Putting an auto and a motorcycle in the same category is disrespectful to a hardcore biker. Comparing an auto loan to a motorcycle loan doesn’t have quite the same effect. Most motorcycle owners also own cars, so this is a relevant question. They know how the auto loan process works. Are motorcycle loans any different?

How does an auto loan work?

Auto loans can be obtained from the auto dealer or directly from the buyer’s bank or credit union. In both cases, if the loan is classified specifically as an auto loan, the lender holds the title to the vehicle until the loan is fully paid off. That makes an auto loan a “secured” loan because the car acts as collateral for the lender.

Car buyers can get better rates on auto loans if they shop around before going to the dealership and securing a pre-approval. The best place to do that is at the bank or credit union where the car buyer has a personal bank account, but some online lenders offer better interest rates and terms. The other option is to have the dealer shop around for them.

How does a motorcycle loan work?

Motorcycle loans have all the same attributes that auto loans do. Buyers can get them through the dealer, apply at a local bank or credit union, or shop around to different online lenders. The title acts as collateral, so they’re considered secured loans. The amounts are even similar in some cases. High-end new motorcycles can go for upwards of $40,000.

The differences are on the lower end of the sticker price scale. Buyers can still get a quality new bike for under $10,000. That opens up the possibility of getting a personal loan to pay for them. The average price of a new car is $47,000, so you don’t see the personal loan route often with autos. There are several new motorcycles on the market in the $4,000 to $6,000 range.

Using a personal loan to pay for a motorcycle gives the buyer full ownership over their bike right away. The lender doesn’t hold the title because personal loans are unsecured. There’s also no stipulation on what the borrower can use the money for, so a personal loan of $10,000 can be used to buy a $6,000 bike and all the accessories needed to ride it.

Dealer financing vs. bank loans vs. personal loans

Dealer financing is the most expensive of the three options discussed here. It’s not just about interest rates. An auto or motorcycle dealer has preferred lenders they do business with. That means they’re not necessarily shopping around for the best rate for the buyer. Their interest is in the business partnership with the lender, not saving the buyer money.

A motorcycle loan from a traditional bank or credit union will likely come with a lower interest rate, but it’s still a secured loan. The title will be under the lender’s control until the loan is paid off. A personal loan from an online lender can have a lower interest rate, is unsecured, and can be obtained by buyers with lower credit scores.


The Bottom Line

In a traditional sense, a motorcycle loan and a car loan are identical. Both are secured by the vehicle, and the title is not surrendered to the buyer until the loan is fully paid off. With a motorcycle, since the amounts involved are smaller, buyers can use an unsecured personal loan to make the purchase, giving them control of the title right away.

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