back to articles | November 29, 2022 | Moses Mwangi

Categories: Auto Loans & Financing Types of Car Loans

How to Buy a Motorcycle: The Pros and Cons of Different Financing Options

Purchasing a new motorcycle is a huge investment. A beginner motorbike typically costs around $5000 to $10000, but a pro model may be much more expensive.


Purchasing a new motorcycle is a huge investment. A beginner motorbike typically costs around $5000 to $10000, but a pro model may be much more expensive.

There are many different options when it comes to how you can pay for a new motorbike. You can finance a motorcycle through a dealership, bank, or too many other options. Here are a few common motorcycle financing options, along with their pros and cons.

1. Personal loan

Personal loans can be used for almost any purpose, including purchasing a motorcycle. Different lenders have disparate minimums and maximums, but personal loans are usually between $1200 and $36000. With a personal loan, you own the motorbike from the first day.

These loans are unsecured, meaning the lender or bank won’t repossess the bike if you default on payment. However, the lender can pursue you through courts for their money. Unlike other loans, such as a home mortgage, a personal loan is quick and straightforward to apply, especially for creditworthy borrowers.

Pros of financing your motorcycle through a personal loan

  • Flexibility: Personal loans can be used in whichever way you see fit. This means you can allocate a portion of the funds to cover the motorcycle cost and use the rest elsewhere.
  • No collateral: Your personal loan provider can’t repossess the motorbike, even if you halt making payments. However, you will likely damage your credit score if you miss payments.
  • Quick access to money: Most online personal loan lenders make same-day approvals and release money as soon as the following day.

Cons of financing your motorcycle through a personal loan

  • Higher interest rates: Since they are not supported by collateral, personal loans usually come with higher interest rates than two-wheeler loans.
  • Shorter repayment periods: Most personal loans have 3-5 years repayment terms, which translates to high monthly payments that could stretch your budget thin.
  • High risk of default: There is a high chance that you will delay the loan payments, especially when the loan term is short and you have a high-interest rate.
  • More difficult to qualify for: Personal loans are unsecured, meaning lenders have more to lose when you default on the loan agreement. For this reason, their eligibility criteria could be more demanding. In addition, if you have a bad credit score, the criteria for a down payment could be greater, or you might be denied a loan completely.

2. Dealer financing

Dealer financing allows you to fund and purchase your motorcycle in one place. With this financing option, you can apply for your two-wheeler loan directly through the dealer.

However, that convenience might come at a cost. Dealer financing may be expensive and can put you off from comparison shopping. For instance, a motorcycle through Yamaha can only be available for specific Yamaha models.

Consider applying online to avoid visiting multiple locations while still going through a dealer for your two-wheeler financing. Today, most dealers offer the option to apply for financing even before visiting their showrooms.

Pros of financing your motorcycle through a dealership

  • More flexibility: There are typically fewer limitations with the type of motorcycle you can choose when you get financing through a dealer. There tend to be more flexible terms with the type of motorbike you choose and how much it costs if you go directly through a dealer.
  • Easier to get approved: Financing through a dealer is easier than with a lender or bank loan. Dealers don’t just offer loans, but they also try to sell their motorcycles and cars. Since they want to make sales, they are more likely to approve your loan, even when you have a poor credit history or your credit score is below average.

Cons of financing your motorcycle through a dealership

  • Higher interest rates: You are likely to pay a higher interest rate when financing a motorcycle through a dealership. There are many people applying for financing, so dealers usually charge higher interest rates in order to accommodate everyone.
  • Potential for less transparency: Since the dealer will want to profit from the deal, they are less likely to be transparent about interest charges. You may also not have enough time to thoroughly research all the offers and discounts available.

3. Personal contract purchase (PCP)

Personal contract purchase or PCP is a way of purchasing a motorcycle and paying off some of the balance within 1-3 years. You will often pay a deposit at the start of the agreement, though most dealers will take the motorbike in part exchange rather than a cash deposit.

You can either pay the minimum deposit set by the dealer or choose to pay a higher amount. Doing this will help you reduce the amount of your monthly installments.

The main difference between PCP and Hire purchase (HP) is that your motorcycle value at the end of the agreement is agreed upon between you and the dealer through signing a contract. After that, this money is put to one side. This total is known as the Guaranteed Minimum Future Value (GMFV) and is calculated by considering the age of your bike and the number of miles it has traveled during the agreement time.

Pros of financing your motorcycle through PCP

  • Low initial outplays, and monthly payments: PCP reduces your initial cash outplay since you don’t have to pay the huge deposit needed for most HP deals. In addition, having a delayed payment option means your monthly payments will be less since you don’t need to pay off the layaway amount until the end of the term.
  • Flexible loan terms: PCP offers much flexibility when buying a motorcycle. You can enjoy your two-wheeler selection over a fixed term and at the end of the lease deadline. No questions are asked; you can simply return keys, trade in your bike, or buy a new one.

Cons of financing your motorcycle through PCP

  • Not outright ownership of the motorcycle: With a PCP agreement, there is no guarantee you will become the outright owner of the bike at the end of the term. You will have to return the motorbike if you can’t afford to make the final payment.
  • Charges on exceeded mileage allowance: There are likely to be limits on annual mileage with a PCP agreement. You will be charged extra if you exceed these limits, so it’s good to estimate the high when you start your agreement.

The bottom line

Financing your motorcycle can be a great way to get a two-wheeler sooner. Just be sure to review the loan terms and conditions, set a purchase budget, and stick to it. Soon enough, you will be ready to ignite your two-wheeler communication system and hit the road with your friends.