Updated date:

So, You Have a Loan on Your RV?

Don has been an avid traveler and motorhome owner for most of his life and he shares his experiences along with valuable tips for RV owners.

work-camping-what-you-need-to-know

Everybody Gets a Loan, Right?

Well, almost everybody. If any of you have ever owned an RV, or gone to an RV Dealership to check out the new and used RVs on their lots, then you know that the price tag can be pretty big.

So, regardless of whether you’re looking at a $30K-to-$50K trailer camper, a $60K-to-$150K fiver, or maybe a 120K-to-$500K-plus Class-C or Class-A motorhome, you will be offered the opportunity to finance one.

Because owning an RV is a luxury, not a necessity, regardless of which design you prefer, the potential buyer will want a payment that is very low. Face it, everyone has a family budget, and an RV's payment must be something you can afford to make and not put any financial strain on the family.

It's a Dealer's World

Once you get further than the “just looking” stage, you need to understand the different financial tools that dealers will use to get you into one of their RVs.

In the dealer’s world, you can expect the following situations;

  1. They will base their RV pricing and conversations on the manufacturer’s original MSRP price, regardless of whether it is an old or new RV.
  2. You should easily be able to get the dealer to drop their asking price on a new RV by at least 10% if they think they have a deal with you.
  3. They will even lower their asking price for an RV by as much as 20% as it gets closer to the release of the next year’s models.
  4. They will drop their asking price for a new last year’s model by as much as 25% or more, once the new year's models are on their lot.
  5. The loan interest rate on an RV will always be several points above what is offered on an automobile.

So you should always remember these numbers as you walk around on an RV dealer’s lot looking for a good deal.

An RV’s Value Versus What You Owe

Your RV loan balance will be reduced in what is known as a "straight line" form over its life.

But you need to understand that an RV’s "Low Retail Value," also known as its "Trade-In Value" is significantly lower that what they call an RV's High Retail Value.

These two numbers, the Low Retail and the High Retail values, drop on all used RV throughout the year and over the years, and the ratio of the two is always big enough that a dealer has pricing that guarantees them a very nice markup when they take one in on trade and when they resell it to another customer.

This reality not only guarantees a dealer a nice profit margin. It also means your RV's trade-in value will always be below your remaining loan balance.

Ready To Get Rid of Your RV?

When it comes to financing an RV, you will not get an RV loan at your local bank.

You see, the majority of the popular local banks don’t like to carry debt on an RV. Everyone in America owns a car, and most owe money on a car, but a much smaller percentage of the population that wants to own an RV.

One problem is that most RV loans are for such a long period of time that far too many owners will just default on their RV loan before it is paid up. This fact causes many banks to stay away from tying their money up in a loan on an RV.

Default is a Dirty Word

The words “Default on your loan” are insulting to anyone who works hard for their money, and is proud of their good credit rating.

Three Ways to Get Rid of Your RV

But if you look at the world of RVs ,you will realize that there are actually only three ways to get rid of an RV once you own one, especially if you own one with a loan on it.

  1. You can Trade your RV every few years, and keep getting larger and larger loans on the new ones, and keep putting off dealing with your increasing debt, to deal with later in your life.
  2. You can Sell your RV to another individual, accepting the fact that you will probably owe more for your RV than you can get for it from the individual buyer. Because of this you will most likely have to write a check yourself to the bank in addition to what the individual pays for your RV.
  3. Or, you can eventually default on the loan as you and your RV get older and older.

RV Loan Realities

There are a number of financial realities that will often force a used RV owner to consider defaulting on their RV loan. Here are just a few:

  • Many RV loans are for long periods of time, up to 20 years, especially on the larger RVs.
  • Most dealers (and their preferred banks) require a down payment of 20% or more of the listed MSRP on a new RV.
  • The interiors, including the furniture and appliances installed in an RV, will become outdated within less than 10 years.
  • Larger RVs, such as motorhomes, have drivetrains that require regular and costly maintenance, especially as the vehicle mileage increases.
  • RV values, as listed in NADA or KBB, reflect the prices of similar models locally, and they change significantly each year as the economy varies,
  • An RV's value, as listed on such dealer pricing sites as NADA and Kelly Blue Book, will normally drop below the RV’s so-called Scrap Value by around the time it is 15 years old.
  • The Scrap Value of an RV is what a unit is worth to used RV parts resellers.

Remember, for all of those years you're making those payments, you will have to remind yourself that It’s Yours Now!

In this article, I have tried to give the potential RV buyer a picture of the world of RV values versus what will be owed on the same RV.

Just remember that it’s a lot easier to get into the financial side of owning an RV than it is to get out financially when you tire of camping in an RV.

“Nuff Said!

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2020 Don Bobbitt

Comments

Don Bobbitt (author) from Ruskin Florida on November 02, 2020:

Eric - Thanks for the response. I learned these lessons years ago, but I did learn! LOL! The RV World is just that, a world of salesmen trying to get your money and I hope these tricks I mention will help others.

Have a Great Day,

DON

Eric Dierker from Spring Valley, CA. U.S.A. on November 01, 2020:

I really never did think of an RV as a second deal. Sell your home and live in it I thought. Dangdest thing but I could afford the lower models. Hmm something to think about.

Don Bobbitt (author) from Ruskin Florida on November 01, 2020:

Liz - What you say is true. And, the worse the economy gets, the higher the default rate. People just don't take the long view on Rv loans and just a recession can send them to decisions they would not normally make.

Have a Great One,

DON

Liz Westwood from UK on November 01, 2020:

This is a sobering reminder to anyone tempted by the look of an expensive RV. They could end up with a loan that puts them in debt for a long time. I would imagine that the higher the default rate the less likely loans will be available.