May 21, 2024

Getting A Bike Loan – How They’re Different

Getting a bike loan is different to getting a car loan - here's some useful tips to help.

A motorcycle can be seen as a ‘luxury or leisure item’ by lenders, even if it’s your primary form of transport. This means that to qualify for a motorcycle loan, you’ll usually need to show that you can easily afford it.

Not all lenders offer secured motorbike loans, so if you ask for a motorbike loan from your bank you might be offered a personal loan instead. A motorbike is often considered a riskier asset, attracting stricter lending criteria, and higher interest rates, particularly if it’s a second-hand bike.

You’ll usually be able to get secured finance for a new motorbike though.

How do I get a motorcycle loan?

The first step to getting a motorcycle loan is to find out which lenders actually offer secured motorcycle loans for the type of bike you’re looking to buy. Getting a motorcycle essentially works the same as financing a car or home, where you finance the vehicle from a credit union, dealership, or bank, and your collateral is the motorcycle itself. If you’re uncertain about the loan, you can use this home loan calculator to estimate its costs:

Financing your motorcycle with the said methods are recognized as secured loans. But, you also have another financing option through unsecured personal loans.

Before picking your motorcycle and signing up for the loan, think about whether financing the motorcycle in the first place is a great decision that suits your needs, preferences, and budget. Unfortunately, some people commit to taking out a bike loan that lasts for years, only to find out eventually that they didn’t enjoy riding the vehicle as much as they thought they would.

Aside from the vehicle itself, you’ll also have to look into motorcycle insurance and its associated coverage costs. Depending on your state’s vehicle insurance laws, which is similar to auto insurance laws, here are some basic insurance coverage requirements to take note of:

  • Liability coverage
  • Uninsured or underinsured motorist coverage
  • Personal injury protection
  • Collision coverage
  • Comprehensive coverage
  • Guest passenger liability coverage

By financing a motorcycle loan, you’ll more likely get the collision and comprehensive coverage along with the package, and you’ll have to choose the other coverage according to your state’s requirements.

Criteria you need to meet

It can be harder to get a motorcycle loan if:

  • It’s your first loan
  • Your credit profile isn’t crystal clear
  • You’re buying second hand.

Depending on the lender, if this applies to you, you will need to show a legitimate reason for the loan. This might be that the bike is your primary form of transport, or that you have sufficient income to easily meet the repayments.

It’s easier to secure a motorcycle loan if:

  • You have strong disposable income
  • You have clean credit
  • You have a 10-30% deposit towards the bike.
  • You’re buying a new motorcycle.

Once you’ve found the bike, you’ll need to provide the Engine and VIN numbers so the motorcycle can be registered on the PPSR. In some instances, you might be able to add the cost of insurance and accessories you need to ride safely to your motorcycle loan.

Understanding depreciation

When you have selected your bike, the lender will do a standard valuation and loan you a percentage of the total value. Depending on what the lender’s criteria are, this means you might need to provide a deposit towards the motorbike purchase.

Your ‘loan-to-value’ ratio shows the value of the bike against how much you owe on the loan. To keep your loan to value ratio healthy, you’ll want to choose a bike that retains its value.

Bikes that tend to hold their value include:

  • Cruisers retain around 65% of their value in the first year, dropping to 50% by the 5th year or 1000,000km.
  • Sports bikes hold 64%, dropping to 42% by year 5.

The lowest depreciation applies to the Harley-Davidson CVO Ultra Limited, which held 78% value in the first year, dropping to 60% in five years.

Brands that retain their value include Harley, BMW, Triumph, Kawasaki, Yamaha and Suzuki.

Bikes that don’t hold value include:

  • Scooters drop to 50% in the first year and 29% by the 5th year.
  • Minibikes are worth just 49% after one year and 27% by year five.

Getting finance for a motorcycle can be a very different process than buying a car.

Buying tip

When new models come out, you can get a great deal on an older bike. For example, in 2012/2013 the Kawasaki Ninja 300 was introduced to replace the previous 250cc model.

Prices on the 250cc dropped sharply, allowing those willing to forgo the extra 50cc to get a bargain. In 2018 the Ninja 300 will be replaced by a 400cc model, so by waiting for the release, you’ll get a cheaper price on the outgoing model.

Get your motorbike license before you apply

It’s a bit of a Catch 22, but you usually need to get a motorbike license before you can get a loan to purchase a bike. Fortunately, most Learner Courses around Australia will have L-approved motorcycles that you can use to complete your initial training and Learner’s permit.

Dirt bikes

Off-road bikes can be a lot of fun, but because they won’t necessarily be registered, it can be harder to get finance. This is because it’s harder to trace ownership of the bike, especially if you aren’t the first owner.

If you want to buy a motorcycle with finance, getting some guidance on which lenders offer the best motorbike loans can help you to secure a better deal.