Exploring motorcycle financing options in Canada can get a bit tricky, but getting a clear picture of what's out there really helps in making the process a lot smoother. As of February 2024, prospective motorcycle buyers have a variety of financing options at their disposal, each with distinct rates and offers based on credit tiers. Let’s explore the different lenders, current rates, and special offers to help you make an informed decision.
Lender and Bank Options
When financing a motorcycle in Canada, you have a few main avenues to consider:
1. Traditional Banks & Credit Unions
Traditional banks and credit unions may offer motorcycle loans with competitive rates and terms. In many cases, they will only consider recreational loans for those who have a strong credit profile. They may push you to opt for a personal line of credit in the event that a structured loan is not available. Banks often are strict in offering motorcycle approvals as far as terms and cap allotment, as it is not their primary business to offer this type of loan. As such, you may find that they undervalue assets posing difficulty in getting the structure that you are hoping for.
2. Online Loan Providors
For those seeking convenience and quick approvals, online lenders may be a fair choice to consider. They cater to a wide range of credit scores and often provide same-day service. The downside of most general online loan companies is that they typically do not tie the asset to the loan and thus have a lower overall cap allowed. Many online loan companies only offer loans up to $5,000 or $10,000 which may not give you the flexibility to shop that you are looking for.
3. Dealership On-Site Financing
Many motorcycle dealerships offer financing on-site which provide some of the best rates available as they are familiar with the motorcycle and powersports industry and have ties to lenders specific to this niche. The downside of financing directly at a motorcycle dealer is that they will almost always pressure and limit you to buying a unit from their inventory.
4. Dealer Brokers & Private Sale Financing
In the age of the internet, many dealerships have started to move in the direction of allowing for private sale motorcycle financing. While typically a dealership will still require some soft of face-to-face contact, an online broker option can give you access to both the niche lending options as well as flexibility to find the perfect bike that fits you. The downside here is usually in fee transparency as many will hide their fees until the last minute so that you feel pressured into accepting them.
Current Interest Rates by Credit Tier
Now that you understand the different resources available to obtain your motorcycle loan, let's have a look at the current rates available as of February 2024. Interest rates vary significantly based on creditworthiness. It is important to understand that your credit score may not be the determining factor to your rate, which we discussed in our post about under-the-radar factors affecting your loan approval. Here’s a general overview of what you might expect across different credit tiers as of February 2024:
- Prime Credit (720 and above): Standard rates for pristine credit currently sit around the 9.9% mark for most recreational loans, which includes motorcycles.
- Mid-Tier Credit (660-719): For those in the mid-tier range, APRs typically range from 11.9% to 17.9%. Mid-tier credit situations could include a high debt-service ratio as well as some prior minor late or missed payment history.
- Poor Credit (Below 660): Borrowers with lower credit scores may face rates from 19.99% and above. It is not uncommon to see a 29.9% rate offered for someone who is looking to completely rebuild with multiple repossessions or write-offs.
Manufacturer Financing, Special "As Low As" Rates and Other Tricks of the Trade
But wait, 9.9%?! I have seen dealers offering 2.9% so that can't be right. Well, hate to break it to you - but some things are too good to be true. Let me introduce you dealerships APR Promotions & Manufacturer Incentives. These promo rates typically feature wording similar to "as low as" or "limited time only". It is important to understand the conditions to these rates prior to performing credit checks and ensure that the approval is going to fit what you're hoping to purchase. Here are some conditions that are common for special rates and offers:
- Short Term Financing: This is the oldest and most cannibalistic tactics that exist. Many of these special rate offers are tied to either a short term loan, or even a short portion of a full term loan. For example, a dealer might offer a rate for the first one to two years of a ten plus year term. What does this mean? Well, that 2.9% that looks great on paper (and makes it easier for the dealer to sell) will jump to a standard rate once the promotional period has ended. Some dealers bury this in the mountain of paperwork that they will get you to sign with the hope that you will not even realize. Others push the idea that you are either going to pay it off within the promotional period or that they may be able to "refinance" at a lower rate down the road.
- Down Payment Required: Many manufacturer loan options will require you to put cash down, typically around 10% but with some exceeding the 30% mark. The truth is in the fine print.
- Model-Specific Deals: In nearly all cases, the manufacturers lowest rate offerings are restricted to certain models or stock. In our experience, these rates are typically tied to underselling, less-desired models. Anything else, and you'll be back to a standard rate program.
- Credit Score Requirements: The advertised rate almost always will require perfect credit to obtain. In some cases, a crooked dealer will advertise a rate that is literally impossible to obtain.
In conclusion, many specialized programs and manufacturer rates are used as a tactic to get you to fill out the application. Most dealerships operate with the ego that they can still sell you at 9.9% even if you applied thinking you were going to get much less.
Financin in Canada presents various options, from traditional banks to dealership financing. Rates and offers vary widely based on credit scores, with prime borrowers naturally enjoying the lowest rates. Special offers, including rate promotions and manufacturer incentives, provide additional opportunities for savings but often come with conditions that may be far more strict that you're hoping to consider. By understanding the landscape of motorcycle financing, you can navigate towards the best option for your financial situation and hit the road with your new ride. Thanks for reading along and good luck in the search of your dream ride!
For further reading, check out our other posts:
Is it Possible to Finance a Motorcycle in Canada without your SIN?