RV Financing – Tips from an RV Dealer
04-20-2016
Author: in Finance
By: Nancy Sothan, RV Dealer for Apache Camper Center in Nebraska
Purchasing an RV these days is no walk in the park when there are hundreds of different decisions to weigh when buying a new or used unit. When you don’t have an RV sensei to walk you through the process, it can all be a bit overwhelming, and spontaneous purchases are more likely to be made! Give your family-owned dealerships a chance to counsel you through the financing options and explain all of the inside scoop to keep you in the best financial position possible because most of us are happy to do so!
One of the most COMMON mistakes we see customers making is buying a camper far too quickly and simply not waiting for an RV that is the BEST and PERFECT fit. As an RV dealership, we obviously hope to have zero customers who regret their purchases. Many of the regretful customers believe if they could just “downsize” their RV it would lower their payment. It is a huge misconception to believe that the money owed on the original purchase will VANISH by downsizing.
I am going to walk you through a few examples, to try to provide a little bit of education on financing before you find YOURSELF in one of these remorseful situations.
EXAMPLE 1: Billy buys a 30 foot travel trailer and takes a loan for $25,000 over a term of 15 years at 6% interest. After a year of ownership, some financial obstacles arrive for Billy’s family and all of a sudden, the payment on the $25,000 is a bit more than they can now budget. (Just this month, I have spoken to 5 customers with this same scenario.) Billy and these other customers want to trade their unit for a smaller and less expensive RV to hopefully finance ONLY the difference. UNFORTUNATELY, the original $25,000 loan is still out there and must be paid off. You can only trade a unit if it has a title that IS FREE FROM DEBT. A year has passed since Billy bought his unit, and the original camper has depreciated and is now only worth $17,000 in the pre-owned market. Within just one year, without financial preparation, customers can become “upside down” on their unit! “Upside down” is the simple term for owing more on something than what it is worth as a used unit. In Billy’s case, he now owes $8,000 more dollars than his unit could even sell for. The best advice for this situation, is to just cut your losses, sell the unit outright and try to re-coup even if it costs you money out of pocket. Another option, is to keep the unit and try to pay the debt monthly at an accelerated pace.
ANOTHER mistake that many customers make is financing sales tax and license plates on their camper and therefore making the debt even larger than the original purchase price. No one wants to pay interest on a tax that you have to pay to the government. So, when you begin to search for campers or any other large purchase, make sure to budget for your government fees to be paid out of pocket.
EXAMPLE of how the debt accumulates:
Original purchase price: $25,000
Sales tax at 7%: $1,750
Licensing: $250
Hitch equipment: $900
Total amount financed: $27,900
If you financed for 15 years at 6% the payment would be $235.44 per month. The total interest you would pay on this amount over the the full term of the loan would be an astonishing $14,478.49.
BUDGETING FOR A LARGER MONTHLY PAYMENT, is one way to hack the amount of interest paid and lower the amount you owe over the entire length of a long-term loan. If you can afford an additional $25-$100 per month, definitely do so, but make sure to apply that amount to only the PRINCIPAL (OR AMOUNT FINANCED) every month. Using the example above, you would make the actual payment of $235.44 each month, but you would designate your additional $25-100, we will say $50, to the principal. This alone will lower the amount you owe by $600, and since all loans figure the interest on the amount owed, you will also lower the amount of paid interest. Over 5 years, you will have lowered your amount owed by $3,000 in addition to the principal getting paid off. You do NOT want to just add your additional funds to the monthly payment of $235.44. All this will do is pay interest while not lowering the principal amount. Since all loans have heavy interests at the beginning of the loan, the faster you can pay down the principal, the less interest you will pay over the loan’s term, and therefore making the payoff that much quicker.
TAKE YOUR TIME MAKING A DECISION. As mentioned as one of our common mistakes before, this is one of the best ways to simply avoid getting yourself in over your head. There are many high pressure sales staffs out there who will try to make you believe you must buy that camper TODAY or the price will just surge the next day! If every single thing about the unit isn’t absolutely perfect, WALK AWAY. Clear your head, take a seat, and make a list of your RV non-negotiables. Don’t forget to take a look at pre-owned campers. So many times, you can find a very similar high quality unit and buy a camper that has had the initial depreciation taken out of the equation by whoever owned it first.
KNOW BEFORE YOU GO. Do your research, know your floorplans that you like and don’t like. Don’t be afraid to stop by several different dealership lots and just look around. This will give you a chance to really see every unique floorplan and layout on your own, and it will give you a way to gauge the different types of dealerships and their staffs that you are working with. If they are extremely high pressure sales, you will know almost immediately upon arrival. Stick with the dealership that you feel most comfortable. Whether it’s your 1st RV or your 20th, it’s a big financial decision that deserves an inviting environment. Sometimes I advise my customers to go out to some campgrounds, to take a stroll. If you see someone with a camper you’re interested in, ask them for their opinion. What do they like about their unit? What do they wish they could change? You will be surprised how friendly the RV community is. You might even get invited in for a coffee and a full tour of the layout and its interior decorations! The camaraderie among campers is what we love the most about the RV lifestyle!
My “Golden Rule”: Look at a camper purchase as something that you are going to need to own for 3-5 years minimum. Ideally 5-7 years. Those who have followed this “golden rule” rather than making a shotgun purchase with the bright idea to simply trade it for something else every year or 2, have been able to remain financially successful. The longer that you own the same RV, the less you will owe, making the next purchase even easier and wiser in the long run.
And of course, if you can afford to put more money down on a camper (or any large purchase), definitely do so! The less you can finance at the beginning, the easier it will be for you to financially adjust to any life changes that may come your way.
I hope these tips can guide you into some successful purchases! Our number one priority is helping customers make the best purchases in order to get their ideal camper and maintain control of their wallets! Camping is a way of life for many Americans. Your camper is your home on wheels and it deserves all of the time you have to give for choosing the right one.
Now, for THE FINAL AND BEST TIP for the readers who have made it all the way through: FALL AND WINTER are the absolute best times of the year to make your big camper purchase. Us dealers are the most motivated to sell and make deals since we must make room for new inventory before the sport show season in the Spring. (We also need room for all of the snow!) So, if you have your eye on a special camper, definitely begin shopping during the fall. This is the time to find a deal you can’t refuse. Even if the winter is a time you can’t really use the RV, you will have saved quite a bit of money and be on your way for adventure in no time! During these slow seasons, you will find that the pace at the dealership is much more relaxed, and the salesperson might have more quality time with you to really help you find the best unit for you and your family’s lifestyle. Ask EVERY question you want, and let the dealerships help you in the education process of an RV purchase!
And always remember: Whether the camping you enjoy is off the beaten path, in a resort or in a local campground, there is a camper for everyone! Happy hunting!
Purchasing an RV these days is no walk in the park when there are hundreds of different decisions to weigh when buying a new or used unit. When you don’t have an RV sensei to walk you through the process, it can all be a bit overwhelming, and spontaneous purchases are more likely to be made! Give your family-owned dealerships a chance to counsel you through the financing options and explain all of the inside scoop to keep you in the best financial position possible because most of us are happy to do so!
One of the most COMMON mistakes we see customers making is buying a camper far too quickly and simply not waiting for an RV that is the BEST and PERFECT fit. As an RV dealership, we obviously hope to have zero customers who regret their purchases. Many of the regretful customers believe if they could just “downsize” their RV it would lower their payment. It is a huge misconception to believe that the money owed on the original purchase will VANISH by downsizing.
I am going to walk you through a few examples, to try to provide a little bit of education on financing before you find YOURSELF in one of these remorseful situations.
EXAMPLE 1: Billy buys a 30 foot travel trailer and takes a loan for $25,000 over a term of 15 years at 6% interest. After a year of ownership, some financial obstacles arrive for Billy’s family and all of a sudden, the payment on the $25,000 is a bit more than they can now budget. (Just this month, I have spoken to 5 customers with this same scenario.) Billy and these other customers want to trade their unit for a smaller and less expensive RV to hopefully finance ONLY the difference. UNFORTUNATELY, the original $25,000 loan is still out there and must be paid off. You can only trade a unit if it has a title that IS FREE FROM DEBT. A year has passed since Billy bought his unit, and the original camper has depreciated and is now only worth $17,000 in the pre-owned market. Within just one year, without financial preparation, customers can become “upside down” on their unit! “Upside down” is the simple term for owing more on something than what it is worth as a used unit. In Billy’s case, he now owes $8,000 more dollars than his unit could even sell for. The best advice for this situation, is to just cut your losses, sell the unit outright and try to re-coup even if it costs you money out of pocket. Another option, is to keep the unit and try to pay the debt monthly at an accelerated pace.
ANOTHER mistake that many customers make is financing sales tax and license plates on their camper and therefore making the debt even larger than the original purchase price. No one wants to pay interest on a tax that you have to pay to the government. So, when you begin to search for campers or any other large purchase, make sure to budget for your government fees to be paid out of pocket.
EXAMPLE of how the debt accumulates:
Original purchase price: $25,000
Sales tax at 7%: $1,750
Licensing: $250
Hitch equipment: $900
Total amount financed: $27,900
If you financed for 15 years at 6% the payment would be $235.44 per month. The total interest you would pay on this amount over the the full term of the loan would be an astonishing $14,478.49.
BUDGETING FOR A LARGER MONTHLY PAYMENT, is one way to hack the amount of interest paid and lower the amount you owe over the entire length of a long-term loan. If you can afford an additional $25-$100 per month, definitely do so, but make sure to apply that amount to only the PRINCIPAL (OR AMOUNT FINANCED) every month. Using the example above, you would make the actual payment of $235.44 each month, but you would designate your additional $25-100, we will say $50, to the principal. This alone will lower the amount you owe by $600, and since all loans figure the interest on the amount owed, you will also lower the amount of paid interest. Over 5 years, you will have lowered your amount owed by $3,000 in addition to the principal getting paid off. You do NOT want to just add your additional funds to the monthly payment of $235.44. All this will do is pay interest while not lowering the principal amount. Since all loans have heavy interests at the beginning of the loan, the faster you can pay down the principal, the less interest you will pay over the loan’s term, and therefore making the payoff that much quicker.
TAKE YOUR TIME MAKING A DECISION. As mentioned as one of our common mistakes before, this is one of the best ways to simply avoid getting yourself in over your head. There are many high pressure sales staffs out there who will try to make you believe you must buy that camper TODAY or the price will just surge the next day! If every single thing about the unit isn’t absolutely perfect, WALK AWAY. Clear your head, take a seat, and make a list of your RV non-negotiables. Don’t forget to take a look at pre-owned campers. So many times, you can find a very similar high quality unit and buy a camper that has had the initial depreciation taken out of the equation by whoever owned it first.
KNOW BEFORE YOU GO. Do your research, know your floorplans that you like and don’t like. Don’t be afraid to stop by several different dealership lots and just look around. This will give you a chance to really see every unique floorplan and layout on your own, and it will give you a way to gauge the different types of dealerships and their staffs that you are working with. If they are extremely high pressure sales, you will know almost immediately upon arrival. Stick with the dealership that you feel most comfortable. Whether it’s your 1st RV or your 20th, it’s a big financial decision that deserves an inviting environment. Sometimes I advise my customers to go out to some campgrounds, to take a stroll. If you see someone with a camper you’re interested in, ask them for their opinion. What do they like about their unit? What do they wish they could change? You will be surprised how friendly the RV community is. You might even get invited in for a coffee and a full tour of the layout and its interior decorations! The camaraderie among campers is what we love the most about the RV lifestyle!
My “Golden Rule”: Look at a camper purchase as something that you are going to need to own for 3-5 years minimum. Ideally 5-7 years. Those who have followed this “golden rule” rather than making a shotgun purchase with the bright idea to simply trade it for something else every year or 2, have been able to remain financially successful. The longer that you own the same RV, the less you will owe, making the next purchase even easier and wiser in the long run.
And of course, if you can afford to put more money down on a camper (or any large purchase), definitely do so! The less you can finance at the beginning, the easier it will be for you to financially adjust to any life changes that may come your way.
I hope these tips can guide you into some successful purchases! Our number one priority is helping customers make the best purchases in order to get their ideal camper and maintain control of their wallets! Camping is a way of life for many Americans. Your camper is your home on wheels and it deserves all of the time you have to give for choosing the right one.
Now, for THE FINAL AND BEST TIP for the readers who have made it all the way through: FALL AND WINTER are the absolute best times of the year to make your big camper purchase. Us dealers are the most motivated to sell and make deals since we must make room for new inventory before the sport show season in the Spring. (We also need room for all of the snow!) So, if you have your eye on a special camper, definitely begin shopping during the fall. This is the time to find a deal you can’t refuse. Even if the winter is a time you can’t really use the RV, you will have saved quite a bit of money and be on your way for adventure in no time! During these slow seasons, you will find that the pace at the dealership is much more relaxed, and the salesperson might have more quality time with you to really help you find the best unit for you and your family’s lifestyle. Ask EVERY question you want, and let the dealerships help you in the education process of an RV purchase!
And always remember: Whether the camping you enjoy is off the beaten path, in a resort or in a local campground, there is a camper for everyone! Happy hunting!
Comment
nanawinnieFebruary 24, 2017 | 02:27 PM
We walked into Camping World to BUY A CAMPER, and they TRIED TO SELL US A LOAN. Saw the Vegas at the Chicago RV Show $69,995, price includes a $3,000 Finance Discount. We had not planned to finance the purchase and didn't understand we had to finance through Camping World so a week later we show up to test drive and sign the papers and are reminded we must finance the purchase. I explain that we've pre-qualifed for $40,000 at 1.9% through MOE Credit Union (60 pmts. of $701). But some college hotshot (Travis) is going to tell us how much smarter it is to finance the entire purchase $75,000 for 20 years at 6.9% because our monthly payment will only be $301.00 a month (for 240 months, 20 years!) and we can invest the rest in the market and earn 5%., plus we will get part of the interest back in our taxes. I said we would just rather pay the extra $3,000 to buy the RV and probably not even take the $40k from the credit union . He still would not quit shuffling his charts and papers and insisting so finally in exasperation I said "To be blunt, this has gone from you trying to sell us a camper to trying to sell us a loan" I was trying to be diplomatic, my husband just said "F*ck You" and we stormed out. While not illegal, this is definitely unethical. My retired husband and I know what is best for our finances. Who is underwriting these 20 year loans for campers that depreciate the minute they leave the showroom? Who is betting against it (sub-prime mortgage meltdown, anyone?). What a joke. YOU ARE NOT SELLING CAMPERS YOU ARE SELLING PREDATORY LOANS - AND GETTING KICKBACKS FROM THE BANK. We'll find our RV somewhere else where we aren't going to get bullied into a loan we don't need!
Queenv1953May 13, 2016 | 12:27 PM
Can anyone recommend a lender for refinancing an RV we live in full time?
Author: Guest Author
