Sara Routhier, Managing Editor of Features and Outreach, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming worl...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Feb 9, 2021

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Motorcycle loans are different from car loans due to how lenders view them as an investment. Risk plays a huge role in this difference, as lenders are more cautious when meddling with risky investments.

The Risk Factors

Motorcycles are far riskier for their riders to operate. Each year, motorcycles account for a disproportionate number of accidents that result in injury or death. According to the Governors Highway Safety Association there were 4,502 people killed in motorcycle-related accidents in 2011. Lenders understand that motorcycle loans could be a risky investment due to the danger posed to both riders and motorcycles themselves.

As sobering of a thought death may be, as far as banks are concerned, dead borrowers don’t repay their motorcycle loans. Similarly, wrecked motorcycles can’t be repossessed and liquidated to compensate financiers for lost money.

In an attempt to mitigate this risk, motorcycle loans carry steeper interest rates when compared to traditional car financing. Steeper interest rates bring in greater revenue for banks. This means that financiers will see a faster return on their investment and a larger profit from each successful motorcycle loan, which helps curb money loss from unsuccessful ones. Since motorcycle riders are at risk of not repaying banks due to injury, lenders must do all they can to recover the cost of lending using high interest rates.

For all their arguable problems, cars are still safer vehicles to drive and have far more safety features, which means there is less risk to banks that put their money on the line.

Recreational versus Conventional

There is also a technical (and debatable) reason for motorcycle loans being more expensive to borrow.

Motorcycles are considered recreational vehicles by financiers regardless of whether they are a borrower’s sole mode of transportation. In the eyes of lenders, recreational vehicles—namely motorcycles in this situation—are considered luxury items.

For financiers, the purchase of a luxury vehicle implies that the purchaser can likely afford higher interest rates since they are buying a non-essential and unconventional mode of transportation. Even if borrowers insist that a motorcycle is going to be their primary and sole vehicle, conventional motorcycle lenders will likely not budge.

Motorcycle Loans in a Haystack

Finally, the basic economic principal of supply and demand comes into play.

Motorcycle loans are rare. Motorcycle loans are much more difficult to find than their auto counterparts since motorcycles are far less plentiful than cars. Online motorcycle loans may be the best (or only) option for prospective borrowers who are unable to find retail lending locations.

Then There’s the Similarities

Like cars though, financiers also base offered interest rates on the age of the motorcycle being purchased. This makes it necessary for borrowers to have selected a motorcycle before seeking out financing options. The make and model of a motorcycle can either raise or lower both the interest rate and amount that can be borrowed.

As with most forms of lending, credit scores also impact interest rates and financing options. Banks, whether offering car or motorcycle loans, will be more than happy to lend to borrowers with excellent credit scores and credit histories. On the other hand, they will almost always be hesitant to lend to borrowers with very low credit scores unless the borrower provides collateral or agrees to a higher interest rate.

Borrowers who look up motorcycle loan quotes before entering a motorcycle dealership will know what sort of financing figures to expect. By having a quote and being more knowledge about these monthly payments, borrowers will avoid being vulnerable to high-priced dealership financing and aggressive sales tactics.