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Buying a Motorcycle – Motorbike Loan or Personal Loan?

(This article was originally published on the 13th of February 2018 and updated on the 18th of June 2020). 

As far as private vehicles goes, the main options are either cars or motorcycles. Given the high car prices in Malaysia, motorcycles offer a cheaper alternative to consumers seeking to acquire personal transportation.

Nevertheless, every prudent consumer would ponder the same question:

How should I finance my motorcycle? Motorbike loan or personal loan?

Hire Purchase Financing

Photo by: Cityofhomer-ak.gov

The conventional financing mode for motorcycle purchase is via motorbike loan due to its lease-to-own scheme. Consumers are able to utilise the vehicle while paying instalments, although they do not gain ownership until the full amount has been paid. Interest (or profit rates under Islamic banking) and tenures may differ depending on the type of motorcycle purchased.

Below is a typical financing package offered under the AEON Credit Motorbike loan (the information disclosed is accurate during the period it was written).

Personal Financing – Another Option?

Photo by Time Toast

Meanwhile, an alternative financing channel for your motorcycle purchase is through personal loan, whereby consumers borrow the required funds from financial institutions and pay instalments for the personal loan instead.

Advantages of personal loan include:

  • Full ownership of the motorcycle (purchased through cash from dealer)
  • Longer maximum tenure can be up to 120 months
  • Lower monthly instalments (loan distributed over a longer period of time)

Nevertheless, a caveat of personal loan financing is its dependency on the consumer’s personal credit history like CCRIS & CTOS and loan eligibility. Applicants opting for personal financing are subjected to credit checks and stringent requirements, in addition to a potentially longer wait for funds.

For example, Co-op Bank Pertama offers a personal loan with a promotional interest rate as low as 2.75% (for financing up to 3 years) and 2.85% (4-10 years). Assuming that the profit rate is 2.85% per annum, on a monthly basis the profit rate is 0.24% monthly.

Comparing Motorbike Loan vs Personal Loan

Here we use 2 examples – one to purchase a 250cc bike and another to purchase a 650cc superbike using motorbike financing (from AEON Credit) and personal financing (from Co-op Bank Pertama) to compare which one is more worth it and cheaper. 

Example 1: Purchasing a 250cc Honda CBR250R Motorcycle (2017) at RM21,940

Photo by: CarAndBike

**This is an estimation of the monthly profit rate. The rate is between 0.24 – 0.57% and the approved rate would depend on the credit profile and history of the borrower. 

Personal loan is cheaperIn this case, consumer saves RM7,767 by financing the purchase of this bike a personal loan and the monthly instalment is also close to RM130 lower per month by using a personal loan.

Example 2: Purchasing a 650cc Honda CB650F Motorcycle (2019) at RM43,499

Photo by: HondaUK

**This is an estimation of the monthly profit rate. The rate is between 0.24 – 0.57% and the approved rate would depend on the credit profile and history of the borrower. 

Personal Loan is cheaper – In this case, consumer saves RM9,135 by financing the purchase of this motorcycle with a personal loan, and the monthly instalment is about RM109 lower per month by using a personal loan. 

Conclusion

Is personal loan a better means of financing your motorcycle purchases? It might be, from the perspective of a lower monthly repayment. The answer will also depend on your own credit profile and your access to credit. As a smart consumer, you should assess all possible options before deciding on the channel that suits your financing needs. Try exploring different personal financing options. It might be well worth the time.

If you conclude a personal loan is the way to go and you are a civil servant, check your loan eligibility with Direct Lending. Our service as always is 100% free.

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