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UTVs AND FINANCING OPTIONS

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David Jackson | Financing | July 09, 2019

Whether it’s taking the family on an epic weekend UTV trail ride, heading to the deer camp, going on a camping trip, or just using your UTV around the house or farm, many of us have to deal with the same question – how do we afford these beautiful machines? Wanting one and being able to PAY for one can be two different things. Getting a loan is often a necessary part of that journey.

LOAN FACTORS

Down Payment

The down payment is used directly against the price of the UTV, and therefore it will reduce the size of the loan. A down payment gives the financing company cash upfront so that if the borrower were to default early, the lender’s losses are reduced. Oftentimes, especially with a  lower credit score/marginal credit, putting a down payment or even increasing a down payment amount may be the difference between being denied a loan and getting one. A down payment in the recreation industry is traditionally anywhere from 10% to 20%. 

Trade In

 Have a unit already but looking to upgrade, ask about a trade in.  Trade in is when you have a UTV/ATV you may be able to offer it to the dealership in exchange for credit toward the price of the vehicle you are purchasing. Buyers can offset their loan with down payments other than cash. If this is not your first recreation item, you can often trade in an older model for credit. If a dealer takes an item as a trade, then the value of the traded item is directly deducted from the purchase price of the new item.

Credit Score 

Checking your credit score before you start your powersport or recreational vehicle search is paramount. Unlike mortgages or a credit card, you can usually get a loan for a vehicle even if you have bad credit. The catch is that you will end up paying more, a lot more. This is because it is much easier for a bank to repossess a vehicle if the loan is not paid than it is to repossess a house. Free services like TransUnion, Credit Karma, Mint.com, or Experian can help you understand your credit profile. Once you have this information, you can then figure out if you qualify for the best loan rates. This table will help you understand where you fall in the credit spectrum: 

The advertised and promoted APRs and interest rates (such as the 0.9% APR ads you may see on TV or in magazines) are usually reserved for people with a credit score above 700. A score of 800 and above is considered excellent, but anything above a score of 700 tends to be considered a good credit score. Most people’s score lies somewhere between 600 and 750. Higher scores represent better credit decisions and behaviors, like paying loans back on time. Credit scores are influential because it is the benchmark creditors can use to determine how likely you are to pay them back (with interest, of course). Generally, your credit score (which can be found on your credit report) is determined by the following factors:

  • Payment history for loans and credit cards

  • Credit utilization rate (meaning, what percentage of your combined credit card maximum you are using)

  • Type, number and age of credit accounts (the longer you’ve held a credit account  the better, so don’t be so quick to close old accounts – just make sure to carry a $0 balance on them.  

  • Multiple accounts that have recently been opened (opening multiple credit or loan accounts in a short period of time lowers your credit score)

  • Total debt

  • Public records such as bankruptcy and foreclosures

  • Number of inquiries on your credit report (if you keep applying for a new credit card every few months that actually lowers your credit score)

 How Much Can You Afford?

The  typical monthly payment of a UTV averages around $300 per month. Thus, you should spend time understanding your financial situation  to ensure that you can afford your monthly payments. 

There are two factors that affect your ability to get financed:

  1. Your personal finances and financial history

  2. The market and interest rates set by the Federal Reserve 

Your personal finances are, for the most part, within your control. The market and interest rates set by the Fed are… not so much. There are a few things to consider when looking at your personal finance portfolio. 

  1. How much money do you make annually?

  2. How much you can afford to spend per month?

  3. How much debt your currently have?

  4. What your credit score currently is?

  5. How much money can you put down today?

 Additionally, you’ll want to understand the cost of ownership, such as gas, insurance, accessories and more. 

 WHERE CAN I GET A LOAN?

Instincts say bank. Banks = money. Money = that UTV I really want. Bada bing bada boom, right? Well, the good news is that you have options, quite a few of them, actually. A non-traditional service like a credit union might actually be the better way to go, or at least something to strongly consider. Here are some options:

DEALERSHIP FINANCING 

Intimidator works with an incredible team of lenders that provide amazing competitive loan rates. Getting a loan through our team of lenders can be a great option for a few reasons:

  • Convenient to use since you are already at the dealer

  • They can ensure you take advantage of manufacturer subsidies if you qualify

  • There are often more options for people with lower credit scores. This can be a particularly good option if you have bad credit.

  • Many lenders only work through the dealer, so you get access to more lenders and thus can potentially get a more competitive offer when working through a dealership.

Intimidator offers financing options via Dealer Direct or Sheffield if the customer wishes to obtain financing on the spot. Going through either of these two companies is a huge advantage to the customer. Financing isn’t free, but it is a great option that is very affordable. There is a participation rate (or buy-down rate) applied when using these companies. This and other information is available at the dealer. With Sheffield you can even get pre-approved on their website BEFORE visiting the Intimidator dealership. For non-prime financing options, the customer may also consider RoadRunner Financial

 BANKS

Banks loan policies are usually on the more cautious side, and some may only work with customers who have exceptional credit, but they are able to offer very competitive interest rates. Most banks have websites that make it easy to check their current loan rates, and shoppers can apply for a loan either online or at a local branch. Visiting the branch is a good way to avoid any mistakes or misunderstandings and might result in an even better offer.

BANKS - Pros:Advanced digital banking opportunities with highly effective security features. Offer highly competitive loan rates to customers with exceptional credit records. Local and national locations, typically easy to find. Cons: Strict loan policies and high standards can prevent customers with poor credit for even applying for a loan. High fees on loans.

CREDIT UNIONS

Credit unions are typically non-profits owned by their investors. Credit Unions have a lower operating cost than banks because they have less offerings. They are usually local institutions and only lend money to members. However, some will make loans to people who don’t have deposit accounts with them. Credit Unions typically have better loan rates than traditional banks, so you should consider your local credit union as an option. Credit Unions are less fussy about credit scores. Their primary purpose is to serve their members rather than to make a profit, so they tend to give out loans to lower credit tiers or they may not charge as high an interest rate as a bank would on a less than perfect credit. 

For example, a Credit Union might have one flat interest rate on a 36-month loan of 4.99% for all members if they have at least “good” credit; whereas a bank might have 4.99% for exceptional credit, 6.99% for great credit, 8.99% for good credit and go lower from there on lesser credit. In this example, if your credit was “good”, you would be better off with the credit union at 4.99% than with a bank at 8.99%.

CREDIT UNIONS - Pros: Offer lower interest rates on loans and credit cards. Easy loan applications. Better, more personalized service. Often better represented in underserved communities - Cons: Many are linked to employers or a group, which limits who can become a member. Credit unions still have fees, albeit lower ones than banks. The average credit union only has three branches (physical sites). Tend to be behind in digital offerings such as apps, online banking and security

List of Major Credit Unions:

CREDIT CARD PURCHASE 

Using a credit card to finance a UTV/ATV loan is possible and certainly can be done. However, the interest rates for paying back credit cards are typically significantly higher than the interest rate on a loan. The length of payment terms is often longer as well. This means you may pay less upfront, and you may pay less per month, but with accrued interest, you will end up paying significantly more than you would with a traditional loan. If you’re unable to pay off your bill monthly, you’ll get stuck with late fees. On the other hand, if you’re someone who consistently pays off their bills on time, and loves rewards points, this could be an option worth considering.

So, the goal with these cards is to pay off the remaining loan as quickly as possible after the end of the introductory period. Also, don’t be surprised if the dealer charges a small processing fee to recoup some of their costs to take a credit card.  

PERSONAL LOAN

A personal loan is considered an “unsecured” loan, which means it is not backed by collateral. A secured loan, or one that is backed by something like a car or a house is typically cheaper, and you don’t risk losing your personal assets. You can use a personal loan to finance a UTV, but it might not be your best option. You can receive a personal loan from a bank, credit union or online lender. Typically, these loans are paid back over the course of 2 to 5 years and have an interest rate between 7% and 36%. The most unique part of a personal loan is that you can use the money for whatever you want. The institution has no say or knowledge of what you might use the money for. 

GUARANTEED FINANCING

Some companies provide “guaranteed financing” where you can get a loan without a credit check. People who have damaged and low credit scores will typically utilize guaranteed financing. All you need for a guaranteed loan is a steady work history and a minimum amount of money that lets the lender know you’ll be capable of paying back what you borrow. Though guaranteed financing is sometimes a reality only in the automotive world, RV, motorcycle, or UTVs are considered to be luxury, recreational items. For this reason, the longevity of the item, and its discretionary nature, guaranteed financing for a UTV is extremely uncommon. 

INTEREST-ED? 

There are a number of basic factors that will affect your interest rate. There are general factors associated with any type of loan, and then there are powersport and UTV specific factors. Your credit score is highly influential in determining your interest rate. Rates can fluctuate by dozens of percentage points, depending on where you fall on the credit spectrum. Credit scores range from 300 to 850, with a low score meaning it’s going to be harder to obtain a loan or it might come at a higher cost, and a high credit score meaning it’s going to be easier to get a loan and the cost of borrowing will be cheaper.

An average auto loan interest rate is in the 5 – 6% range. An average motorcycle interest rate is in the 7 – 8% range. The more expensive the vehicle, the higher the risk of paying back the loan. This will play into how the lender thinks about the financing terms. The longer the loan, the higher the risk for the lender. Thus, this might lead to higher interest rates. You may hear the term federal funds rate. This is the interest rate that banks and credit unions use to lend to each other on an overnight basis. Lending institutions will base their interest rates off the federal funds rate. This rate has started to rise, and with that, loan rates will also rise There’s an expectation that rates will continue to rise, so it’s important to watch this closely. Today’s rates range from 0% to 6% for excellent credit and go above 20% for poor credit. 

FEES ON A LOAN? 

There may be an application fee when you apply for the loan,  and other fees on a loan might include origination fees or monthly service fees. The purpose of fees is to help the lender cover costs associated with underwriting and processing a loan.  

UTV vs AUTO LOANS

Are UTV loan rates different from auto loan rates? The short answer is yes. UTV loan rates tend to be higher relative to car loan rates. This is for a few reasons:

  • UTVs are riskier to drive than cars. Because of this, there’s a higher probability that the consumer is unable to repay the loan due to serious injury or death. But with this, there is also a higher risk of damage to the vehicle, which reduces its value.

  • UTVs are primarily used for recreation. Most consumers use discretionary income to purchase these vehicles. And because they’re not a necessity, there’s more risk associated with them for the lender. For example, a consumer might be more likely to prioritize his car payment vs. his UTV payment.

  • Lastly, the residual value, that is the value of a vehicle as it ages, drops more quickly on a UTV than on an automobile. So, the lenders (and you) take on the risk of the drop in residual value immediately after the UTV is purchased. 

An average auto loan interest rate is in the 5 – 6% range. An average UTV interest rate is in the 7 – 8% range.

CHECK MANUFACTURER OFFERS

Similar to automotive, many powersport manufacturers will offer incentives to help consumers purchase a vehicle. This typically is either a cash offer or a financing subsidy which is typically for previous-year models, depending on surplus inventory. You can find these directly on the manufacturers’ website. Remember, if there’s a cash incentive on the vehicle, that lowers the overall price of the vehicle. This makes the loan smaller, reducing your monthly payment. Thus, it’s important to do your research! 

SUMMARY 

To recap, when you’re in the market to buy one of our Intimidator UTVs, make sure to:

  1. Check your credit score

  2. Understand what you can afford

  3. Find your perfect vehicle

  4. Get the cheapest loan rates available

  5. Take advantage of manufacturer incentives

  6. Get out there and ride!

We guarantee that you will find the best deal and the best financing options available by checking with one of our dealers, located throughout the United States. Intimidator offers world-class, American-made, side-by-side 4x4 vehicles with unparalleled strength, power, and performance at an affordable price. The company's expanding line of products includes the Intimidator Classic, Intimidator Crew Cab, Intimidator Truck Series, and the new GC1K and GC1K Crew Cab, all built to suit a variety of needs. Let us know how we can seal the deal, and make your dream to own a UTV come true.