Dreaming of a new Harley? Wishing you could be buying a motorcycle with credit cards? The good news is that this is possible.
You can buy a motorcycle with a credit card as long as your credit limit is high enough and you believe it’s a wise financial decision for you to make. The last part of that sentence is important. Is this a wise financial decision for you?
If you can pay your credit card off in full, you can earn points or reap various other rewards when you purchase a motorcycle with a credit card. If you don’t pay it off right away, you’ll end up paying a lot more in interest than what you would face with other financing options.
So, how do you make your decision? Here’s how to weigh your options and choose the right one for you.
Table of Contents
Can I use a credit card for a downpayment on a motorcycle?
You should be able to buy a motorcycle with credit cards or make the down payment with a credit card, but the reality of this fully depends on the seller. Some dealerships may impose limits, especially if they are going to be the ones who have to pay the credit processing fees.
Others will add a processing fee that is anywhere from 2% to 3% of the total price to account for credit card processing fees. In most cases, private sellers do not usually accept credit cards.
How financing a motorcycle works
Most buyers will purchase a motorcycle by paying in full or with a secured motorcycle loan, much like an auto loan. With these loans, the buyer agrees to a set monthly payment for a predetermined number of months, which is usually up to 60 months.
For these types of secured loans, lenders will look at your credit history as well as your credit score. A high credit score can lead to lower interest rates overall.
Standard motorcycle loans currently come with interest rates typically between 6% and 7% on average. If you want to buy a motorcycle, you’ll need to check the down payment requirements and all of the financing terms.
Some motorcycle loans have penalties that stem from early repayment, so it’s important to understand the terms before you sign. These can take a bit more time to pay off than buying a motorcycle with a credit card, but you’ll save money in the long run.
What to consider before financing a motorcycle with a credit card
Financing a motorcycle with a credit card is rarely the best choice because it requires you to borrow money. However, if you have money in the bank to pay off the debt, buying a motorcycle with a credit card can yield significant benefits. Here’s what you should consider.
Your credit limit
Motorcycles cost an average of $4,000 to $20,000 per bike. This is quite the range, and your credit limit may not be high enough to cover the more expensive options. But even if it is, using over 30% of your credit limit in general can hurt your credit score, let alone using it on a motorcycle.
If you purchase a $10,000 motorcycle with a credit card that has a $15,000 limit, your credit score may take a dip until you pay it off. Motorcycle credit card debt can have long-term impacts on your credit score as well.
High interest rates
Interest rates on credit cards are usually significantly higher than those on car loans. Credit card interest rates usually range from 18% to 25% or more APR.
The interest rate will add a lot of money to the total amount you’ll end up paying. If you are going to need to pay off the cost of the motorcycle over the course of months or years, it’s usually better to get a secured motorcycle loan than to buy a motorcycle with a credit card.
Your credit score
Your credit score won’t take a hit if you pay off the motorcycle debt right away. However, if you can’t pay back the entire amount by the end of the billing cycle, your total debt will go up, which can negatively impact your credit score.
If you want to qualify for other loans or mortgages months or years from now, it’s better not to compromise your credit score by carrying the motorcycle debt on a credit card. Instead of buying a motorcycle with a credit card, consider other financing options to protect your credit score.
Potential for rewards
While there are several drawbacks, the one major benefit of buying a motorcycle on a credit card is the rewards. You may be able to get cashback rewards or points that can be converted into travel or entertainment rewards.
Again, this is only an advantage if you pay the bill in full before the billing cycle restarts. Otherwise, the cashback rewards or points may not be enough to cover the costs of the high-interest rates you will accrue if you can’t pay the debt in full.
Other ways to finance a new motorcycle
If you were planning to buy a motorcycle with a credit card and just figure things out along the way, you have hopefully been discouraged from following through on that idea. That said, you can still buy a motorcycle with affordable monthly payments, even if you have a low credit score or no credit score at all. Here are other ways you can finance a new motorcycle.
Consider a personal loan
A personal loan can be obtained through your bank or by asking friends or family. Keep in mind that personal loan rates can range from 3% to 36%, making some personal loans even more costly than credit card debt.
Securing a personal loan with a lower interest rate can result in greater long-term savings on the new motorcycle. As such, it is usually a better choice for borrowers than buying a motorcycle with a credit card.
Find a co-signer
A co-signer can make you eligible for a lower interest rate on a motorcycle loan. Also, a co-signer can also help you secure a loan if you have a low credit score or no credit at all.
Wait and save for the motorcycle
Of course, the old basic financial advice always applies. Save up for the big purchase and then pay in full, whether that means waiting a few months or saving up for years.
Buying a motorcycle with a credit card and taking on extra debt can put your long-term savings at risk. You’ll end up paying more than you would if you were to wait and save up for the big purchase.
Pay with cash
If you have the money in the bank, there is no reason to pay for a motorcycle with a credit card. You can also pay with a check or in cash. For many, the simplicity of not taking on credit card debt for the sake of buying a motorcycle far outweighs the potential benefits of points or rewards stemming from credit card usage.
Trade in your current vehicle
If you currently have a vehicle, you can consider trading it in for a motorcycle. Depending on the value of the current vehicle, you might be able to purchase a lower-cost motorcycle and another lower-cost vehicle at the same time.
Alternatively, if you plan to use the motorcycle as your primary mode of transportation, you can always trade in your existing vehicle and get a motorcycle that meets your needs instead. It’s important to remember that you have options.
Final thoughts on buying a motorcycle with a credit card
While a motorcycle can be a dream purchase, don’t let it drag you into a cycle of credit card debt. If you have the money in the bank to pay for the motorcycle in full, buying a motorcycle with a credit card can give you great rewards points or cash back.
If you don’t have the money, a credit card might not be the wisest means by which you pay for the motorcycle. Instead, a motorcycle loan or a personal loan will usually have lower interest rates and more favorable terms. If you can’t qualify for low interest rates, adding a co-signer can help you secure more favorable terms.
Research your options and make sure you read the fine print. Ask a friend or family member to check the terms so that they can help you understand your options a lot more clearly. A motorcycle is within reach for almost anyone when you plan ahead.
Can I buy a bike without insurance?
Yes, you can purchase a bike or a motorcycle without insurance. However, you will need to insure it before you take it on the road. In fact, 49 out of 50 states require proof of motorcycle insurance.
What is a normal down payment on a motorcycle?
The normal down payment for a motorcycle is usually around 10% to 20% of the total cost of the motorcycle.
What is high mileage for a motorcycle?
High mileage depends on the size of the motorcycle. For a smaller motorcycle, mileage between 20,000 and 30,000 is considered high mileage. For larger motorcycles, high mileage is usually 50,000 miles or more. A properly maintained motorcycle can last for upwards of 100,000 miles or more.