How To Buy A Motorcycle With Confidence
Motorcycle buying is suppose to be a fun experience. But all to frequently it turns into a nightmare as buyers try to negotiate the best out the door price with dealers. Thousands of motorcycle buyers all over the USA face the dilemma of negotiating with dealers everyday. Don’t worry if you are having trouble negotiating the best price this motorcycle buying guide will help you succeed.
To secure the best price when buying a motorcycle you need to first understand the process from a dealers perspective. There is one thing all motorcycle dealers have in common and that is to make a profit. Without a profit a motorcycle dealer can not stay in business. It is your objective as a motorcycle buyer to ensure the dealer makes as little profit as possible.
You may think shopping from dealer to dealer for the lowest out the door price is the best way to find a new bike. Shopping is important, but when you dig into motorcycle buying from a dealer’s perspective you will see there are many factors that affect the out the door price of a bike. These factors include manufacturer rebates, salesperson incentives, and backend products like motorcycle loans, extended warranties, freight and prep, document fees, gap insurance, pre-paid maintenance and many more products.
Understanding a dealers perspective on how each of the above factors interrelate is the key to getting the best out the door price on a motorcycle. Below each factor is explained.
Manufacturer Rebates (Factory rebates)
Sometimes factory rebates are known to the public when the manufacturer advertises the rebates. But most of the time in the motorcycle industry, the manufacturer only offers factory rebates to dealers.
As a buyer you normally won‘t know if a manufacturer is offering factory rebates to dealers. However, it is important for you to know that factory rebates paid to the dealer can help you get a lower price. Of course, if a dealer does not pass on the manufacturer rebate it will provide the dealer more profit at your expense. Since you are trying to ensure the dealer makes as little profit as possible you want to find the dealer that will give you the rebate off the price of the bike. The only way to accomplish this is to shop dealers.
When shopping if you find one dealer offering better prices ask the dealer if a factory rebate is offered. Upon asking you will be surprised that many dealers will volunteer information to you about factory rebates. This is good information to have as you are shopping other dealers.
In addition to manufacturer rebates, most manufacturers also pay incentives to the dealership salespeople. In some cases the salesperson incentives are paid based on a total number of motorcycles sold in a given month. For instance, if a salesperson sales 1 motorcycle in a month then the payment could be $25 per bike, but if the salesperson sales 6 then it could jump to $100 per bike.
Salesperson incentives are important to understand because these incentives can put the salesperson on your side with getting you a better price. If a salesperson needs 1 or 2 more units to reach the $100 payout level versus a $25 payout level, then it is likely the salesperson will be more aggressive in getting you a lower price on the bike. The last thing a salesperson wants is for you to walk out of the dealership, especially if your sale can help the salesperson reach the $100 per unit incentive level.
Since a dealership salesperson is more likely to hit higher sales volumes as the month progresses, it is best to shop for your bike in the third and fourth week of each month. In many cases this will help ensure the salesperson is on your side.
The basic thing you need to understand about motorcycle loans is that in a dealership there are two types of loans:
1. Installment Loans
2. Private Label Credit Card Loans (Yamaha Card, Polaris Star Card, Kawasaki Good Times Card, etc…)
By far installment loans are the safer of the two. But you should know that dealers are offered incentives by banks to sell you loan programs that make the bank more money. This puts money in the dealers pocket and leaves you paying hundreds more for your motorcycle.
Here is an example of what a dealer can do with motorcycle loans. Let’s say a manufacturer is running a promotion for 6.95% annual percentage rate on a 60 month loan. Under this promotion the dealer earns no incentive from the bank. However, if the dealer sells you a higher rate of 11.95% the bank pays the dealer a 3% incentive on the amount financed. If you are financing a $10,000 motorcycle this would put $300 in the dealers pocket and leave you paying an extra $471 in interest for the first year. You would also pay more in interest in the next 4 years of the loan.
For the above reason, it is important you get motorcycle loan quotes before you enter a dealership. Try your local bank, credit union and online lenders. At the very least this will give you a benchmark to ensure the dealer is not placing you in a loan that puts money in the dealer’s pocket.
Motorcycle Extended Warranty
Motorcycle extended warranties offer dealers the ability to make extra profit by extending the warranty on your motorcycle. The fact that dealers make a profit on warranties is not a bad thing. But you should understand how extended warranties affect the price you pay for a bike. You may find variances in the price of a motorcycle because dealers charge different amounts for extended warranties.
For instance, which dealer would you by from?
Dealer A offers you a new Suzuki GSX-R1000 for $12,000 and a 48 month extended warranty for $999.
Dealer B offers you a new Suzuki GSX-R1000 for $12,200 and a 48 month extended warranty for $499.
Obviously Dealer B will save you the most money on your purchase. But had you just focused on the front-end price of the motorcycle you would have selected Dealer A costing you $300 more for your motorcycle.
When shopping dealers for motorcycle price quotes always ensure you get a quote for how much an extended warranty costs. Between dealers make sure you ask for details about the coverage and terms to ensure you are comparing the extended warranties accurately. For instance, between two dealers make sure the warranty coverage and the length of time in months is also the same.
Lastly, if a dealer balks at giving you a price for the warranty, it is probably not a dealer you want to deal with!
Freight and Prep
Freight is simply the cost the dealer must pay the manufacturer to have a motorcycle delivered to the dealership. Most manufacturers are currently charging dealers about $225 – $275 per bike. Prep on the other hand, is a charge for getting a new motorcycle ready to sell. Prep is necessary because most motorcycles are shipped in crates to the dealer and require small items to be bolted on before the bike can be sold. Prep is normally about $15 – $25 in labor.
When shopping dealers for the best out the door price, make sure you ask the dealer how much is charged for freight and prep. Some dealers charge as much as $1000 for freight and prep which can obviously have a huge impact on the total price you pay for a bike.
Document fees are simply a charge from the dealership to prepare paperwork like the registration, titling, and loan documents. Document fees can have an impact on the amount you pay for your bike. Some dealers charge as much as $300 for document fees. As you are shopping dealers, it is a good idea to ask each dealer if there will be charges for document fees.
Gap insurance will cover you in the event of total loss or if your bike is stolen. Gap insurance triggers when the value of your motorcycle is worth less than the principal on your motorcycle loan. For instance, if your motorcycle loan is $9000, yet your insurance company will only reimburse you the current $7500 market value, then gap insurance would cover the $1500 gap. In this situation, if you did not have gap insurance you would have to still pay the lender $1500 to payoff your motorcycle loan.
If you are financing your motorcycle, gap insurance should be considered. Consequently, ask dealers upfront how much is charged for gap insurance. You will find the cost of gap insurance varies quite drastically among dealers and it can have an impact on how much you pay for your bike.
Prepaid maintenance is another backend product dealers sell during the motorcycle buying process. Prepaid maintenance simply provides a discount when paying upfront for regular maintenance services. The cost of prepaid maintenance can vary widely among dealers. Also coverage can be totally different making it difficult to compare from dealer to dealer.
In some cases prepaid maintenance is a wise purchase. However, before you buy it you should fully understand what is covered and how much the maintenance would cost without buying the prepaid maintenance.
During the buying process as you are shopping dealers, make sure you ask dealers how much is charged for prepaid maintenance. This will help ensure you get a better overall deal on your motorcycle purchase.
Overall, motorcycle buying is a much more complex experience then most cycle buyers expect. You should not only look at the front-end price of a bike, but the many other factors which dealers use to make high profits from you. Following the above steps can help ensure you get the best possible deal when buying a motorcycle.