Used Market Attracts Higher-Credit Borrowers, Dealer Says

As every OEM preps the launch of brand-new 2019 models, used motorcycles are on an uptick and are attracting consumers with better credit, Brad Van Horn, owner of Buy Your Motorcycle, told Powersports Finance.

“We’re actually seeing better credit coming in now on the cheaper, used, high mileage stuff than we used to,” Van Horn said. “That’s just because the prices have come down to a level in which it’s more advantageous to buy used than new at a level that it’s never been before.”

It’s easy to think of a used bike as being of lesser quality than one fresh out of the factory (did you ever enjoy getting hand-me-downs?). But, manufacturers made bikes of such high-quality in the past that they are still attractive options for consumers now. Combined with the higher cost of new vehicles, the consumer decision to buy used becomes a bit easier.

“The new space is going to continue to go down because there’s such a high degree of used inventory in the space,” Van Horn said. “[OEMs] are going to have to compete against used because the used prices are so much lower than they used to be that now there’s no reason to buy a new bike. I’m selling two-year-old bikes for $10,000 off. That’s a huge discount compared to a new $20,000 bike. At $25,000, you can buy used for $15,000. There’s massive growth in the used business while new is on a downturn.”

As consumers with better credit turn to the used market, subprime lenders are taking the opportunity to reach lower tiered riders by buying deeper motorcycle loans. For example, consumers with a 300 FICO score have been approved for finance at Buy Your Motorcycle.

“We’re noticing that lenders are buying deeper, but no other big program structural changes,” Van Horn added. “On the whole, the industry is heading deeper and deeper into subprime because they are finding out that their losses aren’t as bad as they expected.”

Buy Your Motorcycle is a used-only dealership that sells Harley-Davidsons, in addition to other models such as Honda and Yamaha. The dealer works mostly in the deep subprime and subprime space and works with a variety of lenders such as American Credit Acceptance, MB Financial, and Speed Leasing.

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