How to Sell a Motorcycle with Negative Equity

When you sell a motorcycle with negative equity, you are looking at a net loss to your assets. This occurs because the total sum remaining on your motorcycle financing loan is greater than the value of the bike you are selling. Unfortunately, this is a common problem with any motorcycle, and the process to sell the asset is not greatly changed as a result.

How Negative Equity Develops

Motorcycles, like automobiles, depreciate in value each mile they are driven. They also depreciate in value over time as new technology makes older bikes less desirable. As a result, taking a loan for $5,000 on a motorcycle may mean you have $3,500 left on that loan at a point in the future when the bike is only worth $2,500. Putting down a large down payment and making large monthly payments can help avoid this situation. Negative equity on a motorcycle only truly occurs if you are failing to pay off the loan faster than the rate of depreciation on the asset. If this is the case, then you will owe money when you sell.

Selling With Negative Equity

You can sell a motorcycle with negative equity the same way you would sell a motorcycle you own out right. There is even the option of trading the bike in with a dealer. In both cases, though, you will be responsible for paying off the loan in full. When you receive the profits from selling the bike, this money should go straight to paying down the remaining balance on the loan. In some cases, there will only be a small difference remaining on the debt. In others, you will find you owe several thousand dollars. 

Paying the Difference

The first option you have is to pay down the difference in cash outright. This is the cheapest option for a borrower who has the cash to spend. If you know you will owe money after the sale of your bike, you should save some cash to cover this difference over several months. This can be a real stretch if you are also saving for a down payment on a new motorcycle. Since you need to use the profits from the sale to pay off the first loan, they cannot be applied to the down payment like most people anticipate. As a result, many borrowers will simply not have enough cash to pay off the loan and get a new motorcycle. 

Borrowing the Difference

If you do not have enough liquidity to pay the difference in the loan, you can ask your new lender to do this for you. You may not be getting a new motorcycle, in which case you would have to simply take out a personal loan to cover the difference. Personal loans are cheapest when secured with an asset, so try using your car or home to get the cash needed to pay off the loan in full. Pay this loan off as soon as possible, or you will end up paying for a motorcycle you no longer own for years to come. 

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