Why Luxury RVs Are a Bad Deal for Buyers
It used to be common for people to start camping in tents, then move up to fold-out trailers or pull trailers and eventually to motorized units. By doing this, they were able to learn the pros and cons as they went so that they could make good buying decisions.
Today, however, the public has been hyped into starting their RV adventures with large fifth wheels or motor homes. These units promise luxuries buyers think they need, and manufacturers are happy to provide them. However, they do so at prices that are highly inflated due to buyer demand.
Overpriced RVs Are Bad for Consumers
New RVs are more expensive than ever, and this has driven up the prices of those that have been previously owned as well.
For example, people who used to be able to purchase a six-year-old luxury coach for about half the price of a new one will now pay that same amount of money for one that is 12 or more years old!
This is a bad deal for buyers, and here’s why:
- A coach that old has generally deteriorated and depreciated to the point that its true value is far less than its asking price.
- It may look great, but buyers should remember that it now has 12 or more years of normal wear and tear on its appliances, furniture, wiring, tires, chassis, engine, generator, inverter and other systems.
- On the surface, buying it may seem to be a smart move because the unit looks good and is affordable, but when it comes time to trade or sell it, owners are going to have problems.
The Financials Are a Major Problem
Buying a luxury coach, new or used, brings with it long-term financial issues.
Recreational vehicles, regardless of age or size, are costly to buy. The bigger and fancier they are, the more people must spend to own them, even if they are not new. Most people have to borrow money to own one, so in addition to the initial expense, banks add interest to monthly payments.
Since the biggest depreciation occurs in the first year of ownership, an RV is almost immediately worth considerably less than what they paid and the longer a person owns one, the less it is worth!
The result is that no matter what people buy, they always end up owing more for it than its market value, even when they pay cash.
This, of course, is less of a problem if someone purchases an older middle to lower level coach that has already been mostly depreciated, but for those who buy new and like having all the fancy amenities, the losses they will take at the point of sale can be staggering!
- A seller may think a potential buyer will pay off his loan, but this will never happen because buyers won’t pay more than a coach is worth.
- Furthermore, a dealer will be unlikely to buy it from you, either.
In short, people who have overpaid for costly coaches will either have to just keep them or be willing to take major financial losses to be able to sell them.
Other Contributing Factors
There are a few additional things that can make selling a high-end recreational vehicle problematic.
- It’s a seller’s market. Dealers no longer have to negotiate to sell to consumers, and they now also concentrate on selling more costly units because they make more money when they do so. This leaves people who want to buy with little choice.
- Competition for buyers is fierce. There are thousands of coaches for sale by individuals in today’s market who are willing to take losses just to get out from under the costs of ownership. Furthermore, dealers can offer “extras” such as camping club memberships, warranties, free camping and special discounts to lure buyers, that private sellers cannot.
How Much Money Is Involved
Any recreational vehicle that costs more than $100,000 will cause problems at the point of sale, and the issue grows worse the more one pays to buy it.
For example, at the end of five years the depreciated coach will be worth $65,000, but its owner will owe thousands more than that because principal accrues slowly at the beginning of a loan but interest accrues quickly.
On this loan, for example, during the first year the buyer might only be able to pay off $250 or so of the principal, which means that if he wanted to sell he would lose approximately $20,000 plus all of the interest and sales tax he paid.
Common Sense Should Prevail
If I told you that
- I was going to buy something that would be worth 20% less within minutes of purchasing it,
- that it would continue to lose value over time and
- that I would either lose tens of thousands of dollars trying to sell it later or might not even be able to sell it at all,
would you think I’d be getting a good deal, or would you think I had lost my mind?
You probably would think I was nuts, but the truth is that consumers gladly invest their hard earned dollars in this type of deal every day. However, they’re not so happy once the reality of what they’ve done sets in.
People who buy expensive campers, travel trailers and motor homes really are not crazy. They simply have not done their homework, so they are unable to understand the consequences of their actions.
Salespeople understand the issues, but are the least likely individuals to share this information with consumers, because if they did people would realize that such a purchase might be financially damaging for them in the future.
Once you sign an RV sales contract, be prepared to own your coach forever!
Buyers of Expensive RVs Need to Be Careful
People who want to keep their RV dreams from turning into financial nightmares need to make sure that they can afford what they buy and are well aware of the problems that have been discussed in this article.
Salesmen and dealerships want people to think that everybody is buying the most expensive RVs. They finance them to make things easy and offer perks to make you think buyers think they are getting a good deal.
But once a person signs a contract, he owns what he has purchased.
If he makes an informed decision on the front end, he’ll likely do better at the point of sale later.
Knowledge and common sense are what will make the difference.
Make sure you have plenty of both before you buy an expensive recreational vehicle so that you won’t make a bad deal.