Thoughts on Financing...

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Ian522 · #1 Unread post by **Ian522** » Mon Aug 06, 2007 1:54 am

Ive been thinking about financing a bike next season. But im a bit confused how those "credit card" financing deals from the manufacturers work.

I am 24 and I basically have no credit whatsoever, I have never had a credit card or loan in my name. Ive applied for a credit card though my bank awhile back but they denied me for whatever reason.

Im thinking that financing a bike though one of the manufacturer credit cards would be a good way to finally build some good credit. But would I be approved for financing at the dealer if I have no credit history?

Im not too concerned about the interest rate because I would plan to pay off most of the bike with a large down payment, and then finance the remainder over the next 2 years. I could most likely afford to buy the new bike outright, but id be doing the financing just to build some credit.

Is this a decent idea or kinda stupid?

Septimus · #2 Unread post by **Septimus** » Mon Aug 06, 2007 2:14 am

If at all possible, you don't want vehicle financing to have anything to do with credit cards. A credit card's interest rate can be 19% or 25% or even 30%. The interest rate on a vehicle loan is usually between 4 and 8 percent.

The general idea is that you get a better deal with any kind of auto loan because if you don't pay it, they just come and take your bike. With credit cards, they can't do that, so the rates are much higher.

I would do two things:

- Go to your bank where you have your checking and/or savings account and ask them to issue you a credit card. Even a low-limit one. Go in person and talk to a real human. You need to establish *some* credit ASAP. Use it sparingly and pay it off every month. If they turn you down, ask them why, specifically, they turned you down. It is usually not hard to get a low-limit card if you have no credit (as opposed to bad credit). If they turn you down and refuse to tell you why, you can hit the big guys like Chase (Visa) or Discover or AmEx. Only do one of these, though. Your credit score takes a small hit every time you apply for any kind of new credit.

- Check out online rates for cars/bikes on places like eloan.com or ING Direct (an awesome Internet-only bank with excellent rates for nearly all types of accounts -- savings, mortage, investment). Don't apply for one yet -- wait until you're ready to buy a bike.

If you can afford to buy the bike outright, then do that. Financing a vehicle means you have to get top notch insurance on it (not just full coverage but higher minimums and/or lower deductibles). Build your credit with a traditional credit card. If you planned on getting top notch insurance anyway, then sure, you can do what you're describing and it will help your credit a bit in the long run, though most loans have a minimum amount ... like I doubt you can get a bike loan for $500 or something like that.

paul246 · #3 Unread post by **paul246** » Mon Aug 06, 2007 2:15 am

My advice is to stay away from any credit card scheme of any description.

You say you have some money. Decide beforehand how much you will use as a downpayment on the bike. The larger the downpayment the better.

Go to your bank and show them what you have planned. Ask for a loan for the balance. Then, take that information and shop for a better deal at other banks.

Chances are very good that with a decent downpayment and the bike as collatoral you will be able to secure a loan and establish a credit history. Keep in mind that the bank will likely insist upon you holding full comprehensive insurance, year round.

dzervit · #4 Unread post by **dzervit** » Mon Aug 06, 2007 2:23 am

Credit Cards are evil. Well, for most they are. Unless you get one of those cool introductory 0% APR for 12 month deals. Then slap the bike on that, and at month 10 start looking for another CC with the same deal, transfer your balance. You can actually finance your bike for 0% if you are disciplined. However, getting a 0% APR card maybe a bit tough for a credit-newbie. Get a parent to co-sign a small bike loan. That will help to build your credit. In addition the tips above about getting bank accounts and a CC with a small limit are huge credit-kick starters. Good luck!

Johnj · #5 Unread post by **Johnj** » Mon Aug 06, 2007 2:29 am

Financing motorcycles is a bad, expensive idea.

tropicalhotdog · Mon Aug 06, 2007 2:59 am

Hey, I'm the VP of a bank and a financial analyst so here's my 2 cents: if you can afford to buy it outright without credit, do it. None of the vehicle financing schemes are all that good, especially if you have the cash flow to buy the bike straight up. Don't let some other guy make money off of your money if you don't need to.

If you want to start establishing good credit, get a simple credit card from one of the reputable banks and try negotaiting the rate with them - a lot of the banks are surprisingly flexible on the rate because they need to keep adding new customers. Once you get the card, use it at least once a month, and pay it off IN FULL every month if you can. Don't do just the minimum payment, because you'll just start accumulating debt. You can even do it with a couple of cards, like American Express and Visa, and just make sure you pay them off each month. That will start building a credit history in a way thay allows YOU to control how much you have outstanding any given month. Staying on top of your utlities, telephone, and other bills also helps.

So buy the bike outright, then use an Amex or Visa or other card to buy a good leather jacket, helmet, etc. and then pay it off right away.

Just my opinion.

DieMonkeys · Mon Aug 06, 2007 3:11 am

Don't finance. Don't get a loan.

DON'T GET A CREDIT CARD.

You can live life without credit. You don't need "good credit" to do anything. Not even a home loan (which is the only thing you'd get a loan for because nobody can come up with $500k in the early part of their life on their own).

Save your money and buy it outright with cash. For one thing, you'll get it for less than you would by financing. Also, flashing cash usually gets you a better deal in some cases.

You don't have to be the red faced 4 year old in the supermarket yelling and screaming because he wants it and he wants it NOW!

tropicalhotdog · Mon Aug 06, 2007 3:45 am

DieMonkeys wrote:Don't finance. Don't get a loan.

DON'T GET A CREDIT CARD.

You can live life without credit. You don't need "good credit" to do anything. Not even a home loan (which is the only thing you'd get a loan for because nobody can come up with $500k in the early part of their life on their own).

Save your money and buy it outright with cash. For one thing, you'll get it for less than you would by financing. Also, flashing cash usually gets you a better deal in some cases.

You don't have to be the red faced 4 year old in the supermarket yelling and screaming because he wants it and he wants it NOW!

Nothing wrong with credit cards. It's DEBT that's the problem. And you never know when you will in fact need to have a credit rating. And a good credit rating will help you get a better home loan, ESPECIALLY now with the total collapse of the sub-prime mortgage industry. All that matters is the differential between your debt rate and savings yield, and if your yield is higher than debt interest rate, it's crazy NOT to use credit - you lose money!

Other than that, I agree with everything diemonkey says - but this is getting off topic. Buy your bike flat out if you can.

ANDS! · #9 Unread post by **ANDS!** » Mon Aug 06, 2007 5:35 am

I am 24 and I basically have no credit whatsoever, I have never had a credit card or loan in my name. Ive applied for a credit card though my bank awhile back but they denied me for whatever reason.

Was in your exact situation. The problem is, is that you get a catch-22 situation with creditors, in that you want to get credit, but because you dont have any you cant get any, but you cant get any - cause you dont have any.

You can live life without credit.

Of course you can. You can also live your life w/o a car, friends, a degree, etc. - however the person who has any of these over the person who doesn't, probably has an easier time navigating the Sea Of Life. The reason credit IS good, is because some people CAN'T save up all that cash, and its simply easier to pay 300 dollars a month (which would be like an 8000-9000 dollar purchase) for a "sweet ride".

Obviously if you can buy outright, dont finance. But even if you can buy outright, and dont have much credit - dump a ton of money on it, so that you're looking at 10-dollar payments a month (it wouldnt be that, but you know what I mean) to establish credit. You're not gonna get that great of a rate, and you'll probably need a co-signer, but it is a great way to go about putting some credit on the books because it just makes purchases in future that much easier.

Ian522 · #10 Unread post by **Ian522** » Mon Aug 06, 2007 5:47 am

I have a bike already so its not like im in some rush to buy one. The only reason im am considering the financing is to build credit history.

In the past year or so ive tried getting a credit card on 2 separate occasions with 2 different banks. Both said no. They wont issue me a card because of lack of credit history, yet I cant get one anywhere else to start building credit. Its stupid.

I can probably get one of those "secured" credit cards, but you have to put up like $1000 up front for them to hold as collateral and you cant use the card unless you have the money put in to cover it.

And I agree with you DieMonkeys, I usually prefer to pay for things outright and aviod debt (hence why I have never had a credit card before). But I want to establish some good credit for if/when I need to buy a new car or house, etc.