Exploring financing options in Canada can be tricky, but understanding what's available can make the process much smoother. As of July 2024, prospective motorcycle buyers have various flexible finance options, each with distinct rates and offers which may vary based on credit tiers. Let's dive into the different lenders, current rates, and special offers to help you make an informed decision when you finance your purchase.
Current Motorcycle Loan Interest Rates in Canada
As of July 2024, here's a general overview of what you might expect across different credit tiers:
Prime Credit (720 and above): Standard rates for pristine credit currently sit around the 9.9% mark for most recreational loans, including motorcycles.
Current Harley Davidson promotional rates start from 7.59% with 10% down. To qualify for those loan rates, however, you also need to pay for the Harley Davidson extended service plan. Harley Davidson promotional rates limit the maximum loan term to 60 month.
Mid-Tier Credit (660-719): For those in the mid-tier range, APRs typically range from 11.9% to 17.9%. Mid-tier credit situations could include a high debt-service ratio as well as some prior minor late or missed payment history.
Poor Credit (Below 660): Borrowers with lower credit scores may face rates from 19.99% and above. It's not uncommon to see a 29.9% rate offered for someone looking to completely rebuild with multiple repossessions or write-offs.
Remember, your credit score isn't the only factor determining your rate. Other "under-the-radar" factors can affect your loan approval and terms.
Factors That Influence Your Motorcycle Financing Rates
Beyond your credit score, several other factors can impact the rates you're offered when financing motorcycles in Canada:
- Debt-to-Income Ratio: Lenders want to ensure you can afford your monthly payments. A lower debt-to-income ratio can lead to better rates and benefit your overall budget. This is the most often disregarded factor when borrowers are offered a loan at a higher rate than expected.
- Employment Stability: A steady job history can work in your favor when securing the best loan rates, as it demonstrates your ability to manage ongoing costs.
- Relationship with the Lender: Existing customers might qualify for loyalty discounts, which can significantly impact the final price of your loan.
- Type of Motorcycle: Sport bikes or high-performance motorcycles might come with higher rates due to increased risk. The type of bike you choose can greatly affect your financing options and overall costs.
- Market Conditions: The overall economy in Canada can influence base rates across all lenders. These conditions may vary over time and can affect financing throughout Canada.
Exploring Motorcycle Lending Options
When financing a motorcycle in Canada, you have several main avenues to consider:
Traditional Banks & Credit Unions
Traditional banks and credit unions may offer motorcycle loans with competitive rates and terms. However, they often only consider recreational loans for those with a strong credit profile. If a structured loan isn't available, they might push you towards a personal line of credit.
Banks are typically strict with motorcycle loan approvals, as it's not their primary business. This can result in undervalued assets and difficulty getting the loan structure you want to finance your purchase.
Pros:
- Often offer competitive rates, especially for prime borrowers
- May charge less in fees compared to other options
- May offer unsecured personal loans
Cons:
- Subject to the strictest eligibility requirements of all finance options
- Could undervalue motorcycles compared to specialized lenders
- May not offer loans for all types of motorcycles
Online Personal Loan Providers
Online lenders offer convenience and quick approvals, catering to a wide range of credit scores with same-day service. The downside? Most general online loan companies don't tie the asset to the loan, resulting in lower overall caps. Many only offer loans up to $5,000 or $10,000, limiting your shopping flexibility.
Pros:
- Convenient online application
- Quick approvals, sometimes within hours
- Typically supply customers with cash-in-hand to shop with complete buying power
Cons:
- Interest rates are generally higher than traditional banks
- Loan amounts are usually capped at under $10,000, limiting your shopping options
- Generally offer rigid structures compared to other flexible financing options
Dealership On-Site Financing
Motorcycle dealerships often provide some of the best rates available. They're familiar with the motorcycle and powersports industry and have ties to niche-specific lenders. The downside? They'll almost always pressure you to buy from their inventory. Applicable fees may vary between dealerships.
Pros:
- Convenient one-stop-shop for buying and financing
- May offer manufacturer-sponsored low-rate promotions
- Knowledgeable about motorcycle values and models
Cons:
- Pressure to buy solely from their inventory
- Dealer may earn a higher kickback to sell you a worse rate
- Special offers often come with strict conditions
- Fees vary, many charging "dynamic" fees that are different for every customer
Online Dealer Brokers & Private Sale Financing
Recently, there has been a surge in dealer brokers offering private sale financing. An online broker can give you access to niche lending options and flexibility in finding your perfect bike. Watch out for hidden fees that might be revealed at the last minute, as these can significantly impact your payments to the lender. For example; our partners at Revival Powersports show all fees involved in their private sale finance process up front.
Pros:
- Access to multiple lenders with one application
- Can finance to purchase from private sellers
- Some dealer brokers may offer financing that can be used for multiple unit types
- Multiple lenders allows for more flexible terms for unique situations
Cons:
- Potential for hidden fees if not disclosed up-front
- You may still be subject to paying tax, even when buying privately
- Process can be slower than direct dealership financing as dealer brokers have due-diligence in ensuring buyer safety
Manufacturer Financing, Special "As Low As" Rates and Other Tricks of the Trade
You might see dealers offering rates as low as 2.9%, but these deals often come with strings attached. Let's break down some common conditions for these special rates and offers:
- Short Term Financing: Many special rate offers are tied to short-term loans or just a portion of a longer term. For example, a dealer might offer 2.9% for the first year or two of a 10+ year term. After that, the rate jumps to a standard (much higher) rate.
- Down Payment Required: Many manufacturer loan options require a down payment, typically around 10% but sometimes exceeding 30%. Always check the fine print.
- Model-Specific Deals: The lowest rate offerings are often restricted to certain models or stock, typically less desirable or underselling models. For example, a Harley Davidson dealer may offer financing attached to a promotional rate for qualified applicants. This special rate is usually tied to a specific model at full list price with strict eligibility requirements for applicants.
- Credit Score Requirements: The advertised rate almost always requires perfect credit. Some dealers might even advertise rates that are impossible to obtain.
These specialized programs and manufacturer rates are often tactics to get you to fill out an application. Many dealerships believe they can still sell you at a higher rate even if you applied thinking you'd get a much lower rate.
Tips for Securing the Best Motorcycle Financing Rates
Ready to lock in a great rate on your dream ride? Here are some strategies to help you snag the best deal:
Review Your Credit Report
Before applying, review your credit report for errors. Fixing inaccuracies can boost your score and improve your rate offers.
Set Your Expectations with Lower Credit Scores
When you're looking to finance with bad credit, you should set your expectations accordingly. If you're not willing to take on an approval at a higher interest rate, you may want to wait and work on your credit.
Shop Around
If you're shopping directly at the dealer, don't settle for the first offer. Compare rates from multiple lenders, including banks, credit unions, and online options. An online dealership broker like our motorcylce financing partners at Revival Powersports have access to multiple flexible financing options with one application.
Consider a Co-signer
If your credit is less than stellar, a co-signer with strong credit could help you qualify for better rates. Always ensure that you are still on the loan, however, as your goal is the improve credit through your purchase.
Make a Larger Down Payment
The more you put down, the less you need to finance, which can lead to better rates and terms. While it may vary by dealer, cash up-front may even leverage you into a better price or a better option.
Improve Your Debt-to-Income Ratio
Pay down existing debts before applying for a motorcycle loan to improve your chances of securing a lower rate.
Be Flexible on Models
If you don't have great credit, shooting for the brand new Harley Davdison may be out of the question. By being open to different bikes, you leave yourself with more purchase power in finding the perfect piece of equipment to fit your needs.
Time Your Purchase
End-of-model-year dealer sales or off-season purchases might come with a lower price and thus be subject to better financing options.
Refinance When Possible
If you feel as though your credit situation has changed, reach out to a dealer broker or lender to check your eligibility on whether refinancing at a lower rate is available.
Remember, loan approvals and rates may vary depending on your credit category and the dealer. Fees can also vary subject to the specific purchase. Use your knowledge to stay within your budget and find the best deal.
Understanding the Total Cost of Financing
While the interest rate is crucial, it's not the only factor to consider when evaluating financing options. Be sure to look at:
- Loan Term: A longer term might lower your monthly payments but increase the total interest paid over the life of the loan.
- Fees: Look out for origination fees, documentation fees, and prepayment penalties when you finance your purchase.
- Insurance Requirements: Comprehensive motorcycle insurance coverage is a standard requirement for loans in Canada, which can add to your monthly costs.
- Additional Costs: Factor in gear, maintenance, and potential modifications when budgeting for your new ride. Harley Davidson motorcycles are notorious for pushing direct-at-dealer maintenance which can rack up large bills.
Motorbike financing in Canada offers various flexible financing options, from traditional banks to dealership financing. Rates and offers may vary widely based on credit scores, with prime borrowers enjoying the lowest rates. Special offers, including dealer rate promotions and manufacturer incentives, can provide savings opportunities but often come subject to strict conditions.
By understanding the landscape of financing, you can navigate towards the best option for your financial situation and hit the road with your new ride. Take your time to read the fine print before you sign any paperwork, and don't be afraid to shop around. Remember, fees and loan terms may vary between lenders, so it's crucial to compare offers carefully. Good luck in your search for the perfect financing deal that allows you to pay a fair price for your dream ride!
For further reading, check out our other posts: