How to Sell Your RV When You Owe More Than It's Worth
If you owe more on your camper, travel trailer or motor home than it is worth, and you want to sell it, you’re going to find that doing so is going to be difficult.
In some situations, it’s going to be impossible.
Much depends on your financial situation and how willing you will be to take a fair-sized loss in order to get someone to purchase your unit.
This, I’m sure, is not the news you want to hear, but if it makes you feel any better, there are thousands of people all over the US right now who are dealing with your same problem.
These are folks who bought into the dream and paid more than they could afford to buy a depreciating asset that they never thought they might have to sell one day!
There are a few ways to escape this problem, but unless you get lucky, all of them are going to bring major financial losses to you.
Here are some things you will need to do.
Research Your Coach’s Value
In order to sell any product, you need to know how much it is worth.
You may think that what you paid to buy your unit (including taxes and registration fees) and what you’ve put into it with regards to repairs, maintenance, and upgrades equals its true financial value.
This simply is not true.
One of the things that determine real value is how much a unit that is the same year, brand and model as yours is worth in the NADA RV Price Guide. However, this is just a base line.
How to Know What an RV Is Worth gives you the rest of the story, but basically items such as overall condition and mileage can either add or detract from real value.
Those who want to sell must have credible information about value if they are to ever find a buyer because if they ask too much, nobody will buy, and if they ask too little, they’ll increase their losses.
Compare the Financials
Once you have determined a realistic market value, compare it with the amount you owe.
The difference between the two will be the loss you can expect to take. The amount will likely shock you because it may make you realize that you are trapped owning an RV that you can neither afford to keep or sell!
However, if you have ample finances, you can easily resolve this problem simply by being willing to pay off the balance due before selling or arrange for a bridge loan from your bank that you can pay off over time after you find a buyer.
A True Life Example
An older couple purchased a new motor home for $187,000 twelve years ago. They put a relatively small down payment on it and financed the balance.
After deciding to give up full-timing, they purchased a house. They then spent all the cash they had to remodel the bathrooms.
Then the husband passed away suddenly.
The widow now owned a coach that still had a $66,000 loan on it as well as a house she also had to pay for.
She called me for advice, and I discovered that the market value for her unit in top condition was at most going to be around $40,000, but because it needed tires, was 12 years old and had a rubber roof, she’d be lucky to get $33,000 for it.
She had no savings or equity and therefore no cash with which to pay off the loan. She also could not afford to make payments on a bridge loan.
With the help of an attorney she resolved her problem by giving the coach back to the bank and having them put a lien on her house. This meant that whenever she sells the house, she’ll have to do so at a high enough price to pay off the entire bank loan.
The big mistake this couple made was to not take the time to research their financial situation before buying the house.
Had they done this, they never would have purchased it, would have retained their cash and would have avoided their financial problems simply by continuing to live as they had for years.
The widow was lucky to have found an attorney who was able to help her dump her coach. But for his connections and efforts, she might not have been able to do this.
While his help did relieve her of her immediate financial problems, the truth is that unless the value of her house increases significantly, when she goes to sell it she may be once again faced with the same problem!
How These Situations Happen
The problem this couple had is one they created for themselves because they did not understand how the financials of RV ownership work or the risks they would be creating for themselves if something changed in their lives that would make them need to sell.
For instance, they likely did not know that the minute they signed their sales agreement, they paid an extra $11,220 for sales tax and their unit lost $37,400 in value due to depreciation.
If they put $10,000 down, they still owed $188,220 on their loan, but now their coach was only worth $149,600. Thus they drove off owing $38,620 more than their coach was worth!
They also had to pay interest on their loan, which made paying it down slow.
This is how it came to pass that even after twelve years, the unhappy widow still owed $66,000.
Stories like this one have become common in recent years due to the extremely high costs of recreational vehicles and people's willingness to finance them without realizing the problems they are creating for themselves.
What You Can Do
If you find that you want or need to sell your recreational vehicle but your loan on it is upside down the only realistic way you’ll be able to get rid of it is to either pay off the loan for cash you already have or take a new loan that will cover the difference between what you owe and the amount of money you'll get when you sell.
Banks will give you this type of bridge loan if you have enough savings or equity in your home or car to cover it.
The reason for doing this is that trying to sell a unit that does not have a clear title is an impossible thing to do.
This is because cash buyers will not want to pay for a unit without walking away with the title in hand, and banks will not give buyers loans to do so without the coach having a clear title.
You may think you can avoid this issue by holding the loan yourself, but the bank still will not release the title and people still will not want to buy without that title being transferred to them!
You may also think you can put your unit on a consignment lot, but this will not do you any good because the problem will be the same.
Consignors cannot sell a unit that does not have a clear title unless they can get more for it than its loan value, which is a situation that is unlikely to happen, especially since they will expect to get a hefty commission for selling your unit for you.
If your only problem is that there is something you dislike about your RV, another option would be to trade it in at a dealership.
They would transfer the amount due onto the new loan and likely would be able to spread the payments out over a longer period of time, which might make it affordable for you to own the newer coach.
The caveat with doing this, however, is that down the road you may find yourself in the same financial situation if you can’t work the deal to your best advantage.
Is It a Good Idea for You to Trade Your RV? provides more details about this option, and you should read it if you think doing this might work for you.
If making a trade won't work, a last resort would be to use your RV for rental purposes.
Doing this has become very popular recently because although it does have some risks, it can bring in enough income over time to pay off your coach so that you can then sell it.
6 Things You Need to Consider Before Renting Out Your RV gives you both the benefits and caveats of taking this route, but it might just be the answer for you.
The Real Solution
To avoid having to deal with the financial problems that are involved with borrowing to purchase recreational vehicles, the best solution is to buy an affordable one for cash at the point of sale.
This way, when it comes time to sell, you'll still lose money but you will be less likely to get stuck owning a coach you neither want, will use or can afford to keep.
The bottom line is that recreational vehicles are luxury items. If you cannot afford to buy one for cash, you shouldn’t try to do so.
Either wait until you save enough to make this type of purchase, or live without it.
There are many ways for you to enjoy camping without spending a small fortune on an RV, so while you might be giving up some travel comforts, you’ll also be gaining some peace of mind and some financial stability if you are willing to make a few sacrifices.
Bear in mind that there is nothing more miserable than getting stuck with an RV because you owe more than it is worth, can’t afford to sell it and can’t afford to keep it.
This is why paying cash will always trump borrowing, especially when it comes to buying campers, travel trailers and motor homes.
Which RV buying option do you think is the best?
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
Questions & Answers
How can we move into a mobile home with a leftover balance from selling the RV that we currently live in?
I doubt you can. Your best bet is to sell the RV, find a way to pay off the balance (a bridge loan from a bank?) and rent an apartment until you can save enough to buy a mobile home. The only way you can sell an RV whose loan is upside down is to pay off the balance at the time of sale...which is very difficult to do.Helpful 16
Is it possible to refinance an RV for a lower payment?
Yes. An RV loan is no different than a car loan or any other loan, but if you're upside down with what you owe, you'd have to pay the difference before you'd be able to refinance because a bank will not finance a vehicle for more than it is worth.Helpful 15
© 2018 Sondra Rochelle