Becoming the proud owner of an ATV should be an exciting experience. There is nothing better than getting your new rig out on its first ride to break it in! That being said, as you navigate the world of ATV financing, it's crucial to avoid some common mistakes that rookie Canadian powersports loan applicants make. Here are the top five pitfalls you should avoid:
1. Going Solo Instead of Using a Loan Broker
Relying on a single lending source can limit your options. Furthermore, many dealers who offer their own loans or manufacturer financing are often incentivized to steer you towards their approval as the only option. A professional ATV dealer broker with access to multiple lenders can provide a broader perspective and, in many cases, more favorable terms. They have the expertise and resources to shop and compare different options, ensuring you find the best loan in Canada.
Pro Tip: Many dealers offer their finance managers and salespeople kickbacks to sell you at a higher rate.
2. Over-Purchasing and Over-Borrowing
It's tempting to choose the top end ATVs on the market, especially when you're only considering the payment when making the decision. It is important to remember that bigger isn't always better. Over-purchasing can lead to excessive debt that might be challenging to manage down the line. For most people, an extra hundred dollars spent every two weeks can seem easy to afford but later on lead to strain on a budget. Consider your needs and budget carefully, and consider any pitfalls that you could run into before settling on your dream ATV.
Pro Tip: Never take on a loan in which the regular payment costs over 20% of your regular paycheque. Aim for 10% or less if possible.
3. Underestimating How Biweekly Payments Work
Many first-time borrowers fail to understand the impact of biweekly payments. With 26 payments a year, it is easy to understand that you'll wind up with months that you'll be expected to make an extra payment. While this payment structure can help to pay off a loan more quickly than semi-monthly payments, the extra payment month could lead to unexpected financial strain, especially if it does not aline with your employment pay schedule. Understanding how biweekly payments work and planning to have extra capital available on extra payment months is key to managing your off-road financing effectively.
Pro Tip: If your employer pays you biweekly, see if the lenders are able to do an automatic withdrawal that lines up with your paydays. This way you can be sure you'll have the funds available to make paying back your loan a priority.
4. Overlooking Prepayment Penalties and Early Buyout Fees
Before signing any ATV financing agreement, check for clauses related to prepayment penalties or early buyout fees. Early payments can have a dramatic impact on saving interest over going full term on your ATV loan and can be a positive when it comes to improving bad credit history. If you plan to pay extra on to your loan or pay off your entire ATV loan ahead of schedule, such charges and penalties can take a major toll on your finances.
Pro Tip: Even the smallest extra payments can save you a boatload when applied toward the principal of your loan. Make a plan to pay extra whenever possible whether it be at tax time, through government rebates or if you receive a bonus.
5. Forgetting to Set Your First Payment Date
When many people receive their documents, the adrenaline in knowing you're about to own an awesome new rig takes over. One of the areas that tends to get overlooked is the buyers payment schedule. Not setting up your first payment date can lead to an irregular schedule and thus missed payments and harsh penalties. Once your powersports financing is approved, ensure you've made it clear on when you want your first payment to be. Double check that this is also the date set in the documents that you are signing.
Pro Tip: If you're not picking up your new or used ATV right away, see if they can push back first payment until closer to pickup date so that you aren't paying before a machine that you aren't using yet.
By avoiding these common mistakes, you can navigate the ATV financing process with ease and confidence. Make your off-road dreams a reality while keeping your finances intact. Remember, knowledge is power when it comes to powersports financing. Use our handy ATV loan calculator to get informed, make wise decisions, and soon, you'll be exploring off-road trails on your own ATV.