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Author Topic: yet another financing question  (Read 899 times)

sunrisor

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yet another financing question
« on: June 07, 2017, 02:07:01 PM »
Kinda' new to the RV world.
I've read a few topics here about financing, and loan lengths vs. RV age vs. depreciation.  We've been thinking hard about a purchase, since longer loans give lower payments.  But, some of the topics talk about how quickly RVs depreciate, and it makes me a little nervous thinking about what the value will be when the loan is paid.  I'm not talking about credit scores, or income/debt ratio, or APR, or this bank vs that bank.  I can figure out that part (my wife is the haggler), being new to the RV world depreciation is the question...

All the above being equal, I have a hypothetical scenario:
2010 Class A diesel pusher, 31', with 15K miles (seriously I actually saw this) asking 64,995 from an east coast dealer.
Assuming all mechanicals are functioning properly, condition is 'Good-to-Good+'

Question:
In regards to depreciation, would this be an acceptable risk for a loan over 10 years?  over 15 (is this even possible? not that I would)?
Would it matter if I put 20% down?  10%?

This, now, 7 year-old RV will be 17 years old (or more), when it's paid for.  If it's everything we asked for in a RV, then life is good, and we keep rolling....but...what if its not?  I guess that's my question.
Joe

No matter where you go, there you are.

ArdraF

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Re: yet another financing question
« Reply #1 on: June 07, 2017, 03:01:13 PM »
One of the ways you might look at the question is in the context of 'what if' something happened to you during this ten years and you were unable to make the payments?  Perhaps you lose your job if you're still working or you become incapacitated because of a major illness.  What then?  Would you be able to make the payments in this circumstance?  My personal feeling is never take on more debt than you can afford to pay if everything goes south.  Unfortunately many of us know people these things happened to, especially after the 2008 economic downturn.  The banks wouldn't negotiate a new loan, they wouldn't take the RV back, and the RV just sat in the owner's yard for a couple of years until they were able to sell it at a huge loss.  The RVs were "underwater" just like people's stick and brick homes were underwater.

Also, being new to RVing means you don't "really" know what you want until you live in an RV for while.  That's why we often advise people to buy used and/or something less expensive for their first RV.  Say you go all in and buy something really nice and really expensive.  Then you start using this RV and find out six months or a year later that you really don't like this feature or that feature or, worse, you really don't like RVing and want to ditch the whole idea.  Now you're really stuck if you can't sell the RV at a reasonable price to pay off your loan.  Then what?  Buying an affordable RV means you can trade it in later without a huge loss.  Which way makes you sleep better at night?

As you can tell, I'm in the group that prefers to only buy what you can afford without going into debt for it, or at least with a minimal loan easily paid off in a couple of years.  Each of us has to decide on our personal level of risk but personally I feel it's best to err on the side of caution where the purchase of a luxury item like an RV is concerned.

ArdraF
ArdraF
:D :D

sunrisor

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Re: yet another financing question
« Reply #2 on: June 07, 2017, 03:54:24 PM »
AdraF, what a great reply!!  I think that's given me more questions though, than answers.  Which is a good thing I guess.

We know first hand about 2008.  We had our share of the 'downturn', and recently come out of the backside of it, much smarter and with less debt: no credit cards since '09, and only a mortgage, and a 3/4 paid auto loan.  So, I'm in your camp when it comes to taking on debt.  All those reasons you put, is why I asked about depreciation.

You are also correct in not knowing what we 'really' want, but that's a topic for another area of this forum:).

Someone in this forum said that I should think of a RV as a 'house' and not a 'vehicle', and he is probably correct to a degree.  However, I'm a lifelong gearhead, and I'm having a little trouble wrapping my brain around that notion.  We 'only' buy used vehicles, so my natural tendency is to look at used RVs.  The whole depreciation thing has me a bit nervous, and I'd like to spend more time using it, the fixing it.  So we've switched to looking at only a few years old, thinking that if the there would be something worthwhile left at the end of the loan.

I really appreciate your response, as it made me think even harder about this, but it has generated more questions.  Hopefully someone else will respond, since I don't think I am the only person with this dilemma.
Thanks again!!
Joe

No matter where you go, there you are.

SeilerBird

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Re: yet another financing question
« Reply #3 on: June 07, 2017, 04:09:08 PM »
Joe I suggest you should find an inexpensive RV to begin your RV adventure. Most people have no idea what it is that they really want in an RV until they have been RVing for a year or two. This results in people buying an RV and then trading up very quickly and taking a huge hit in depreciation. Something like this:

http://www.pplmotorhomes.com/classa/1997-Pace-Arrow-By-Fleetwood-35958.htm

This way you are limiting your losses on your first RV and after you figure out what it is you really should have bought you will be a much wiser shopper.
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Isaac-1

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Re: yet another financing question
« Reply #4 on: June 07, 2017, 05:08:06 PM »
You will see a lot of advice about getting a starter RV, and it is not that bad of advice.  Unfortunately here is where ones definition of a starter RV comes in, there are a lot of worn out RV's out there, these are units that may still have some value, but all too often can turn into money pits, depending on ones expectations.  There are also some older gems out there. 

However the reality is the used RV market is driven by formula based depreciation schedules, meaning that on paper it is all about the model year, up until you pass the 10-12 year age point where most lenders will no longer finance a used RV.  Therefore you can price compare 2 otherwise identical motorhomes and the newer model year one will tend to be priced much higher than the older one.  These calculations do not consider build quality, so that on paper a flimsy built "entry level" 10 year old motorhome has the same proportionate value to new MSRP as a 10 year old top of the line well built coach. While actual asking / selling price may vary, it is still heavily influenced by what people can get financed, and banks generally will not write loans for more than book value.

You will also find a substantial dip in asking / selling prices when motorhomes hit the magic 12-13 year age mark as the pool of potential buyers drops down to those that can pay cash, or arrange some form of alternate financing possibly a home equity loan.

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sunrisor

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Re: yet another financing question
« Reply #5 on: June 14, 2017, 04:50:24 PM »
I love this forum!!!  Sorry for the late reply...
Isaac-1!  Thanks!! That's the answer I was hoping for.  My research, so far, looked like the 10-year mark was the fallout point.

I know from elsewhere in this forum, quality varies greatly among similar size/equipped RVs, and I've certainly owned my share of money pits (some with wheels and some without).  The gearhead in me says 'I can fix anything', but at this point in my life, I'd rather use it than fix it.

I'm a 'once and done' kinda person, so the wife and I will spend a lot of time looking and deciding 'what we really want'.

So, I think what we will do is try to get the newest that fits our budget, and has the features we want (or can live with).  Maybe sacrifice length/features, for a newer model.

Again, thanks for all the great replies.
« Last Edit: June 14, 2017, 04:52:43 PM by sunrisor »
Joe

No matter where you go, there you are.

Isaac-1

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Re: yet another financing question
« Reply #6 on: June 14, 2017, 10:45:02 PM »
A couple of things to keep in mind when it comes to older motorhomes, and their real world values:

Industry experts agree that RV tires should be replaced after about 7 years, certainly no more than 10 years.  A full set of tires for a typical diesel pusher with 22.5 inch wheels will run $3,500 or more, off brand tires a smaller gasoline class A with 19.5 inch wheels may run only $1,200.  Big name brand tires will of course be more.  Either way a significant percentage of value of your potential used coach, so consider tire age when shopping.

Also there are a lot of rubber parts that tend to age out at around the 15 year point, if looking at a motorhome in this age range, try to buy one where as many of these rubber parts have already been replaced as possible.  Just some of these include, belts, hoses, and all sorts of bushings, sway bar bushings, shock absorber bushings, rubber bump stops, air bags, propane regulator diaphragms, etc.
2002 Safari Trek 2830

andrew3744

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Re: yet another financing question
« Reply #7 on: June 16, 2017, 03:31:08 PM »
I'm brand new to the RV industry and currently looking but I just wanted to chime in on the lender aspect of it. My credit union has no age they wont finance, however when they check the blue book value they expect the loan to be within a certain percentage of the blue book value. I was surprised to hear this because everyone else told me different.

KandT

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Re: yet another financing question
« Reply #8 on: June 17, 2017, 04:10:35 PM »
Have you considered making your RV "payment" into an account before you buy it?  At worst this could give you some wiggle room for unexpected expenses.  At best you may decide just to save up the money and buy one cash.

A $65000 RV with 0 down at 5% gives you a $689 payment (if you can get someone to go 10 years on a used RV).  Add insurance, maintence and deisel and propane.  Even a state park is $35 a night.  If you want to tow a car you will need that set up as well.  A full tank of deisel is probably in the $200-250 range.

Maybe make a payment of $1000-1300 a month (estimated expenses if you use it) and see if you are comfortable with that.  What do you think?
« Last Edit: June 17, 2017, 04:12:56 PM by KandT »
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Gary RV_Wizard

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Re: yet another financing question
« Reply #9 on: June 18, 2017, 11:04:51 AM »
Lender policies differ widely, and credit unions often have more flexible rules than major banks.  However, they all need to protect there investment in the load, one way or the other. Some lenders may only finance 80% of the book value, for example. It pays to shop around and consider all possible sources.
Gary
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