A motorcycle is an exciting way to travel. Some times we are so anxious to take ownership of a new bike, the motorcycle dealer gets a better deal than we do. In order to make sure you can burn up the road and not your money, follow these seven tips when you are negotiating motorcycle loans.
Take out the shortest loan term possible
When you are comparing motorcycle loans, it is easy to choose the one with the lowest payment and therefore the longest term. This can be a bad decision. You should choose the motorcycle loan term with the payment that you can most comfortably afford. When you extend the term of the loan, you may be lowering your payment but you are adding hundreds, and possibly thousands of dollars to the interest you will be paying over the life of your motorcycle loan.
Negotiate the price not the paymentIt is important not to discuss payment options until after you have settled on the price of the motorcycle. Many dealers will ask you what you would like your payment to be.
You should be looking for a payment that is comfortably affordable to you, but do not negotiate with the dealer based on the monthly payment amount.
Once they have this figure, they can make any motorcycle end up at that payment by extending the term or increasing the interest rate of your motorcycle loan or possibly even increasing the price of your motorcycle. You should negotiate based on the total price of the motorcycle, then negotiate the terms of your motorcycle loan after agreeing on the bike's total cost.
Don't sign a loan with penalties
Many loan types, including motorcycle loans, can have stiff penalties in the fine print of the loan documents. Before signing your motorcycle loan documents, be sure you have read every word of the document carefully. Be on the lookout for prepayment penalties or late fee penalties. Prepayment penalties are fees that are imposed if you prepay the loan in any way. This includes paying it off early, refinancing the motorcycle loan, making an additional payment or adding a little to the payment each month.
Another common penalty is for late payments. Loan documents vary widely on this but some can call for an increase in the interest rate to 18% or higher, for one late payment. Generally, these terms can be negotiated and you should do your best to negotiate them out of your motorcycle loan contract.
Don't settle for a high interest rate because of errors
Credit reports frequently contain errors or outdated information. The interest rate on motorcycle loans is going to be based largely on your credit score. If your credit score is bad, you can expect your interest rate to be high. However, you should not pay a higher interest rate if your credit report is wrong. You can request a copy of your credit report beforehand to check for errors. If you spot any inaccuracies, you should contact the credit reporting agencies to have these cleared from your report as soon as possible.
Don't discuss the trade-in value of your old bike before the price of your new bike
Buying a new motorcycle and trading in your old motorcycle are two completely separate transactions. You should not discuss these numbers together. Settle on the price of your new motorcycle first before you even mention that you have a trade. If you conduct the transactions together, it is easy for the dealer to hide how much you are paying for the new bike or how little he is giving you for your old bike. The calculations for your motorcycle loan amount should clearly show the price of the new bike minus the trade-in value of your old bike. If the numbers are combined, it is too easy to be fooled.
Don't pay junk fees
Once you have settled on the price, it will be time to discuss the terms of your motorcycle loan. Almost every dealer will at this point add in junk fees to your motorcycle loan. These fees are not necessary and are simply added profit for the dealer. These fees could include document preparation, freight, assembly and sales promotion fees. Anything that is added to the price of your motorcycle other than taxes and title fees should be questioned.
Don't overpay for the motorcycle
When you decide to buy a motorcycle, it pays to do some research about the model that you want. You should know the dealer's invoice price, the MSRP (manufacturer's suggested retail price) and any rebates or special offers for the bike. This will give you the upper hand in negotiations. There are several services online where you can find this information such as bikesatcost.com and cyclebuy.com. Use this information to your advantage when you are haggling with the dealer over the price of your new motorcycle.