When it comes to purchasing a motorcycle or anything powersports and recreation, 'guaranteed financing' sounds like a lifesaver, especially for those with less-than-stellar credit. However, this seemingly attractive offer may not be as beneficial as it appears. This post delves into the reality of guaranteed motorcycle financing and discusses some common dealership scams to watch out for.
What is 'Guaranteed Financing'?
'Guaranteed financing' is a term often used by dealerships to suggest that they can secure a loan for you, regardless of your credit history. In theory, it sounds appealing, particularly for individuals facing financial difficulties or those with a poor credit score. However, the truth is that there's no such thing as guaranteed financing. It's a common tactic used by some dealerships to lure in customers who may feel desperate due to their financial situation.
In reality, all financing is subject to some form of approval, whether it be a hefty down payment, a non open-ended loan at high interest, or a layaway plan. While some dealerships may have more lenient lending networks or resources, it's crucial to remember that every loan comes with its own terms and conditions, often linked to your credit score, income, and other factors.
The one thing for certain is that there is never any guarantee when it comes to motorcycle, powersports or recreational financing. Period.
Other Common Dealership Financing Schemes
1. The 'Yo-Yo' or Spot Delivery Scam
The 'Yo-Yo' scam involves a dealer letting you take your motorcycle home before your financing has fully finalized. They then call to inform you that your financing was not approved with the initial lender, but there is still an option. You would simply need to come back and sign off on some paperwork. At this point, you've already accepted that you're buying a bike and, while inconvenient, this doesn't pose a major issue. What the dealership won't tell you up-front is that the terms that were initially outlined don't match the new approval outline. In many cases with this scheme, the dealer knew from the start that you didn't have the rate they sold you, but also know the emotional connection you would have when you were able to ride and that you would likely agree to new terms.
2. Packed Payments
In this scheme, dealers quote an inflated monthly payment which include add-on products or services you didn't agree to or ask for. The dealer is well aware of your total financing cap and will push the limit to ensure that all of it gets used. This may include add-ons, protection plans or gear. In the worst cases, the sleaziest dealers won't even include the program or upgrade that they included in the deal with the hopes that you don't notice.
3. The "We'll Payoff Your Loan, No Matter What You Owe" Scam
In this scheme, the dealer promises to pay off your existing motorcycle loan no matter how much you owe. What you may not realize, however, is that the outstanding balance often ends up in your new loan, increasing your debt. In addition, this scheme is hardly guaranteed as lenders in Canada take your debt service ratio and book value into account when assessing a loan offering. This means that if you owe too much in negative equity, you're likely going to either get a decline or require a massive down payment to offset this.
The Warning Signs
These dealership scams exploit the lack of transparency in 'guaranteed' financing deals. To avoid falling prey, remember:
- Always read and understand all documents before signing.
- Don't rush into a deal. Consider other motorcycle financing options like banks or credit unions.
- Be aware of your credit before entering a dealership and know current rates to set expectations.
- Confirm that your motorcycle financing is fully approved before taking your vehicle home.
The truth about 'guaranteed' dealership financing is that it's rarely a guarantee. When looking for motorcycle or powersports financing, always conduct thorough research and be wary of offers that seem too good to be true. When you're informed and aware, you're more equipped to navigate the waters of dealership financing. If you want an honest quote on your bike payments, check out our motorcycle loan calculator. If you need more guidance, check out our guide to motorcycle financing in Canada 2023 edition. Happy riding!