What You Will Have to Pay If You Trade RVs
If you are thinking of trading in your current camper, travel trailer or motor home for a different RV, you need to understand that you're going to lose money.
You may be generally aware of this fact, but it is unlikely that you understand the real scope of the losses you may take when trying to trade up because there are many hidden costs involved in these types of transactions.
You may think that if you have done a good job of maintaining your unit and detail it beautifully before taking it in that this will increase the amount you will get for it in a trade, but doing these things won't help much.
Even if you have only owned your coach for a short period of time, the chances of your getting a fair trade in price for it from a dealer will be minimal.
- Knowing what you can expect financially when you sit down at the negotiating table will help you to make better decisions.
- I also make you think twice before you decide to make a trade!
New Vs. Used
Most people who trade do so with the intent of buying a new RV because they are either tired of paying for repairs or have decided that there is something they don't like about their current unit.
What few realize is that the cost of buying new is very high and that there is no guarantee that a new coach won't also need repairs.
Furthermore, there is no one coach out there that will meet all needs.
Thus, trading in an older RV for a newer one may not provide the relief you seek. In fact, doing so may create more problems than it solves!
Most people end up purchasing previously owned recreational vehicles because it costs less than buying new.
However, no matter whether you decide to trade for a new or used unit, the sales price of what you buy minus the amount of money a dealer gives you on trade will be what you pay.
This is why it is so important to take the time to research values.
How to Know What an RV Is Worth provides specific directions to help you determine the real value of any recreational vehicle.
I say “real” value, because the term value is relative.
For instance, you may think that the money you have invested in your unit is what it is worth. You may even assume that someone will be willing to pay you that amount for it.
However, what you think and what the truth is are always going to be two entirely different things.
Six years ago Joe bought an older motor home for which he paid $19,500. Since that time, he has put another $10,000 into it for upgrades, repairs, storage and other expenses.
The NADA value on this coach currently is around $15,000, and this is based on the fact that the unit is in average condition. (If it shows a lot of wear and tear, it might only be worth around $12,000.)
Joe does not really want to lose his $29,500 investment, and thinks he should be able to get at least $25,000.
After advertising his motor home for six months with no buyers, he decides to take it to a dealer to see how much he will give him for it if he trades it in on a newer vehicle.
He is shocked to learn that the dealer only offers him $8,000!
The dealer offers him that amount because, regardless of upgrades and condition, the unit is still 17 years old.
The dealer goes strictly by his “black book” of values which tells him he should only offer half of the NADA value.
He does this because he’ll be sending the coach to auction and knows that is probably the amount someone will bid to buy the motor home.
Thus, Joe’s dream of getting $25,000 to put towards a newer coach disappears.
(He might be able to sell it himself and get $15,000, but that is the best he’ll be able to do! However selling a unit yourself requires time, effort and know how, and many people are intimidated by the thought of doing so.)
More Bad News
What Joe doesn’t realize is that prices have risen significantly during the six years that he has owned his RV.
Even if he trades for a used coach, he’s going to pay far more than the NADA listed value because there is a great deal of competition for recreational vehicles these days, and dealers know it.
If they have a unit that is older but in good shape, they know they can ask what they want, and someone will always be available to buy. (The less they pay Joe for his coach, the more money they will make when they sell it to another buyer.)
Joe finds a nice motor home that books for $16,000. However, the dealer is asking $27,000 and refuses to budge on the price.
The seller is only offering Joe $8,000 for his unit but is asking $27,000 for the one Joe wants to buy. So if Joe does buy this coach, he will take an up front financial loss of $18,000 if he makes the deal! (He'll lose $7,000 on his trade and $11,000 on his purchase).
These figures do not include the extra costs Joe will have to pay for sales tax and registration fees, which on a $27,000 coach comes to an additional $1620.
Furthermore, the coach he is negotiating on needs new tires and has body damage on one side. Therefore, he can add another $6,000 to his costs.
- If he has to finance the basic cost of his new coach, the news is even worse because now he'll have to pay interest on top of the other costs he has incurred.
- If he has to pay 6% for 10 years on the $25,000 balance it will cost him an additional $33,307.
He'll only have a monthly payment of $277.56, which seems reasonable, but the long term amounts are budget breakers, especially since he's already taken an $18,000 loss up front!
Over the 10 years of the loan, he'll end up paying $18,000 plus $33,307 or $51,307 for an RV he thought he was getting for $19,000!
Worse yet is that after the ten years are up, he'll be stuck with an old RV he likely will want to trade in again.
If he follows through, he'll go through the same cycle again and lose even more money!
A Typical Situation
You may think, at this point, that this is an incredible situation, but the truth is that it is typical and represents what most people must go through when they try to trade units.
The really bad news is that the loss Joe will take is minimal compared to the one other people take who have purchased more costly coaches.
$18,000 doesn’t even cover the first year’s depreciation on a $100,000 coach let alone the financial losses people who bought them will take if they try to trade them in.
Are There Any Remedies?
To avoid getting stuck with a costly trade-in deal, there are several things people can do.
- Make sure that the original RV you buy suits your needs and will last. Important Things You Need to Think About When Buying RVs will show you how to do this.
- Pay as little as possible for a coach at the point of sale. Learn all you can about values, and do intense research about what you want to buy and what you want to trade before you ever enter negotiations.
- Consider making your old coach roomier and more comfortable, so that you can keep it. There are many changes you can make: find some of them in How to Make Your RV More Livable and others by browsing videos about this topic on YouTube. Making some repairs and upgrades is much cheaper than trading for another RV.
Joe decided to remedy his situation by taking a pass on the deal he was offered.
He sold his coach himself for $15,000 and used the money for a down payment on one he found for sale by a private owner for $30,000. His basic cost for the coach he bought was then $14,500 (his up front loss) plus $15,000 (his down payment) plus $19,985 ( financed costs at 6% for ten years) or a total of $49,485.
By doing this he dropped his monthly payment to $166.54 and saved $1822.
However he could have saved even more if he had chosen to
- find a less expensive coach to buy,
- looked for cheaper financing,
- financed for five years instead of ten,
- financed his deal for a shorter period of time or
- took money out of his savings to pay cash for the new coach.
The Bottom Line
The most important thing for you to remember, if you are thinking about trading your old RV in for another one, is that it is the market, not you, that will determine the cost of making such a deal.
It will never be cheap, and you will likely lose a great deal of money if you choose to trade up.
This is why you need to learn all you can about the costs that are involved in trading one RV for another.
Did you understand how much it could cost to trade RVs before reading this article?
© 2017 TIMETRAVELER2