The Primary Differences Between Motorcycle & Auto Loans

Understanding why Canadian motorcycle loans have different interest rates than traditional auto loans requires a comprehensive look into the world of lending and finance. This post will explore the reasons behind these differences, and how they can impact your motorcycle financing journey and expectations.

Motorcycles share a freeway in Canada with autos

1. Risk Factor

Motorcycle loans are often perceived as higher risk than auto loans. Motorcycles can be easier to damage or steal and can also depreciate faster. Moreover, the chances of a motorcyclist being involved in an accident are statistically higher than that of a car driver, and the damage that results from a motorcycle collision are typically at a higher expense giving a greater risk for write-off. Finally, motorcycles in Canada are considered a seasonal mode of transport. As such, motorcycle maintenance might not be as thorough as an automobile. These factors increase the potential risk to the lender, often resulting in higher interest rates.


2. Resale Value

Generally, motorcycles tend to have a lower resale value compared to cars and depreciate at a higher rate. This means that if a borrower defaults on a motorcycle loan, the lender is less likely to recoup their losses through a sale or auction of the motorcycle. Therefore, lenders often balance this risk by setting higher interest rates for motorcycle financing.


3. Loan Size

Typically, a motorcycle loan is smaller than a car loan, simply because motorcycles cost less than cars. As a result, lenders may increase the interest rate to ensure they're making a worthwhile profit from the loan despite its smaller amount.


4. Specialized Market

Powersports loans, which include motorcycles, ATVs, and watercraft, serve a specialized market. As there are fewer lenders in this market, the competition is lower, allowing lenders to set higher interest rates.

Biker sits next to a sport bike on a quiet road

In short, the differences in interest rates between motorcycle and traditional auto loans can be attributed to:

  • Higher perceived risk with motorcycles
  • Lower resale value of motorcycles
  • Smaller loan size
  • Specialized lending market

Understanding these factors can equip you with the necessary knowledge to navigate your journey through the world of motorcycle financing. This could potentially help you secure better terms when applying for a Canadian motorcycle loan. Despite these factors, it's important to shop around and compare loan offers from various lenders. Do your due diligence, consider all variables, and make sure to factor in your personal financial situation and repayment ability when making a decision.

With the right planning and understanding, motorcycle financing can be a smooth ride. Get ready to hit the open road!

Sport touring motorcycles under a cloudy sky on a highway