Owning a motorcycle can require a lot of responsibility. A lot of that responsibility relates to finances, especially if you used a loan from a bank to purchase the motorcycle in the first place.
We all know that life happens and that sometimes finances can be tight. That means the unnecessary things in life are put on the back burner such as monthly payments for a motorcycle. Unfortunately, that can eventually lead to other problems if you don’t take the right steps to address it.
Can a motorcycle be repossessed? It is entirely possible for a motorcycle to be repossessed if you used a loan from a bank or financial institution to purchase the motorcycle and begin to miss payments. The bank is entitled to repossess it because they technically have the rights over the title.
Having your belongings taken away from you isn’t necessarily a pleasant experience. Having to sell such items because you’re in a financial crunch isn’t fun either. I’ve been able to compile a guide that can help you navigate through possible motorcycle repossession and explain the best options you have.
The Process Of Motorcycle Repossession
Having banks to help us make larger purchases has been a wonderful tool for people in the past decades to help them get by. Without loans from banks, a lot of us wouldn’t have cars and most of us certainly wouldn’t have a house.
Banks have luckily made it possible to purchase other vehicles, too. Motorcycles have been a popular vehicle for many and banks have made it easy for riders to purchase the motorcycle of their dreams.
Unfortunately, some of those dreams are crushed when big life changes happen and finances are tight. Motorcycles are amazing to have, but they’re not an essential need when it comes down to simply surviving and trying to put food on the table for you and/or your family.
The process of repossession begins when someone who has borrowed money from a bank to buy a motorcycle and stops making their payments either because they forget or they simply can’t afford it.
Technically, the bank has a right to repossess a vehicle after just one missed payment, but the process of repossession is a bit expensive for them so they usually wait a few months of missed payments before taking action. Some banks will make the borrower pay for the repossession, but each bank is different.
After a few missed payments, the bank may try to contact you via email or telephone to warn you about repossession. If there is no reply from the buyer, the bank will then take it a step further and hire a towing company that specializes in repossessions to physically go to the borrower’s place of residence and attempt to repossess the motorcycle.
Banks and towing companies are now allowed to enter personal property such as the inside a house/apartment or garage without permission. But there are a few rules that do let them repossess motorcycles that are sitting in the driveway since they are not technically entering any sort of building.
Once the bank has the motorcycle in their possession, they will then sell it off to an auction in attempt to recover any money that was lost on it. Usually motorcycles sell less than what they’re worth at auctions. If the motorcycle auctions off for less than the balance owed, the borrower is still held liable for the difference. This is called deficiency balance.
If the borrower still owes money on a deficiency balance but still does not make the payments, the bank has a right to sue the individual to recover the money that has been lost. Not every bank does this especially if the deficiency balance is small, but they still hold the right to do so.
The Impact A Repossession Has On You
If you have become a victim of a repossessed motorcycle or you feel you may become one in the near future, there are a few impacts it can have on you. The first can be an emotional impact. It’s a pretty degrading feeling knowing you had to have something taken away from you because you couldn’t make the payments.
Not only that, but you bought a motorcycle for a reason: to enjoy it and have some sort of recreational vehicle to go to when you wanted to have fun. Having something like that taken away from you can be difficult.
Aside from the emotional impact, having a motorcycle repossessed can also greatly affect your credit score and credit history. If a bank has to take the effort to repossess a motorcycle that you weren’t willing to negotiate on, your credit score will dramatically decrease. And if you’ve used the bank to borrow money for one purchase, chances are you’ll need to rely on them again for future purchases.
A motorcycle repossession stays on a credit report for seven years. The record shows as soon as the loan is claimed delinquent, meaning when you stopped making payments. Seven years is a long time when you’re trying to get future loans.
If you still owe money on the motorcycle even after the repossession, you will still continue to owe money even after the seven years is up. The bank still has a right to come after you for an unpaid balance.
What About Voluntary Repossession?
There are literally millions of different situations and scenarios a motorcycle owner can find themselves in when it comes to getting their motorcycle repossessed. It doesn’t have to come down to the bank hiring a towing company to come and get your motorcycle. You can actually voluntarily take your motorcycle in to the bank if you know you can’t make any more payments. This is call voluntary repossession.
A voluntary repossession is a much more civil way to go about negotiating your inability to make the payments. Though it will still show up on your credit score or credit report, it will have a much less impact on it since you voluntarily took it in.
The bank will also likely be a lot more willing to work with you in the future if you are needing a loan for another purchase. Keep in mind that if you voluntarily bring in a motorcycle you can no longer make payments on, you will still need to pay off any deficiency balance, or any balance that remains after the bank sells it or auctions it off.
How To Prevent Your Motorcycle Getting Repossessed
A motorcycle repossession is an unpleasant experience and if you’ve been through one, you probably don’t want to every do it again. There are a few ways to prevent such a thing from happening in the future.
I’m not going to tell you how to trick to bank or cheat your way out of paying the balance. You signed a contract with the bank saying you would pay the balance off and so you should abide by that. Anything otherwise is dishonest.
With that being said, let me give you some tips on how to keep yourself out of this situation. The first suggestion is to only buy a motorcycle with cash and simply don’t involve a bank at all.
Unless it is your main source of transportation, motorcycles are seen as recreational vehicles and should only be purchased if the buyer can afford it. This will keep you out of trouble from the bank and will also be an asset you can sell if you fall on hard times.
If you struggle financially, never buy a brand new motorcycle from the dealership. When you buy a brand new motorcycle, you lose an average of 11% of it’s value the second you ride it off of the parking lot. That’s a lot of fluff money you’re giving.
Let someone else pay for the depreciation and buy a used motorcycle. You will end up paying a lot less in the end. Click here for more information about buying a new vs. used motorcycle.
If you have found yourself falling on hard times and see that you cannot afford the payments for your motorcycle, don’t wait for it to become delinquent before you do something about it. It is entirely possible to legally sell a motorcycle in which you still have a loan on it. I am NOT suggesting you sell the motorcycle without the title, pocket the money, and run. That is illegal.
Once you find that you can’t make the payments, talk with your bank and let them know you are going to sell your motorcycle. Hopefully the motorcycle is worth however much you owe on it. Once you get an interested buyer, the two of you will go to the bank together where the loan will be paid off and the title will be given to the new owner.
The interested buyer can also buy the motorcycle with their own bank loan. In that case, the banks would work together and transfer the money themselves.
If your motorcycle is not worth however much you still owe on it, talk with your bank and see if you can come up with some sort of agreement. Say your motorcycle is worth $6,500 but you still owe $7,800 on it and you get a buyer that will pay the $6,500.
The bank may agree to give you a personal loan for $1,300 to pay off the difference of the motorcycle and sell it. This would be a form of refinancing and your monthly payments would be much lower with a $1,300 loan than a $7,800 loan.
Can a repossessed motorcycle affect the credit of a co-signer? If you have a co-signer on your loan and you default on that loan, your co-signer’s credit will also be affected. A co-signer is obligated, by signing a contract, to help make the payments if the initial borrower isn’t able to make said payments so they are also held reliable.
Can you get your motorcycle back if it is repossessed? It is possible to get your motorcycle back if it is repossessed. You will need to pay the remaining balance in full as well as the repossession fees before the bank attempts to sell it at an auction.