Welcome To The World Of ?Upside Down? Motorcycle Loans!

Home
>
Motorcycle
>
Welcome To The World Of ?Upside Down? Motorcycle Loans!

Welcome To The World Of ?Upside Down? Motorcycle Loans!

With the depreciation on motorcycles being so enormous after they are driven off the showroom floor, the potential for a buyer owing more on their motorcycle loan than the bike is worth it quite high. Owing more on your bike than it is worth is often referred to as the world of "up side down".

Many people finding themselves in this situation discover that financial lessons are sometimes the hardest and most expensive to learn. Motorcycle loans of more than 48 months (especially without a down payment) put you in the position of owing more than the value of the bike.

Let's take a look at this phenomenon.

First, the interest calculation your lender uses can make a big difference in your situation, especially in the first 18 months. There are two primary interest calculations, pre-computed (combined with rule of 78) and simple interest.

Pre-computed interest combined with Rule of 78, is typically the worst situation for a buyer because most of the interest is paid in the first 24 months. Therefore, in the first 24 months little of the monthly payment has gone towards paying down principal. If a buyer wishes to sell or trade in the motorcycle within this timeframe they will likely find themselves owing more than the bike is worth. Statistics show that the average owner trades in every 18-24 months.

Simple interest on the other hand, is much more favorable for buyers since interest accrues on the balance of the loan. However, buyers that extend their loans for greater than 48 months can still find themselves up side down with simple interest. This is especially true if a down payment is not made. The reason this occurs is that the motorcycle depreciates faster than the principal is paid; leaving the balance owed to the lender to be more than the bike can be sold for.

A common view that many people have is that they will just surrender their motorcycle to the lender if they are caught in an "up side down" position. If you are considering this option don't! Your worries do not just end after your bike is surrendered or repossessed; in fact they are just beginning. The lender will sell your bike at an auction for much less than it is worth. You will still owe the difference between the amount you owed on your loan and the amount the motorcycle sold for at auction. So if you owe $5000 and the bike sells for $1500, you still are responsible for owing the lender $3500. To make it worse lenders may tack on hefty auction fees which you will owe as well. So the net result is that you are now responsible for making monthly payments on a bike you can no longer ride.

So what steps can you take to prevent from being caught "up side down"?

1. Find a lender that uses simple interest. Avoid lenders that use pre-computed / Rule of 78 interest calculations.

2. Always try to put money down on your purchase.

3. Try to avoid motorcycle loans that extend past 36 months.

Jay Fran is a author and publisher for a website that specializes in Motorcycle Loans: High Risk OK. A comprehensive resource on simple interest motorcycle financing, poor credit, new, used and bad credit motorcycle loans.

In The News:

Runaway bull lassoed by motorcycle cop in Fresno
Los Angeles Times
A Fresno motorcycle cop lassoed a runaway bull that was on the loose Friday in residential neighborhoods and forced the lockdown of two elementary schools. Sightings of the 1500-pound bull running through the streets of the city took police officers ...

and more »

Street Chopper Magazine
Tsunami Motorcycle to Be Preserved by Harley-Davidson Museum(TM)
MarketWatch (press release)
A Harley-Davidson(R) motorcycle, recovered on the coast of British Columbia after drifting for more than a year and 4000 miles across the Pacific Ocean following last year's tsunami in Japan will be preserved by the Harley-Davidson Museum(TM) in ...
Tsunami Motorcycle To Be Preserved By HD MuseumMotorcycle Cruiser Magazine
TSUNAMI MOTORCYCLE TO BE PRESERVED BY H-D MUSEUMSacramento Bee
Harley-Davidson Museum to preserve tsunami motorcycleExaminer.com
GlobalPost
all 40 news articles »

Ultimate MotorCycling | News and Reviews
Rod Bush to be Inducted into MoHF
MotorcycleUSA.com
The American Motorcyclist Association Motorcycle Hall of Fame is pleased to announce the first member of the induction class of 2012. The late Rod Bush, who helped establish and grow KTM North America and served as company president from 1987 until his ...
AMA Recognizes Memorial DayUltimate MotorCycling | News and Reviews
American Motorcyclist Association Recognizes Memorial DayRoadracingWorld.com

all 18 news articles »

Motorcyclist Magazine (blog)
Motorcycling nominated for Spirit of Sport award
Motorcyclist Magazine (blog)
Without the support of the FIM and the motorcycle community Riders for Health would not exist. This nomination is for all of us.' The annual Spirit of Sport awards commend the commitment and humanitarian spirit of SportAccord members who have made an ...

and more »

Washington Times
Motorists should expect road closures in northern Va. For Rolling Thunder ...
Washington Post
In the DC region, Memorial Day weekend means motorcycles and lots of them. Bikers from across the country are expected to descend on the area for Sunday's annual Rolling Thunder motorcycle rally in support of military veterans and those missing in ...
Rolling Thunder motorcycle rally remembers POWsWashington Times
Photos: Rolling Thunder Ride for Freedom 25th anniversaryDenver Post
Rolling Thunder Rally Up to Honor Vets on Motorcycles (VIDEO)Christian Post
PotomacLocal.com -CBS Local -FOX19
all 38 news articles »

SD Safety Council Joins Motorcycle “Share the Road” Effort
Chamberlain Oacoma Sun
SIOUX FALLS, SD – As Memorial Day weekend arrives, the South Dakota Safety Council reminds motorists and motorcycle riders to share the road to make traveling safer for everyone. The Safety Council joined the South Dakota Department of Public Safety, ...

and more »

The Commercial Dispatch
SPD introduces two-officer motorcycle unit
The Commercial Dispatch
Both officers said the increased maneuverability was one of many advantages their motorcycles offer on the job. Photo by: Micah Green/Dispatch Staff STARKVILLE -- In November, the Starkville Police Department was looking for a couple of good men for a ...

The Milton police log: racing motorcycles; wires sparking on Canton Avenue
Boston.com
On May 19 at 9:16 pm, several callers on Blue Hill Avenue reported racing motorcycles. The responding officers stopped two motorcycles in the area, and both operators were cited for violating automobile laws. On May 20 at 1:24 pm, several callers ...

DOL working to raise awareness of motorcycles
Access Washington
OLYMPIA — As temperatures rise across our state this season, the Department of Licensing (DOL) would like to remind drivers to watch out for an increasing number of motorcycles on our streets and highways. Riders can be difficult to see on busy roads ...

and more »

RoadracingWorld.com
AMA: Report Finds Motorcycle Fatalities Did Not Increase In 2011
RoadracingWorld.com
"Any motorcycle fatality is one too many, but we are encouraged that the report's preliminary finding suggests that overall motorcycle fatalities in 2011 will not be greater than 2010," said AMA President and CEO Rob Dingman.

and more »

Google News