2020 will undoubtedly go down in history as the year that the world changed. Outside of global health impacts, here in the U.S., it felt like a motorcycle Renaissance. Many manufacturers had record sales, and dealer floors went from overstocked to barren overnight. I personally bought and sold four motorcycles since that time. After riding 365 days straight into 2018, 2020 was one of the best years I spent in the saddle; riding, racing, and adventuring. Unbeknownst to most of us, those days marked a distinct evolution in the motorcycle market.
Anyone that’s surfed for-sale ads recently is well aware of the fact that many used motorcycles are being listed at or above the manufacturer suggest retail price (MSRP). Many local motorcycle dealers are still struggling to keep various motorcycles in stock, propping up asking prices for high-demand bikes like the Tenere 700. All of us have already heard, if not experienced firsthand, the ongoing supply chain woes. However, there’s a new problem on the horizon, high interest rates.
An Era has Ended
In 2008 after a string of banking issues, massive mortgage defaults, and countless other financial details I don’t recall, the economy came to a grinding halt. To fix the economy, the Federal Reserve cut the interest rate to almost zero; then proceeded to keep it below one percent for a decade. When I started driving a car back in the ’90s, Fed interest rates were around 4-5%, but in recent memory, all of us have become conditioned to seeing 0-3% APR listed on car and motorcycle stickers. This stretch of cheap borrowing from ’08-’17 is virtually unprecedented in U.S. history, and I suspect we won’t see it again.
Compounding Problems
At the time of this writing, the fed funds rate is near 5%. While closer to 4% back in September, that translated to a 9% interest for a used car I was looking at. While supply chain challenges have limited the supply of highly desired motorcycles, the increased cost of borrowing may start to “solve” that problem, as more common motorcycles are starting to sit longer on dealer showrooms. This breakneck change in conditions has put both the customer and the retailer in a pretty awkward position. A new motorcycle is out of reach for many buyers considering inflation and interest rates. Meanwhile, dealers are sitting on more and more inventory, some of which includes paying interest on “floor plan” loans for unsold models.
Incentives back in vogue
Scoffing at the insane asking prices for dirt bikes on Marketplace, I looked over some of the manufacturer’s list prices. To my surprise, some manufacturers were already offering incentives for specific models on their websites. This was further confirmed while walking around a dealer last weekend; I saw Kawasaki offering a $1000 rebate on the new KLR, $2000 off their KX dirt bikes. Assuming it’s not happening already, I have a strong suspicion we’ll start to see shops offering discounted upgrades on trim levels, factory options, luggage, and so on to entice buyers and move aging inventory.
Getting used
The consequences in the pre-owned market will take time to resolve. At the moment, many people have (arguably) overpaid for the bikes they are currently selling. Worse, some of these sellers are still sitting on a loan for a bike they bought above MSRP. As many of us have seen, the whiplash of frozen supply and pent-up demand drove up prices, and within a year, interest rates have increased almost 5-fold; many sellers are currently left holding the bag.
Simultaneously, sellers that are still “even” don’t realize that new prices are essentially “coming down” through incentives. Understandably, these folks are trying to hold out for the price they want, but they don’t see the market shifting under their feet. The longer these sellers wait, the more used bike inventory grows; essentially adding more competitors to the market. If competing sellers decide they need to move a bike and cut prices, the stalemate may end.
With limited supply on certain models, I won’t be surprised to see some of these in-demand used bikes maintain lofty prices. However, off-road and dual-sport models are seriously starting to stack up. 2020 may have been the record year of off-road growth for all ages and segments, but unfortunately, the rising costs of food and housing have forced many Americans to jettison the expensive motorcycle hobby. I fear this reality will settle in for lots of sellers over the next year, and the consequences that follow.
Predicting the fallout
There’s no way to know for sure what the Fed will do in the coming year. It’s likely safe to say rates will increase marginally, pause, and then be reduced slowly over time. However, I stand firm that I don’t expect we’ll see 0% interest for any prolonged period going forward.
For the motorcycle market, this essentially means returning to what my parents would describe as “normal”. We’ve seen impressive price inflation since 2008, but with higher borrowing costs, we’re likely to see shifts in both pricing and offerings in a higher-interest world. As I mentioned, I expect we’ll see more concessions to clear inventory, but manufacturers don’t want to rock the boat too hard with recent customers. Buyers tend to get a little bent when they pay full retail on a bike, just to see it marked down a few months later. To thwart this, I think we’ll see certain model names disappear from line-ups in the coming future; likely to re-appear with revised features to justify the asking price. On the opposite end, companies are likely to slash features and offer new, low-spec models in pursuit of more affordability. To this point, Honda recently announced a new XR150L here in the U.S. In the era of TFT dash, adaptive cruise control, and electronic suspension, it will be interesting to see how these “high-end” features trickle down the model offerings when customers are paying 5% APR. If we’re lucky, we may even see the rebirth of the “trail bike”, considering many of them date back to the ’90s.
We’re presently on the front end of this trend. Interest is still rising and prices are still high virtually everywhere. If things play out the way I think, in the coming year I believe folks with cash may land some incredible deals. I fear dealers are going to struggle tremendously after the gear grinding shifts from 2019 to 2020, to 2023. I certainly wish we could skip the pain we’re all experiencing right now, but I expect we’ll see interesting things come out of the manufacturers in the next 5 or so years.
Am I wrong? Do you think we’ll make a “soft landing” and go back to business as usual or are higher interest rates here to stay? How do you think Manufacturers will respond?















































































