Motorcycle loans may show bikers are riding out of recession too

Signs that the two-wheeled world is getting back on the road to recovery are coming from not only improving motorcycle sales, but also by the financial health of bikers themselves.

Fewer bikers appear to be defaulting on their motorcycle loans according to a report issued by Fitch Ratings, a credit rating agency working with Harley-Davidson’s fFnancial Services (HDFS) division.

Harley-Davidson Funding Corp. (HDFC) is a 100% wholly owned subsidiary of Harley-Davidson Credit Corporation which itself is a 100% wholly owned subsidiary of HDFS. Basically, HDFS are the financing company Harley-Davidson dealerships use when a rider finances the purchase of a new motorcycle.

In a financial transaction relating the loans Harley-Davidson has ‘on its books’ Fitch noted HDFS enjoyed a better performance in 2010 compared to other, recent years. Fewer bikers are late with their monthly payments with the 30-day delinquency rate falling nearly 1.50% compared to 2009.

Actual loan losses, or the loans that bikers simply stopped paying on, also improved for HDFS.

‘Losses on HDFS’ managed retail motorcycle loans were 2.11% for the year-ending Dec. 31, 2010 compared to 2.86% in 2009’ the report notes. However, while the number of loans that went bad may have been fewer, the report also notes the improving market for previously owned motorcycles is again gaining strength. This would allow for any repossessed motorcycles to be sold for a better price than they may have the year before.

And it appears that HDFS are raising the credit standards of who they’ll lend money to, with more underwriting scrutiny usually producing a stronger loan portfolio.

Finally, the rough road Harley-Davidson took on reducing inventory levels coming out of the factories and that found on dealership room floors seems to be helping, ‘Improving inventory levels at dealers will improve the supply/demand dynamic, stabilizing recovery rates’.

Apparently, not only did some bikers keep riding when the worldwide two-wheeled craze died down, but they’re finally reaching some clearer skies in this economic storm.