Hidden New Bike Expenses
In addition to paying tax and licensing fees (Uncle Sam's gotta take his cut too) there are also a few miscellaneous charges you might see:
Freight: Since the manufacturer often charges the dealer to ship them the bikes, many times they'll pass that on to you. In general the freight charge is about 1-2% of the cost of the bike.
Set-up fees: While each bike is different, in general a mechanic will spend about an hour prepping the bike for sale. Typically they add various fluids, check others, tighten bolts and give it a once-over before it rolls on to the showroom. Depending on service rates this can range from $40-200.
Used Bike Markups
Like the new bikes sitting inside the showroom, the dealer must also turn a profit on the used ones as well. In general there are two types of used bikes:
Dealer owned: The dealer owns the bike and thus makes the total profit off the sale. This usually hovers around the 10-20 percent region but can extend higher if a dealer is able to score a bike for cheap.
Consignment: A private party uses the dealer's resources to sell the bike for a desired amount. Regardless of what the owner wants to sell the bike for, the dealer will take a predetermined cut of the profit in exchange for its services. Many dealers will collect between $200-500 for selling your used bike. With that in mind, sometimes a consignment bike can be priced a little high since the owner will be trying to offset the dealer's cut.
New Bike Markup
Markup is what a dealer makes in profit on the sale of a bike. A dealer buys a bike from a manufacturer at a set dealer cost and then sells the bike for a higher MSRP (manufacturer suggested retail price) that is set by the manufacturer--the difference between the lower cost and the higher is the profit the dealer will make. If you can find out what that dealer cost is then you'll know exactly how much barter you have to play with. We learned that dealer markup can range from ten percent up to 17, so shopping around is highly recommended.
Financing 101
Typically, more motorcycles are paid for with financing than with cash. Since most of us aren't outta control ballers, financing is our only option.
In general, the longer the duration of a loan the smaller the monthly payment will be. However, the longer the loan the more you'll ultimately pay since you'll be forking out interest over a longer period of time. For example, a $10,000 loan divided by three years will cost more per month than if it was a five-year loan, but in the end you'll pay less interest if you go with the shorter loan.
Without a doubt our economic situation has changed things these days, and on average, financing rates have almost doubled from what they were a year ago. Mach 1 has seen its average financing approvals go from seven out of ten people to three. Work with your dealer and see what options you have.
Insurance, New vs. Used
A general rule of thumb is the older the bike the cheaper the insurance. Just as you'd expect, the slower the bike the cheaper the insurance as well. Insurance on a 600 is far cheaper than on a liter bike. Just like insuring an '05 CBR600RR will be less than on an '09.
New or used, if a bike is financed it must have full coverage. So when considering if you can afford a bike be sure to factor in the insurance as well.
Financing From The Inside
If a dealer uses certain finance companies it will score a cut. This means that a dealer can get credited one or two percent of the finance price simply for using a particular company.
We wish it weren't so, but there are some dealers that hike your financing rates in exchange for money from the "banks." This means that if you qualify for a loan at seven percent they might tell you that you were qualified at nine percent. If you then unknowingly agree to the rate, the bank will give the dealer a cut of that extra percent it tacked on top. It isn't the squarest way of playing ball, but it's still the reality of certain shops. To help curb any attempts, you can ask to see the actual approval application with your qualified rates.
Insurance
Another important factor to consider is insurance. Here are the different insurance categories and some interesting facts:
Liability Coverage: This is the bottom of the barrel and is the minimum you'll need. If an accident is your fault, liability will only cover the injuries or damage done to the other person's vehicle, not injuries or damage done to yourself or your bike.
Underinsured & Uninsured Motorist Coverage: This covers you in the event you get in a pile-up with someone who has limited insurance coverage or nothing at all.
Comprehensive Coverage: This covers theft or damage from things like a fire or flood. This is commonly used for bikes that are parked in storage.
Collision: Covers any damage done to your own rig by yourself.
Full Coverage: This is the cream of the crop and it usually includes everything above except for comprehensive in some cases.
Thanks to:
Mach 1 Motorsports
Located in Vallejo, California, the shop has been around since the 1960s and was later bought in 1997 by the current owner and former roadracer, Jeff Leggit. www.mach1motorsports.com