Higher Interest Rates For Motorcycle Loans

This was first posted at FinancingUsa.com. I think this piece has been posted on a few sites now, but here it is on The Cash Crunch  

Why do motorcycle loans have higher interest rates? A question I have asked myself many times but was too shy to ask. I assumed that everyone knew why motorcycle finance interest rates were higher so I did not want to ask a stupid question. As it turns out there is no such thing as a stupid question. I have to write many articles for affiliate web sites regarding high risk motorcycle financing and low interest motorcycle financing but I never actually looked in to why the interest rates were higher. I should have sooner. All motorcycle owners know this answer right? Wrong.

I asked a few of my motorcycle riding buddies this question and they all said, "Well..they are high risk". That was it. No detailed explanation in to why motorcycle financing was on average 3 percent more than car loans. My wife said that the mental stability of anyone riding a motorcycle must be impaired and the banks can't trust them to get it together and make the payments. (joking of course) The other theory a friend of mine had was that motorcycles are often just toys and given a lower priority by borrowers when it comes time to skip a payment or four.

Once I realized that no-one had any good answers for this I went to the good old powerful Google search engine to reveal all. Guess what.....no luck. Even Fair Isaac did not give me a straight answer. There were thousands of sites offering online motorcycle financing and many had articles about high risk motorcycle financing. These were mostly affiliate web sites using specific keywords to attract visitors but none of them actually explained why motorcycle financing have higher interest rates than cars and trucks.

Eventually I gave up on finding this information online or asking my friends. I picked up the phone and started calling the banks. Believe it or not some people working in banks told me the reason motorcycle financing had higher interest rates was "just because" or even better - "it's always been that way". I assumed that perhaps the janitor cleaning the bank's floor had picked up the phone for the fun of it! Eventually I did get a straight answer. It was from a very nice bank manager with a slightly stuffy english accent. (she wasn't stuffy.....just her voice sounded that way)

She said in very polite tone of voice, "Motorcycle owners are more likely to perish and henceforth default on their loans". Yep...cold and point blank. No wonder no-one talks about it! Very morbid indeed. I said, "You mean that is it? Your statistics show that motorcycle riders crash their bikes - die and leave the bank holding nothing but a smashed up bike?" She said, "Yes sir...that is one way of putting it. Now I know why they call them high risk motorcycle financing. High risk for the bank losing their money and high risk for the owner spreading his internal organs across the pavement. (now look who is morbid)

This kind lady went on to show me the silver lining however. I imagined her raising her chin slightly and dropping her attached eye glasses. She then said, "You will find that your insurance premiums are less with a motorcycle than with your car". I of course asked why.......She said, "Because people in motorcycle accidents tend to die and the insurance company does not have to pay for their medical expenses. So this was very comforting. I can find cheap insurance for my motorcycle because I am more likely to end up being a large piece of road kill and the insurance company does not have to pay to have me fed through a straw for 30 years!

So there you go. If you every find yourself day dreaming about a perfect world and listening to Cat Stevens too much - look no further than the pleasant lady working at the bank. Five minutes with her and you will be back to cold reality.

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