RV financing quandary.

Greetings all,

I?m running in to some issues in my quest to purchase an RV and thought you folks might be able to provide some insight. I have been shopping for an RV on the private market (Craigslist) and have found a few that meet my needs and are within my budget. I got preapproved for financing through my primary bank and set out to purchase an RV. The problem that I run in to is that my bank will only finance the N.A.D.A. base value of the rig, which is consistently vastly different from the dealer price of the rig. An example: I went to look at a 2001 Fleetwood Tioga class c that the dealer had listed for $17,900 (perhaps a little high, but I can work with it) N.A.D.A. bas value and consequently the amount my bank would finance is $6,450. That?s a huge difference. I have found similar circumstances on every used RV I?ve looked at. Virtually every one is valued by N.A.D.A. at less than half of the asking price. So now I?m forced to look at more expensive rigs at dealers that will provide in house financing.
So I guess my questions are: Are asking prices that unreasonable and my bank is saving me from overpaying or is my bank unrealistic in their valuation of RVs? How does anyone ever buy an RV on the private market if this difference in price and financing is as common as I have seen? Is there a company that is willing to finance RVs on the private market? Anyways thank you all for the information that I?ve picked up in these forums and for any help you can provide on this issue.

-Chris

It's called cash.>>>D

Welcome to the RV Forum Chris

The problem your running into is that RV's lose value fast and the banks don't want to take the risk. Your best bet is to hold off until you can pay cash. I would suggest making payments to a savings account for twice the amount of the payment you expect to make on a loan.

When you do get an RV your going to be spending a big chunk of money prepping the RV for camping. And you will also have the added cost of another vehicle. And then you will need to add the cost to drive and maintain the RV. 

If your running that close to the chest with what you can afford,, then you would have heart failure when you get the bill for taxes & license,,then discover the need for $3000 for all new tires before you could use the unit  or $400.00 to fill the fuel tank... These are real world problems that have to be dealt with.>>>D

Well alright, cash it is then. Guess I?m going to have to become an NFL pro if I ever want to RV.
Seriously though, thanks for the replies folks. I thought I was being reasonable staying in the $15,000 range and I was reluctant to believe that there enough people with that much cash in their pockets for any of the private market RVs to sell without financing but I guess I was wrong. Best get to filling up the piggy bank. Thanks again for your responses.

I hate to sound like a downer,, but if it makes you more cautious, it's a good thing.>>>D

Cheiniger said:

Well alright, cash it is then. Guess I?m going to have to become an NFL pro if I ever want to RV.
Seriously though, thanks for the replies folks. I thought I was being reasonable staying in the $15,000 range and I was reluctant to believe that there enough people with that much cash in their pockets for any of the private market RVs to sell without financing but I guess I was wrong. Best get to filling up the piggy bank. Thanks again for your responses.

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Don't give up....Just get quite a bit of money put back for the big day. Nothing worse than getting the RV you always wanted and can't afford to take out on the road. RV'ing not cheap but it's very rewarding.

That?ll be the plan then, I?m not much of a fan of debt anyways. Thanks again folks.

Financing an almost twenty year old vehicle?  Not a good idea unless your doctor says you're dying and that's your only chance to RV.  Keep saving and keep looking for a good price on a functional unit with NO WATER DAMAGE.  I hope you get one soon!

The bank will only loan what they feel they could get back should the investment 'go up in smoke'.  Nada is simply a recognized standard for prices.  It certainly has it flaws. 

Sometimes the dealer may be able to get more generous financing, using lenders who specialize in RVs and know the values better.  Most local banks and CUs are accustomed to car loans, where NADA is literally the Bible for value. For Rvs, NADA is no more than a guestimate.  However, the banks know they would have a difficult time recovering their investment if the loan went south. Wholesale value on an RV is barely 60% of retail, and then only in good condition. Sometimes they won't finance an older RV at all, simply because the risk is too great. Which should be a warning to you as well.

Gotta get that price down, then make a substantial downpayment.

I am a retired lender and can tell you that most RV lenders will not finance any RV that is over 12 years old regardless of condition. I know of no lender that will finance a unit that is more than 15 years old. In the lender's eyes, if you want to buy and finance something that old, you might as well be asking for an unsecured loan and be qualified for such. If you have a good relationship with a bank or credit union and they know you're good for a signature loan, they might be willing to give you the money and take the title to what you're buying in good faith. Otherwise, you need to begin either planning on paying cash for what you want or start looking at newer units that can be financed, either by your own bank or a dealer's lender.

The NADA book that most lenders go by to attempt to determine the value of an RV is nothing more than a guesstimate because there is no definitive way of evaluating an RV as there is with an automobile. That's not to say the NADA values are wrong, but the prices you are seeing at dealers are probably quite negotiable. You can always take the NADA value to the dealer and attempt to have the price reduced to something closer to the book value.

What a great forum, so much good advice from so many people, thank you all.

I?ve always been very responsible with money, I have no debt except for a house mortgage, a good credit score and generally live well within my means. I suppose I figured that meant that I could get a little crazy this one time and do something irresponsible by financing a relatively inexpensive RV so I could get some RV?ing in with the family before my daughter goes off to college in a couple of years. I suppose that wouldn?t be wise anyways so I appreciate you all talking me out of doing something irresponsible. I?ll start saving hard now and it shouldn?t take too long. Thank you all.

Happy Easter!

Don't forget, you can rent RV's for a few trips prior to your daughter going to college.  Great way to make memories.  You seem responsible with your money, but I will add, that if you try and save on a class C rv, you might get haunted on the backside with repairs and maintenance items.  Maybe a smaller investment like a pop-up camper?  Happy Easter to you as well     

Rather than finance mine as a vehicle, I used a home equity line of credit and wrote a check.  Interest rate was better too.  Not an option for everyone but it bought me time to move some other money around.

Now, if you think book vs retail is bad, consider the dealer financing terms for new RV's.  Between payment and interest I don't think they even keep up with depreciation for the first half dozen years.  One ad on the radio here has 12 year financing on a $12K trailer.  I ran the numbers and the interest is over $6K.  Hard to imagine folks aren't doing the math but clearly they're marketing these things on payments alone.  Which continue on long after the newness has worn off and residual value evaporated.

Mark B.
Albuquerque, NM

One other thing to keep in mind, particularly with an older motorhome is cost of ownership.    I know those rental rates may seem insane, but for many people that would only use an RV for a couple of weeks per year it may likely cost less than owning a motorhome, particularly once you account for amatorized expenses, like new tires ever 7 years, new batteries every 4 or 5, then there is resealing roofs, general vehicle upkeep, insurance, registration, storage fees, ....

Well, tying it to a home equity loan could bite someone in the butt big time. I would never do it on a deprecating item. The only time I would consider is if was a short term loan to myself and I had other money tied up to pay the HEL off in 30-60 days. And 60 days might be a stretch. I would walk away from an RV that I can no longer afford in a nano-second rather having my house tied to an anchor. 

RRR said:

Well, tying it to a home equity loan could bite someone in the butt big time. I would never do it on a deprecating item.

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If you have this kind of insight, then you're already a good steward of your money.  Point being, dealers are more interested in moving units off the lot and the new financing is more nefarious to the purchaser than the subtleties of risk assumed by folks with better options.

A used RV has already depreciated quite a bit.  The 12 year old one I bought with a HELOC had depreciated 75%.  I figured a paydown of one year would be a manageable risk for my current circumstances.

I would walk away from an RV that I can no longer afford in a nano-second rather having my house tied to an anchor.

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There's a lesson to be learned there for sure.  The expense doesn't end once the purchase is done, they're only just beginning.  If you're not handy with vehicles and home repair, the expenses multiply.  Just like boats and planes these things run on money and a lot of it.  Managing the purchase is one thing, repairs and overhead are their own wealth drain.  You really gotta want it to keep one of these things going.

Mark B.
Albuquerque, NM

Cheiniger said:

So I guess my questions are: Are asking prices that unreasonable and my bank is saving me from overpaying or is my bank unrealistic in their valuation of RVs? How does anyone ever buy an RV on the private market if this difference in price and financing is as common as I have seen? Is there a company that is willing to finance RVs on the private market? Anyways thank you all for the information that I?ve picked up in these forums and for any help you can provide on this issue.

-Chris

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The Dealers asking prices are unreasonable.  Make the offer based on the financing, not the price.  Many dealers will bite if they know you will walk.  30% off NADA is not unreasonable for a used RV.  Some dealers like to hold them for souvenirs, and hold birthday parties for the RVs that have been with them for a long time.

Use a HELOC to make a cash offer and pay off the HELOC.

I would walk away from an RV that I can no longer afford in a nano-second rather having my house tied to an anchor. 

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And that's one of the reasons that lenders are reluctant to grant loans on older Rvs or at a high percentage of market value.  Hardly anybody needs an RV and most would walk away rather than sacrifice some other aspect of their lifestyle, let alone food or shelter for their family.  A repo'ed RV is lucky to bring the lender more than 40%-50% of its retail market value, even in halfway decent condition. More often than not, the RV has been neglected for a year or two by the time the lender gets it back.