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How do you pay for your bike?

Discussion in 'General Motorcycling Discussion' started by SilverFox, Oct 16, 2005.

  1. Hello all,

    I am not trying to pry into your financial arrangements :) , I am trying to see if anybody has any thoughts on the best way to pay for my new bike.

    It will be my first bike, most probably a new GT250R, and I working out how to pay for it. Salary packaging isn't an option, so as I see it, the two options are a) personal loan or b) finance on the bike.

    The personal loan is easier, and has no early repayment fees when I sell the bike, but the downside is a higher interest rate because the bank has no security on the loan

    Finance has a lower interest rate, but I am curious whether they usually sting you for fees when you sell the bike and want to pay the loan off. Also, if the amount I get for the bike is less than the amount remaining on the loan (quite likely on a learner model hyosung :) ), I assume I would have to find the extra money immediately (as i would be selling the item the loan is secured on)

    Also, insurance companies always ask if there is finance on the bike. Does the answer to this affect the premium?

    Any thoughts/personal experience would be appreciated.

  2. Bike shop finance is just another form of personal loan, but they can sometimes have a higher interest rate than a loan you would get from a bank.

    And yes in most cases having the bike as security on a loan will result in a higher insurance premium. The reason being statistically more claims are made on bikes that are financed than on those that are not. Read from that what you will. :D

    Another option for financing a car or bike is when you re-finance your mortgage (assuming you have one). The interest rate is far, far lower than any personal loan on the market. It's not worth doing just to get the bike, but if you're looking at refinancing anyway to consolidate your debts, it's something to consider.
  3. I do not own a house so have no security. I took out a personal loan for my bike, and the lady suggested I bundle in with it the payout on an expensive credit card, which I did. All my bank needed was proof of my earnings and ability to service the loan. In the end it worked out that I could afford to buy the bike without including my wife's earnings in the equation.
    Now as often as I can I pay a bit extra into the loan as well as my regular payments, so it should actually be paid out a bit earlier.
  4. Just got a loan from the bank.

    I could of waited a few months and saved the cash, then got a bike.. but thats no fun
  5. Thanks for the replies. In relation to the above, I don't have any property as I am 26 and spend all my money on expensive toys, like cars, computers and (soon) motorcycles :)

    I think the personal loan is the way to go. About $8000 will get me the bike, on roads, insurance and most of my gear. A bank will give pretty much anybody with a job $8000, so thats no problem.

    With no finance, under 8000 kms a year, and one rider (moi), QBE quoted me only $316 for comprehensive insurance - I was shocked it was so low, and I think it has tipped me over into deciding to put in an order (plus hyosung now offer tinted screens to replace the ugly bubblewrap one that comes standard) :)
  6. Agreed - go with a personal loan. You don't need to worry so much then, IMO. Check out the offerings though, as some banks are better than others (service fees, early exit fees, etc). I went with Commonwealth last time, as they had the best deal - no fees other than the establishment fee of $150. This time I'm trying Members Equity, as they've got a better interest rate and even less fees. The catch is, apparently it'll take longer to approve.
  7. Do yourself a favour and phone the insurance company back.

    Tell them that you will be doing more than 8,000km a year and see the difference in the premium. You will find out that it is bugger all.

    I have heard stories from brokers that the ins. co. have rejected claims coz the rider did more than 8,000km in the first 12 months.

    Something to think about.
  8. Hi silverfox,

    I would shop around on the net for the best loan deal, get the loan approval, then negotiate a cash purchase with a reputable dealer. I managed to get a few hundred off a couple of 2nd hand Viragos, $400 shop credit and three months warranty with a cash purchase, and that was from a personal loan deal.

    Basically, if you have cash, whether from a loan or whatever, you have the upper hand, and you can negotiate a pretty good deal. But you having the cash in the first place is a neccesity IMHO.

  9. Hrm, I was thinking of asking this exact same question.

    However, I'm going to go with the "Save myself" option... As much as instant finance is cool, I just can't bring myself to give my bank $150 establishment fee, $300 early repayment (I can afford a scooter in a year... I hope) and 12% interest. Paying for money seems like they're writing themselves blank cheques, too much smoke'n'mirrors for me:p

    Good luck with your loan, enjoy your bike!
  10. Ive bought two bikes in the last month... saved money up myself?? is that really so hard??
  11. I bought my 250 up front. The replacement, which costs a great deal more, will be partly financed with a personal loan. Act of need rather than choice.

    Try to avoid financing the actual bike (personal loan is a better way to go) since your insurance will be significantly more expensive if the bike is under finance.
  12. p_stampy, it can be really hard. Especially if you are the only bread winner. I bundled my bike in with my car loan. 8.75% interest, I'm happy. Silverfox I was with commonwealth but I moved to savings and loans as commonwealth had lots of hidden charges etc etc. But I won't start bashing the comm bank here, all I will say is I found S & L to be far far better to deal with and have much better rates all round. Just my experience....
  13. ever tried doing that when you earn 270 a week. end up with 2 model bikes and a block of chocolate
  14. Be real skeptical of the finance option. Often they don't let you pay it of early and there are other fees. Also sometimes the interest is simple, not reducable, so even though the figure is lower, you end up paying more.

    My advice is only go into debt on an asset. If get into trouble with something that devalues, like a bike or car, then you loose big time.

    The practicle reality is this is not always possible. However I still advice you to minimise the amount borrowed. Maybe save a bit and buy second hand.
  15. One way to get around the early payout option (in a way) on finance is to pay all bar say $20 on the standing balance..... then you pay an early out fee on $20 insted of $2000....
  16. The QBE discount for under 8,000 kms a year is 5%.
    Named rider is 10% discount.
    Member of a riding club is 5% discount.
  17. Saving up for it is of course the best option, but I am too impatient :) I agree that the fees are excessive, but there are ways around it, especially if you are only borrowing a small amount (e.g. under $5K) - A variable rate loan doesnt have an early repayment fee, and the higher interest compared to a fixed rate loan has bugger all effect on a small amount.

    The other option is a low interest credit card. I know people assume that credit cards are a bad idea, but if used correctly they can be advantageous - the banks offer low interest cards which have interest rates comparable to a personal loan, they have no application/establishment fees (usually just $50 annual fee) and they have no early repayment fees. By giving up your 55 day interest free period (which you aren't going to use anyway) you can get a more competitive rate. They get even more attractive if you are going to be paying it off pretty quickly.

    I think I am going to get a personal loan, buy the bike on credit card (for the reward points) then pay off the card immediately with the personal loan :)
  18. There is another finance alternative that the banks don't often mention - it is a bit of a trade secret and they only recommend it to "preferred customers". I've used it myself to buy all my bikes and it works really well.

    It is called "cash". Here's how it works. You list the things in your life that cost money and decide which ones are the most important (this step is known as "prioritising"). Then you stop spending money on things that are less important and you keep that money aside ( aka "saving") until you have enough to buy the thing you want (here we apply a skill called "patience"). If the thing you want is going to cost more than you can "save", you adjust your expectations and buy something cheaper (sometimes known as "prudence").

    Here's the best bit - after you've bought the thing you wanted, you keep saving, and that money can be used to buy other things. The trick is to find a balance between buying things that go down in value (these are known as "depreciating assets") and those that go up in value (called "investments"). If you get the mix correct, you get to retire comfortably, and still be riding when you're 90.

    Now, as some have pointed out, this can be hard. Sometimes, there isn't enough left after you've bought basics (food, shelter, clothing, see Maslow for details). In these cases, you need to adjust your expectations again. "red, shiny...must have...even though I cost a bomb to insure and can't ride yet" is not a sound investment strategy.

    I've been riding 20 years, had a ball, owned 6 bikes, and never paid more than $2000 for any of them. None have been much to look at, but they've all been a ton of fun.

    Strangely, I've just finished having the same talk to someone else because the bastards at Yamaha advertised PW50's right through the GP telecast and he wants to know why I can't just ask the bank for more money. So, if I sound like someone's dad, its because I am.

    Financing your first bike strikes me as a win for your bank and insurer.