Financing a Bike

[eman2289]

Hey guys. I have been trying to learn about financing for a while. I search on google, but I still dont grasp it.
The bike is a new R-6. The deal going on right now is $99 a month for 36 months. With 7.99% APR. The bike is about $8700
http://www.yamaha-motor.com/sport/webpromo/currentpromos_R1R6_details.aspx
What I am trying to figure out is exactly what APR is and how it works. If I end up paying $3600 after the first 36 months, what about the $5100 that is still left to be paid?
From what I understand, After the 3 years, there would be $5100 left to pay which would then be subject to some new percentage rate. Can anyone explain in fairly easy terms how this would work out. Possibly using an example. Thanks in advance.

 

[Supracentral]

Can anyone explain in fairly easy terms how this would work out. Possibly using an example. Thanks in advance.

It's right in the link that you sent:

First and foremost, this isn't a loan. You're putting the bike on a credit card. After the initial 3 year $99 payments, they are going to nail you with a 22.99% rate and a regular payment. That will likely be between $100 to $150 a month.

If you are ever late on even one payment, you lose the $99 a month special, and the rate goes up to 24.99% and the standard minimum payment will apply.

If you make the 36 payments on time, and then continue to pay off the $5,100, it's a horror story. If you make the minimum credit card payment, it will take you 697 months to pay off the bike at that rate. In that time, you will pay $23,966.71 in interest on top of the cost of the bike.

It's a very bad deal.

I guess they are targeting people who are really bad at math.

Everything you needed to know to determine this is a bad deal was right on the bottom of that ad.

 

[eman2289]

So i would be paying 23% of the remainder a month?

 

[Ckanderson]

Mike said it well.

They give you a CC with a rate of 7.99 for 3 years. the minimum payment on that cc is 99 dollars. After 3 years it goes to default rate which is based on your credit (even with teir 1 credit is goes up to 12.99 (NOT A GOOD RATE)) So youve had the bike for 3 years and now you owe almost as much as your orginal purchase price.

the better way to go is pay cash.

That being said talk to your credit union or some lending place about a loan. I have USAA and was offered a loan for a motorcycle at a rate of 6.9 for 48 months. im considering a used bike and the payments are only 130 bucks a month, and that is paying it off in 4 years.

please dont get suckered into those credit card deals, its a great way to royaly fuck yourself in 3 years.

 

[eman2289]

Thats why I asked. Thanks guys!

 

[Ckanderson]

if you ever have any questions about financing a car or bike ask away. Mikes damn good with it (obviously) and I sold cars for 2+ years. I have more then a little experiance with bad credit and working arround it

 

[eman2289]

Ok, well now i gotta find something else to buy as a beater. I was hoping to have a nice DD, but I dunno now. Damn supra is taking all of my money.

 

[Supracentral]

So i would be paying 23% of the remainder a month?

No, compounded interest doesn't work that way. I'm not going to list out all 600+ payments, but here are the first six months:

Month: 1
Payment: $127.50
Interest: $106.25 (Bank profit)
Principal: $21.25 (Amount that goes towards paying the $5,100 off.)
Balance after this payment: $5,078.75

Month: 2
Payment: $126.97
Interest: $105.81 (Bank profit)
Principal: $21.16 (Amount that goes towards paying the $5,100 off.)
Balance after this payment: $5,057.59

Month: 3
Payment: $126.44
Interest: $105.36 (Bank profit)
Principal: $21.07 (Amount that goes towards paying the $5,100 off.)
Balance after this payment: $5,036.51

Month: 4
Payment: $125.91
Interest: $104.49 (Bank profit)
Principal: $20.90 (Amount that goes towards paying the $5,100 off.)
Balance after this payment: $5,015.52

Month: 5
Payment: $125.39
Interest: $106.25 (Bank profit)
Principal: $21.25 (Amount that goes towards paying the $5,100 off.)
Balance after this payment: $4,994.62

Month: 6
Payment: $124.87
Interest: $104.05 (Bank profit)
Principal: $20.81 (Amount that goes towards paying the $5,100 off.)
Balance after this payment: $4,973.81

So after 6 months, you've paid out $757.08 of your money and you've only paid off $126.19 of your debt...

The minimum payment on credit card debt is calculated as a percentage of your current balance. The minimum payment drops as your balance is paid, but thanks to the magic of compounding, you'll end up paying for a long, long time. (In this case 58 years if you make the minimum payments....)

Don't they teach this stuff in High School anymore?

 

[Ckanderson]

Don't they teach this stuff in High School anymore?

did when I was there......

guess not anymore.



This is the best calculator I have ever found for loans.

http://www.bankrate.com/brm/calculators/autos.asp

It will break down payments like Mike just did for the entire life of the loan (based on a fixed rate)

 

[Clip]

sadly they don't. only course i got was about a half hour in govt class in high school. im looking at taking some serious ones in college to make up for the lack of schooling back in hs.

 

[eman2289]

No they dont, and i went to a "Good" high school. I think kids should be learning stuff like this instead of shit that will never be used in the real world.

 

[eman2289]

So after 6 months, you've paid out $757.08 of your money and you've only paid off $126.19 of your debt...

Holy Shit! Now I know why you always say to pay with cash. Damn thats a lot of money to pay extra.

 

[Supracentral]

No they dont, and i went to a "Good" high school. I think kids should be learning stuff like this instead of shit that will never be used in the real world.

This is why the govenment should not run schools. They suck at it.

This is information you need to succeed in our society. If they aren't teaching this, they have failed you at an epic level.

Consider this next time someone brings up government control of the schools.

I should teach an economics 101 course here...

So after 6 months, you've paid out $757.08 of your money and you've only paid off $126.19 of your debt...

Holy Shit! Now I know why you always say to pay with cash. Damn thats a lot of money to pay extra.

Go back and read post #2. If you make the minimum payments, by the time you have paid off the car, you will have paid out a total of $29,066.71 to pay off a $5,100 debt...

The cost of credit is high, very high. Interest rates matter. Putting a bike on a credit card is financial suicide.

 

[OneJoeZee]

Ok, well now i gotta find something else to buy as a beater. I was hoping to have a nice DD, but I dunno now. Damn supra is taking all of my money.

I don't think a Yamaha R6 qualifies as a "nice DD"

It's a street legal race machine.

You could DD one and people do but there are a lot better and cheaper bikes if you're looking for something to putt around in as a DD and save gas.

 

[eman2289]

I went to a private high school. LOL.

 

[Supracentral]

I don't think a Yamaha R6 qualifies as a "nice DD"

It's a street legal race machine.

You could DD one and people do but there are a lot better and cheaper bikes if you're looking for something to putt around in as a DD and save gas.

He was doing exactly what the bike folks wanted him to do. Looking at that $99 payment and going "Damn, that's a good deal!".

I'm just glad he had the brains to ask before signing. Most people don't.

I went to a private high school. LOL.

Tell your parents to ask for their money back...

 

[eman2289]

Probably should... I do want a bike, because I will save a lot on gas during the next few summers and I will be away at school during the colder months. I always thought you would get royally screwed through a bank loan.

 

[buckshotglass]

I'm selling a great dd bike real soon, in eastern Pa. PM me if you want.

 

[Sawbladz]

Apparently if you live in Hawaii you aren't entitled to this awesome deal. lol

 

[eman2289]

LOL. Nope.

Supracentral, you should teach a class on flashchat. I would have a lot of questions.