Powersport Financing Options for Your Next Purchase
A powersport vehicle can be a great way to add some fun to your life, but figuring out how to pay for it may be a bit confusing. You could either pay cash or look at getting a loan to pay for the purchase over time. Many types of financial institutions offer powersport financing options, including banks, credit unions, online lenders, manufacturers and dealers.
Types of powersport financing options
Here are five types of powersport lenders you could apply to for financing a dirt bike, jet ski, snowmobile, ATV, motorcycle, golf cart and more. You don’t have to apply to every single type, but we recommend that you get a few loan offers from different lenders so you can compare rates and terms and choose the best one for you. You could also fill out a single form at LendingTree and get up to five potential loan offers at once from a variety of lenders, depending on your creditworthiness.
Bank powersport financing
The pros of getting a bank loan for your powersport equipment center around convenience. National banks tend to have great name recognition, offer 24/7 customer service and fast phone apps. However they may not offer the lowest rates out there. Some may not finance recreational vehicles at all.
Credit union powersport financing
Credit unions tend to offer lower loan rates. Some credit unions have minimal requirements for membership, such as Consumers Credit Union, which only requires a one-time donation of $5.
Online lender financing
Without the overhead of brick and mortar investments, online lenders could also be in a good position to offer low financing rates. LightStream, the online arm of Truist, had the lowest average closed loan rate to powersport borrowers who applied through the LendingTree platform in 2019.
Powersport manufacturer financing
If you’re looking for new equipment, you may be able to score a powersport loan with a manufacturer, such as Honda, Polaris or Yamaha. Depending on your preferred model and when you want to buy, the manufacturer may also offer an incentive to finance with them, such as a rebate. Yamaha, for example, offered UTV financing specials through August 2020 for its side-by-side models with no down payment or payments for 90 days.
Dealer powersport financing
Some dealerships are “buy-here, pay-here” dealers, meaning they do actually lend money to customers. However, these types of dealerships typically charge high APRs and are marketed to people who cannot find powersport financing elsewhere.
Powersport financing can differ not only in what type of lender provides the loan, but the type of loan itself. Depending on what the lender offers (or doesn’t offer), you may be able to obtain different types of financing. You can see more about how to qualify for powersport financing.
With a secured loan, the vehicle is collateral. If you default on the loan, the lender could repossess the vehicle. Examples of secured loans include ATV loans, motorcycle loans and auto loans. Secured loans typically have lower APRs than unsecured loans.
An unsecured loan does not have any collateral. If you default on the loan, the lender can’t repossess anything, but could take the case to court. A personal loan is an example of an unsecured loan — borrowers could use funds from a personal loan to finance a quad, golf carts, motorcycles and more. These loans typically have higher APRs and depend strongly on the borrower’s credit for approval.
How to compare powersport financing options
When you receive a powersport financing offer, the four things to pay attention to are the APR, monthly payment, term and interest charge. Of these four things, the loan offer might not clearly disclose the interest charge. If it doesn’t, plug the numbers into this ATV loan calculator to see what it is for yourself, whether you’re looking to finance an ATV or any other powersport vehicle.
APR. Annual percentage rate is the cost of credit, including interest and fees, expressed as a percentage. The higher the APR, the more you are paying the lender for allowing you to borrow funds. The lower the APR, the better.
Monthly payment. This is how much you pay every month towards the loan until you pay it off. To potentially avoid a great amount of stress, make sure that your monthly payment is comfortably affordable.
Term. This is how long you’re borrowing money in a loan. It’s usually expressed as the number of months rather than the number of years, as the number of months is also the number of payments you would make before successfully paying off the loan.
Interest charge. This is the dollar amount you would pay the lender for the loan. It’s important to look at this because it simplifies things and allows you to compare apples to apples. It can be difficult to compare financing offers with different APRs, monthly payments and terms. A longer loan with a lower APR can be more expensive than a shorter loan with a higher APR. Looking at the interest charge tells you immediately which loan costs the least.
How to get the best powersport financing
When you apply for a powersport loan, whether it’s for jet ski financing for fun in the surf or ATV financing for fun on the turf, the lender will look at several factors about you, the loan you want and what you want to buy.
- Your credit score is very important. Lenders like to see FICO® Scores of 680 and above, based on LendingTree data, and powersport loans for bad credit may be expensive. Your income should also be enough to cover any loan payments you currently have, plus the new loan you want.
- The loan you want should have a term appropriate for the amount. For example, if you want to borrow $10,000 for a car, you may be looking at a term of three years (36 months) or shorter.
- What you want to buy matters. If you default on a powersport loan, the lender wants to know that it could repossess the vehicle and sell it off to cover costs. Generally, the newer a vehicle is, the better, in a lender’s eyes.
Get a few powersport loan approvals directly from lenders of your choice before you go into a dealership. This way you have the ability to choose the best one and possibly play the lenders off each other to get an even lower rate. You also don’t have the pressure of a salesperson looking over your shoulder.
Then take your best offer(s) with you and ask the dealer to beat your lowest preapproval rate. If the dealer comes back with a lower rate for the same term, you just got the best powersport financing rate possible. If they can’t find a lower rate for you, then you already had the best rate available to you.
Is powersport financing worth it?
Before you fill out applications and work on getting powersport financing, determine if you should get a powersport loan in the first place. Here are three questions to ask.
Are you living paycheck to paycheck?
If you’re living paycheck to paycheck, taking out a loan for a powersport vehicle probably isn’t the best idea. Even a small financial setback could cause you to miss a payment on your loan, which may lead to a costly repossession. Instead, you can delay the purchase in order to save enough money to make your purchase in cash.
If you don’t want to wait that long, you could get a loan, but consider delaying your purchase until you have saved enough money that you’re not living paycheck to paycheck and you’re able to maintain a separate emergency fund for unexpected expenses. That way, if something unexpected arises after you’ve improved your finances a bit, you either won’t have to make any payments or you’ll be able to use your emergency fund to cover the unexpected expense while still making your payments on time.
Do you have excellent credit?
Powersport vehicles are considered luxuries by most lenders. As a luxury, the interest rates on powersport loans will normally be higher than the interest rate you would be offered on a typical car loan. An excellent credit score (740+) will give you the best chance of qualifying for a loan, as well as the opportunity to qualify for the best interest rate possible. You may still be able to obtain a powersport vehicle loan with bad credit, but expect higher interest rates. Here’s how to improve your credit — and if you don’t have any, here’s how to build credit from scratch.
Do you mind paying extra to buy today?
If you don’t have the cash saved up to pay for your purchase, the only option to make a purchase today is to get a loan. Before you decide to go ahead and get the loan, take a minute and calculate how much more the powersport vehicle will cost you if you use a loan to make the purchase, versus saving up and using cash to purchase it.
The interest charge on a loan is the cost of financing your new purchase. So ask yourself before choosing to finance your purchase: Are you willing to pay the interest charge to get the vehicle today, or would you rather save money and not pay interest by saving up the cash and buying the vehicle outright?