Buying your next motorbike on finance means that you are able to afford a newer, faster and more reliable bike than just using your savings alone. The benefits of bike credit are many and varied, but there are potential pitfalls to be wary of when taking on a debt to finance your next set of wheels.
Well-researched, honest finance deals can be found easy enough, either through your dealership, your bank or even online. But, sometimes finance packages can look too good to be true – and in this instance they generally are.
Avoid falling into the trap of bad finance by a following our advice below.
When you go bike shopping it can be very easy to be lured in by a top of the range monster machine, when really you can only afford a more modest set of wheels. The salesman wants to up-sell where they can, so will always try and persuade you to invest in the latest models.
But, whilst an extra £20 or £30 a month on your repayments may not seem like much, over the course of the repayment term it equates to a lot. It also adds up once you include insurance, tax and any other associated monthly costs. Set a realistic budget, and stick to it – no matter how shiny the bigger bikes look.
If your dealer is offering you 0% APR, special offers like insurance cover or free extended warranties, be sure that you find out exactly what is included before you commit to buy. Warranties and service plans may sound like useful additions, but be sure to get the low down on what is, and more importantly, isn’t covered.
0% APR rates will usually only last for a fixed amount of time, so find out what the rate will rise to at the end of the deal so you don’t get caught out.
After the initial cost of the bike and depreciation, mileage is the next biggest factor the can affect how much the monthly repayments will be. A monthly repayment based on 8-10,000 miles per annum may be affordable, but if you plan to do 30,000 miles a year it will increase rapidly. It is unwise to underestimate you annual mileage or tell a little fib to keep your costs down, as it will come back and bite you in the end. Bikes that have exceeded their mileage at the end of the term will be subject to penalties, which can be very expensive.
If you want a new bike but don’t have anything tucked away for a deposit, there are lots of dealers touting zero deposit deals on bikes of all varieties. Whilst not paying a deposit seems like a gift, it can actually end up costing you an awful lot in the end. Your monthly repayments will be far higher then if you had a deposit to put down, and you will pay more interest over the course of the term.
The same works with long-term (3 years plus) deals. Paying your bike off over a longer period of time means more interest payments. It also leaves you open to the negativity equity trap, as your bike may well depreciate faster than the expiration of the term.
Most dealers will have a preferred finance package that they will undoubtedly try and push you towards. But, by shopping around online, and looking at different types of finance packages, you will be able to save precious pennies.
There is no one size fits all finance deal. Your credit score, own personal income and the cost of the bike, will all play an important part in the cost of your monthly repayments and your interest rate.