Motorcycles, to those who ride them, are a symbol of freedom. They also get better mileage than cars, which is a big deal considering how quickly gas prices are rising. Buying a motorcycle requires a certain mindset. There are personal questions to be answered internally and financial issues that require some thought, like whether to take out a motorcycle loan.

The decision about how to finance a motorcycle purchase may come down to whether the rider buys new or used. New bikes are expensive and may require dealer financing. Used motorcycles can be purchased with cash or by taking out a personal loan. To choose the right option, consumers should first look at the reasons for the purchase, then the economics.


Why buy a motorcycle?

Motorcycle owners fall into two categories: those who ride full-time and those who ride casually for fun. The former group relies on their motorcycle as a primary source of transportation. This is common in major cities where automobiles are a burden and in rural areas where motorcycles are simply more economical for traversing great distances.

Casual or recreational riders have different motives. They’re seeking the exhilaration of the open road, the feel of the wind in their faces, and maybe an ego boost from looking like that “biker” they saw on their favorite TV show. Unlike primary riders, they want a motorcycle to have fun with. That makes it a luxury expense, not a necessity.

It all comes down to needs versus wants. An individual who needs to buy a motorcycle as their primary source of transportation is willing to stretch themselves financially to accomplish that. Those who do it for pleasure typically wait until it’s affordable or make a cash purchase to get started. There’s no shame in getting a used bike to make sure the lifestyle is a fit.


Motorcycle loan options and charges

Dealers may offer financing to buy a new motorcycle. That might seem like the simplest way to go, but it’s important to look at the total cost of the purchase. Dealer financing comes with finance charges, including interest and fees. These are bundled together under the heading of annual percentage rate (APR) finance charges, which could range anywhere from 6% to 36%.

Another way to finance the purchase is to take out a personal loan to buy the motorcycle. APRs on personal loans could be high also, but they may be lower than what the dealer has to offer. The lender will determine the exact numbers using the applicant’s credit score and credit report. Individuals with higher credit scores pay lower rates.


Matching the motorcycle with the right loan

An additional variable in this equation is the type of motorcycle being purchased. Sport bikes may have a higher price tag and APR while touring bikes tend to be more affordable. There’s also a difference in the insurance cost for these models. Dealer financing won’t cover that, but a personal loan will if there’s enough left over after the purchase.

The final decision is whether to buy new or used. This also affects the type of loan the buyer should apply for. A used motorcycle can be purchased with cash or by using a personal loan. New motorcycles can cost $35,000 or more. That might require dealer financing.

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