What determines the interest rate on motorcycle loans and why are they higher than auto loans?
In todays age, most motorcycle buyers have seen advertised low promotional interest rates for auto loans. As a result, this creates a common question for most buyers, why are there not similar interest rates for motorcycle loans?
On the average a motorcycle loan is 3.5% higher than that of an automobile. This 3.5% is a direct result of increased risk to lender.
Logically, since the average car is much more costly than a motorcycle, it would seem that lenders would have more risk with a car than a motorcycle.
As it turns out, this is exactly the contrary. From a lender's perspective a motorcycle is a luxury item and if a person is going to default they are more likely to do it on their luxury item than they would a necessity item like a car.
Another thing that lenders evaluate is that if motorcycle buyers are in an accident then there is a higher chance of a fatal outcome, which could leave the lender with no one to repay. Since the chance of fatally is higher than an automobile there is higher risk.
Since the average age of a motorcycle buyer is much less than an automobile buyer this also adds some increased risk. Since younger people tend to be less established in life and may have higher job turnover they are more likely to just stop paying on their loan.
So while auto manufacturers may advertise zero percent financing, you must be aware that on motorcycles the same luxury may not be available. However, this is not to say you can not find great low interest rates, it just means the interest rates you find may not be as aggressive as on cars.
Your best chance of getting motorcycle loans with interest rates close to a car is to search online through Lending Tree.
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