How to Get Rid of a Financed Motorcycle

Circumstances sometimes require parting with a financed motorcycle before the loan is repaid. Whether due to financial changes, evolving preferences, or the desire for a different model, understanding the process of divesting a financed motorcycle is important. This guide explores various approaches to handling a financed motorcycle you no longer wish to keep.

Understanding Your Financial Position

Before parting with a financed motorcycle, understand your financial standing. Determine the precise loan payoff amount, comprehend the nature of a lien on the title, and accurately assess the motorcycle’s market value. These steps provide a clear picture of your equity position, guiding your decisions.

Contact your lender’s customer service department for the exact loan payoff amount. Provide your account information and request a current payoff quote. This quote specifies the amount required to satisfy the loan on a particular date, as the total owed changes daily due to interest accrual. Lenders can provide a payoff letter or statement for the precise figure.

A lien is a legal claim a lender has on your motorcycle, serving as security for the debt. The lender retains a financial interest until the loan is repaid. The lien is noted on the title, and until it is satisfied and released, the title cannot be transferred to a new owner. This impacts how the motorcycle can be sold or transferred.

Assess the motorcycle’s current market value using online resources like Kelley Blue Book (KBB) and NADAguides. Both offer valuation tools based on extensive data. While NADAguides often provides higher values, KBB incorporates more factors like local market conditions and popularity. Research recent private sales of similar models on platforms like Cycle Trader or local classifieds to understand the private sale value, which is often higher than a trade-in value.

Compare your loan payoff amount to the motorcycle’s market value to reveal your equity position. If market value exceeds the payoff, you have positive equity. If you owe more than the motorcycle is worth, you have negative equity, or are “upside down” on the loan. This influences the feasibility and financial implications of selling or trading the motorcycle.

Selling the Motorcycle

Selling a financed motorcycle privately can yield a higher return than a trade-in, especially with positive equity. This process requires careful management of the existing loan and lien for a smooth transfer of ownership. Proper preparation and understanding the financial steps are important for a successful private sale.

Prepare the motorcycle for sale to maximize its appeal and value. This includes thorough cleaning, detailing, and addressing minor maintenance. Gathering service records and the owner’s manual adds value and builds buyer confidence. Use high-quality photos and a detailed description when advertising on online platforms like Cycle Trader, Facebook Marketplace, or local classifieds.

Handling the lien is the most important aspect of selling a financed motorcycle. You cannot transfer the title if a lienholder is listed, as the lender holds a legal claim. One option is for you to pay off the loan before the sale. Once satisfied, the lender releases the lien and sends a clear title, which you transfer to the buyer. This provides the buyer with a clear title immediately.

Alternatively, the buyer can pay the lender directly. This involves the buyer and seller meeting at the lender’s branch or coordinating remotely. The buyer pays the loan amount directly to the lender, satisfying the lien. Any remaining funds beyond the payoff are then paid to you. The lender releases the lien, and the title transfers to the new owner. Involve the lender to ensure correct procedures for lien release and title transfer.

Proper paperwork is crucial, regardless of payment method. Complete and sign a comprehensive bill of sale, detailing the motorcycle’s information, selling price, and VIN. Odometer disclosure statements and state-specific title transfer forms are also necessary. Do not release the motorcycle until the lien is confirmed satisfied and all funds are securely transferred.

Trading In the Motorcycle

Trading in a financed motorcycle at a dealership offers a convenient alternative to a private sale, especially for those acquiring a new vehicle. Dealerships handle existing loans and streamline the process, though the financial outcome may differ from a private sale. This option simplifies transactions with outstanding financing.

When trading in a motorcycle with an outstanding loan, the dealership handles the payoff of your existing financing. The dealer obtains a payoff quote from your lender and incorporates this amount into the new vehicle purchase. The dealership pays off your old loan directly, simplifying the transaction.

The dealership assesses your trade-in value. If the trade-in value exceeds your loan payoff, you have positive equity, which can reduce your new motorcycle’s purchase price. If you owe more than the trade-in value, you have negative equity. The dealership may “roll over” this negative equity into your new loan, increasing its total amount and your monthly payments.

Negotiating the trade-in value is important. Research your motorcycle’s trade-in value using resources like Kelley Blue Book or NADAguides to inform your negotiation. Negotiate the trade-in value and the new motorcycle’s price separately for transparency. Dealerships manage all paperwork for lien payoff and title transfer, coordinating with your original lender to ensure proper release and transfer of the title.

The convenience of a trade-in is the dealership managing loan payoff and title transfer complexities. This is appealing if you have negative equity, as the dealership consolidates the balance into a new loan. While trade-in value might be lower than a private sale, the ease and speed often make it a viable option.

Voluntary Repossession

Voluntary repossession, or voluntary surrender, occurs when you return a financed motorcycle to the lender due to inability to make payments. Consider this action when selling or trading is not feasible due to financial constraints or the motorcycle’s value. While it relinquishes the asset, it carries significant financial consequences.

To initiate voluntary repossession, contact your lender and inform them of your inability to continue payments and intent to surrender. The lender will provide instructions on where to return the vehicle. Document all communications and retain records of the surrender.

Upon receiving the motorcycle, the lender sells it at auction to recoup losses. The auction sale price is often less than the outstanding loan balance. You are responsible for the “deficiency balance,” which is the difference between the remaining loan amount and the auction proceeds, plus associated fees like repossession, storage, and auction expenses. You are legally obligated to pay this deficiency balance. If unpaid, the lender may pursue collection efforts, including selling the debt to a collection agency or initiating legal action for a judgment, which could lead to wage garnishment or asset seizures.

Voluntary repossession negatively impacts your credit score. This derogatory mark can remain on your credit report for up to seven years. A repossession signals higher risk to future lenders, making it challenging to obtain new loans or credit, and possibly resulting in higher interest rates. While voluntary surrender avoids some involuntary repossession fees, the credit impact and deficiency balance obligation remain substantial.