So you want a new quad and you're saving your pennies as best you can, but every time you check your piggy bank, it's as empty as a Raptor's gas tank at the end of an all-day trail ride. At this rate, you'll be able to afford a machine sometime around the year 2020 (provided prices don't go any higher than they are today). Don't despair- there's another way to have your dream wheeler while you're still young enough to enjoy it. The answer is simple: Let the banker help!
A lot of riders see a new quad as a luxury item, and others (like the editors of ATV Rider) think it's one of life's most crucial necessities. If you're of the luxury item camp, then you're probably not as likely to want to . finance the purchase, preferring instead to save up for the large outlay of cash a new purchase requires. There's certainly nothing wrong with that, and we admire your self-control, but don't ignore the other side of the equation. Even if you're paying northwards of $8000, buying a new four-wheeler isn't really an expense. Sure, you're tying up some money, but if you take good care of the machine, you're going to get most of that investment back when you sell it or trade it in. Financing the purchase simply means that you're tying up less of your own funds, but of course you're paying the bank to use theirs. Let's take a closer look at a financed transaction so we can see what's really involved.
For the purposes of illustrating, let's say that you've been to the dealer and you're totally in love with a new 450 sport machine. You know you can't possibly swing the $7199 cash price, so you, at the urging of the friendly salesman, decide to . ll out a credit app. Here comes what for most guys is mistake No. 1: If you . ll out a credit application without already knowing if you're creditworthy, then you've jumped ahead to the middle of the finance transaction. We need to back up a bunch and see what the banker is going to look for, and discuss how to get your credit in better shape.
Nowadays, your "creditability," or your creditworthiness, is largely determined by your credit score. This is a numerical score determined by a computer analysis of your credit history. Typical scores usually range from a high of 800 to a low of 400-450. Points are awarded based on factors such as: Do you have any credit cards? Have you made your payments on time? Are your credit balances near their maximum limits? As well as other assorted variables. The higher your score, the more likely you are to be approved for financing, but more importantly, higher scores mean lower interest rates. If you're a better financial risk to the lender, he's going to give you a better rate, pure and simple. So our goal here is to show the best credit score possible, not only for the approval, but for a lower interest rate as well.
There are three national credit bureaus that provide your credit info to lenders. They are Transunion, Experian and Equifax. All three use similar methods for computing your score, but due to variances in reporting it's normal for your score to be different depending on which bureau your local lender consults. Most banks will check two or sometimes all three of the bureaus to see your scores, and they'll normally rate you according to the higher one. How do you . find out your score yourself? Glad you asked that! This is the first step in financing a new ATV-to raise your periscope and see where your credit score is rated today, before you go to the dealership. Knowledgeable buyers visit www.equifax.com at least once a year to check their personal credit rating. You have to pay for the service, but the price is reasonable, usually under $15. Some states require the credit bureaus to provide this info free once a year to consumers, but it's pretty convenient just to go to the source and check it for yourself.
Once you view your compete credit history, you'll notice that just about everything you've ever bought on credit has been reported to the bureau. But while the bureaus catalog your reports, they don't make any effort to verify them, so it's not uncommon to have some negative items on your report that don't belong there. Some of the things that adversely affect your score are: delinquencies, public records such as tax liens, judgments or bankruptcies, balances on revolving credit that are near the maximum limits, too many revolving (credit card) accounts or even an excessive amount of recent credit inquiries. You should carefully check your credit history and resolve as many negative items as possible before you attempt to finance a new purchase. It's amazing how easy it is to clear up some of the items and frequently this can raise your score by more than 100 points!
The magic number that most banks are looking for today is about a 620 score. This is considered the break point between a decent risk and a poor one. If your credit score is at least a 620, then you're usually not going to have any problems getting a loan for your new ATV, but you should also recognize that other factors like your personal income and your level of existing debt are going to be considered, too. Anyone with a score below this threshold will be asked to increase the down payment or to get another person with a more solid credit rating to cosign on the loan. If your personal score is below 540, you may not be able to get a loan at all, even with substantial money down. One more important point, if you're younger than 18 or if you've never financed anything, not even a cell phone, then you probably don't even have a credit score! Sad to say, but you're almost certainly going to need a cosigner to vouch for you on your first go around.
So armed in advance with the knowledge of our credit score, we're ready to go back to the dealership and talk about financing the new machine. If our score is above 680, we know we can expect to . find a very competitive rate and we probably won't have to put any money down. If our score is at least 620, we're ready to provide up to a 20 percent down payment but we're reasonably certain of receiving a loan approval. If our score is below 618 but above 550, we've got our down payment in hand and we've already discussed cosigning with Dad or Grandma. And if our score is below that range, well, we've probably got some work to do strengthening our credit score before we actually apply for credit.
Is there more we need to know about loans before we sign the papers? Heck yes there is! There are as many different types of loans as there are ATVs! Basically you can break them down into two categories, though. All major manufacturers usually offer financing programs that are revolving or unsecured loans. Much like credit cards, these loans offer lower monthly payments, flexible interest rates and sometimes delayed payments, too. The good: these loans often allow you to buy a quad at a far lower monthly payment than a straight-rate, . xed amortization loan would provide. Usually you'll qualify for a ceiling amount when you apply for a revolving loan, and like a credit card, you can spend that money on anything in the dealership, even riding gear and performance parts. And frequently, though not always, revolving loans are easier to qualify for.
But here's the bad side-revolving loans sometimes have such low payments that you're not really paying down the principal amount on the loan, all your score. This is considered the break point between a decent risk and a poor one. If your credit score is at least a 620, then you're usually not going to have any problems getting a loan for your new ATV, but you should also recognize that other factors like your personal income and your level of existing debt are going to be considered, too. Anyone with a score below this threshold will be asked to increase the down payment or to get another person with a more solid credit rating to cosign on the loan. If your personal score is below 540, you may not be able to get a loan at all, even with substantial money down. One more important point, if you're younger than 18 or if you've never financed anything, not even a cell phone, then you probably don't even have a credit score! Sad to say, but you're almost certainly going to need a cosigner to vouch monthly payments go toward interest. This means you could be paying off that new four-wheeler for a very, very long time. What's more, revolving loans might have an attractive starting interest rate, but watch out for loans that raise the rate after 12 or 24 months. They're just trying to get you to trade the machine in for a new one later. And finally, most of these revolving loans charge a greatly increased default rate if your payment is late more than once in a 12- month period. Can you afford 27 percent annual percentage rate? Ouch!
The other category of loan, a conventional note, comes through a more traditional .financial institution like a bank or credit union or through an independent finance company. Those loans are for a fixed period of time like 36, 48 or 60 months, rather than an open-ended term like the revolving loan accounts. They also feature a fixed payment that will pay down the principal and the interest charge simultaneously. While your monthly payment is generally going to be a bit higher with this type of loan, for most people going the conventional route makes better financial sense. You know exactly what your rate is for the life of the loan, and you know exactly when it's going to be paid in full. If the loan is through a bank or credit union, they can be a bit more picky about your qualifying credit score, but the rates are going to be very competitive. If the loan is through a .finance company (or any institution that doesn't take deposits like a bank does), then you might find it easier to qualify but you can bet you're going to pay for it through a higher interest rate.
For most of us, financing is a necessary evil that allows us to enjoy a much nicer machine than we would be able to afford for cash. The simplest way to look at it is this: When you get a loan for a new ATV you're really buying two things, the four-wheeler and the money to pay for it. Just as you want to get a sharp deal on the machine, you need to know how much you're paying for the money as well. Now that you know how to figure that out, go back to the dealership and grab that new 450!
How To Find And Evaluate OE Finance Plans
Before you agree to finance any new ATV purchase, make sure to ask the dealer for all the details on every .finance plan he offers. It's reasonable for him to want to know your credit score, but before you fill out the app, ask him for the full rundown on every plan available.
All of the major OE manufacturers, including KTM and Polaris, have their own special retail finance plans. Any franchised dealer in good standing can offer those plans to qualifying customers. If the salesman is being cagey about the details, you can check them out for yourself on the manufacturer's website.
Make sure you note all the .fine print in any finance plan, particularly a revolving or "card" type loan program. Manufacturer's retail .finance plans change often, sometimes monthly, and depending on the plan they're sometimes pretty attractive. You might even decide to switch brands based on the finance program (at least that's what they're hoping).
Don't expect to see too much of the Zero Interest/Zero Payment plans that car dealers offer, though. The car business has been exceptionally weak for years, and they've had to resort to ridiculously cheap financing in order to attract customers. New ATV sales have been strong in recent years, so expect to pay interest rates that are closer to prime at best when buying a four-wheeler.
One nice thing about most OE finance plans is convenience; the approval process is fully automated and applications are submitted by the dealer online, so you'll know if you're approved or declined in minutes. Decide which loan is right for you, just like you take the time to pick the right machine. If you do you're shopping in advance, it's a safe bet that you're going to save big money on the financing.