Financing a Luxury vs a Necessity

The only reason I can imagine most of you reading this is if you have already read the rest of the internet… even the dark web.  Talking about financing and interest rates aren’t typically the most popular topics on the internet, but understanding how some of this works can make your buying experience much more enjoyable.

First off, let’s talk about risk.  If you have ever had the chance to sit down with us to go over financing options, we would have undoubtedly brought up risk.  It’s one of the most important consideration that any bank will take into account before granting a loan.

Consider these factors:

There are hundreds of factors that a bank will take into consideration though ultimately depends on how much risk the bank would assume if the borrow was unable to pay back the loan.

One of the main factors is the collateral. Collateral is what you are using for the bank to hold in exchange for money. https://www.beavertonmotorcycles.com/blog/how-much-do-i-need-to-put-down--16398 If you give them cash, also known as a secured loan, you will usually get better interest rates than if you give them nothing which is known as a personal loan, or line of credit https://www.beavertonmotorcycles.com/blog/why-finance-when-i-have-cash--16852 

That brings us to buying a luxury item vs a necessity.  The home you live in is considered a necessity. The car you bring your kids to soccer practice is considered a necessity. The Jet Ski you’re hoping to buy to use this summer would be an example of a luxury item.  It’s something the bank believes you do not have to have to function in everyday life.

Here is another way to think about it. Consider the recession of 2007-2008 during the market crash. When money started to get tight for people and they did not have enough to make all of the loan payments, they had to make cuts.  They prioritized the home that their family lived in and kept the rain off their heads along with the car they used to take the kids to school, get groceries, and get back and forth to work.  And then they looked at the motorcycle in the garage - which they loved and still brought them much joy but suddenly became much less important when it comes to providing for the family.  Which item do you think that most people chose to stop paying on?  Hey, life happens and the banks will consider those risk variables when considering a loan.

You rarely see rates on motorcycles, ATVs, side-by-sides or personal watercraft as low as cars or homes. Does that mean it never happens?  Of course not.  There are exceptions to every rule and if you can find ways to lower risk (more down payment, shorter terms, or co-applicants with better credit) your chances of getting lower interest rates will improve.

As you can see, there are several factors when considering getting a loan for a luxury item. If you have questions, we are just an email or phone call away. Please feel free to reach out anytime and we’ll impart as 

much knowledge as we can to help you make financing your next motorcycle, ATV, UTV or personal watercraft easy, effortless and enjoyable.

Life’s an adventure. Your journey starts here at Beaverton Motorcycles. Reach out to a Product Specialist today!