make monthly payments which are typically far lower than loan repayments would be, and then at the end of an agreed period (two to three years, usually) you can choose to return the motorcycle as long as it’s in good condition, make an agreed final payment to keep the bike, or trade it in for a newer model.

The advantages of PCP motorcycle financing is that your monthly payments are usually quite low, and it’s a good way to upgrade to a new bike regularly. However, the downside is that, unless you want to make the chunky final payment, you don’t ever really own the bike.

Zero percent interest deals – in these tough economic times, a lot of motorcycle manufacturers are offering 0% financing on their bikes to increase sales. With low minimum deposits these can often be good deals, although make sure you read the small print as they may have short repayment periods which means that your monthly payments will be high.