Here's how it seems to work and what happens later because of it.
Dealers advertise a "come on" low monthly payment for a brand new motorcycle and maybe they say it's an "introductory" rate for 2 years or maybe they don't. The part they don't seem to tell the buyer is that the payments are paying interest on the loan balance only. Dealers seem to routinely give the same sales pitch. They sell the buyer on the idea with something like this: "most people trade their bike in every two years, which is how long your payments will be low, so you'll be able to afford it and come out okay when you trade it in before the payment goes up."
What they don’t tell you is that if all you pay is interest then after two years you still owe the same amount on your motorcycle that you started out with but your bike isn't worth the same amount any more. The result?
You can’t trade it in and break even because it isn’t worth what you bought it for, which is also what you still owe on it. But now you're faced with a sudden jump in your required monthly payment amount.
At end of two years, the interest rate jumps to a much higher rate and your payments can triple or quadruple, so you can’t afford the payments then either. You are stuck in a loan that you can't afford and if you try to trade in your bike you can't get enough to pay it off either.
This introductory rate scam virtually forces you to trade it in and either come up with a down payment you weren't counting on or else "roll" the debt off the old bike and onto the new loan for the new bike. In other words, you go deeper in debt on the next bike. Do that a couple of times and you can't get out of the loan alive. In other words you will be stuck in a debt rut.
If you are thinking of buying a motorcycle and your dealer tries to sell you on this rip off introductory rate scam, be extra careful. The paperwork we've seen is confusing and misleading and the dealer's sales presentation is slick and smooth. If you aren't careful you will never know what happened to you until two years later when reality sinks in.
And the worst part? The strongest consumer protection law that most states have (they are called "Udap" laws) usually has a 2 year time limit to file a claim in court. So by the time you find out you are really stuck, your legal rights have already expired.
Gee, does anyone think that's a coincidence?
If you are the victim of this rip off scam, don't wait to find out your rights. Talk to a Burdge attorney now.
Burdge Law Office
Helping bikers protect themselves since 1978.