While leasing my Toyota 4Runner was probably the worst financial decision I’ve ever made (so far…), my purchase of a brand new Honda CBR 600F4i motorcycle back in 2003 was the straw that broke my financial back.
I never considered myself the “motorcycle type”, but as more and more of my friends began purchasing and riding their bikes around, I thought it would be a cool thing to do.
The first hurdle in my quest for my motorcycle was to get my motorcycle permit. In Maine, all that is required to obtain a motorcycle learner’s permit is an 8-hour course. Ironically, the course is held in a class room and no time is spent actually riding motorcycles. The class was easy and I think I scored a 100% on the written test (multiple choice).
The next hurdle was acquiring a motorcycle. For me the choice was easy, three of my friends already had similar Honda CBR600 motorcycles and I was 99% sure I was going to purchase that same model as well.
Based on my experience of buying new vehicles, I wanted to do the smart thing and buy a used motorcycle. Unfortunately, after calling several banks, I was unable to find anyone who would approve me for the amount I needed.
“We’re sorry sir, but your debt to income ration is too high” they kept saying.
In hindsight they were right…between rent, my 4runner lease, another car payment, student loans, a wedding loan, and credit cards, my debt to income (DTI) ratio was approaching 40%! The warning signs were right in front of me, but I needed that bike and I was determined to make it happen.
After a few more days of frustration, a buddy tells me that Honda Financial Services (Honda’s in-house financing company) is very lenient with their financing standards. The only problem was that I would have to purchase a brand new bike if I wanted to finance with them.
That’s right…the traditional banks found me financially incapable for a $5000 used motorcycle loan, but Honda was willing to finance me for a brand new one at $8600.
I should have known better but there is not a rational thought that goes through a man mind when he’s staring at a shiny new toy!
I filled out my application and was approved on the spot, I couldn’t believe it.
Not only was my decision to buy an expensive motorcycle unwise given my current financial situation, it was also unwise because I had never ridden a motorcycle in my life.
Essentially, I was purchasing a top of the line performance bike (and paying for it with money I didn’t have) without ever having ridden one in my life.
As the warm summer season turned to fall, I cold temperature forced me to put my bike into storage. Unfortunately, that motorcycle bill kept coming in and I found myself putting more and more things on the credit card. It wasn’t just the purchase of a new motorcycle that eventually brought me to my financial knees, but it was the last purchase that I ever made on credit. Since that fateful day in the summer of 2003, my family and I have paid off over $90,000 in consumer debt and are debt free with the exception of our mortgage.
In retrospect, I’m glad that I fulfilled the urge to buy a motorcycle. Had I not done it I’m sure I would still be carrying that urge today. Another important note was that I eventually did pay the bike off and then sold it to get my debt snowball rolling in my eventual path to debt freedom.
Who knows; had I never bought that bike I may have never actually gotten to the financial bottom where I decided that what I was doing was not working and that I needed to change.
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