How to pay for an RV that makes the most sense and saves money?

We are bouncing around ideas how we can save the most money to buy an RV that can last about 10 years. So we came up with reasons why to use or not use some ways to pay, just to see what the best way is and if it is realistic to do.

Assumptions:
-Retirement next year
-We have money in our 401K to pay cash
-Expect to pay between $60.000 and 90.000
-Our house will be payed off in 3 years.
-Our credit score is In the highest range.
-We do not have a trade in.
-Looking for a 5th wheel or motorhome

How?
1. Take out an RV loan and pay it off in a month (We think this is the most expensive but can lower the price but at what risk?)
2. Reverse mortgage (We do not think it is a good option)
3. Second mortgage (Paying too much per month the next 3 years)
4. Mortgage Refinance (10 year) (So far our best choice also better for tax? Costco has great deals. Lowers our % too)
5. Take money from 401 K  (Nah too much tax to pay on that)
6. Sell the house (Oh no my wife would kill me!)

So number 4 (Mortgage refinance) is our choice for now as I still have my job and can show a steady form of income. I might or will retire soon after approval.

Any other ways we did not think of? 

Buy a cheaper old used RV and pay cash. That way you can "test" the waters before you tie up much in funding and financing. Some folks fall in love with RVing and give up the sticks and bricks house within a year because they are never home anyhow.

Many used RV's for under $20,000 that have a lot of life left in them. you might have to fix a few things as you roll along, but all RV's require repairs and maintenance anyhow.

Take out half the cash in December and other half in January, then the taxes are split over 2 years.

Good luck!

My answer was to focus more on how to inspect a used motorhome, and how to fix and maintain a motorhome, before I buy one. My belief now is that I can buy a used dp for cash, with a $20,000 after purchase budget for surprises/upgrades, and sleep well.

Almost two years later from when I started, the only thing holding me back is waiting for my 2nd set of funding to be released. My choice falls somewhere between $60,000 to $140,000 depending on the timing and my focus on the the Newmar comfort drive technology. I have sort of nixed the idea of a gas Class A, a Seneca super C, or a semi hauler with 5th wheel.

I think I will do better, despite not going full time, in a Newmar 40ft dp, probably Dutch Star....a very difficult compromise but seems the best. The comfort drive technology sets the date at 2008 and newer, but that is that.

My wife and I have started going on trips with our Mercedes and staying in hotels...top down and it serves as a smooth riding motor-not-quite-a-home rv. Being that I'm getting a Boxer puppy in two weeks, it kind of dawned on me that he or she will be another type of recreational vehicle, though not a motorhome either.

Why not leave your 401 K intact and make some money while doing so. RV loans are tax deductible as a second mortgage is. Loan rates are very low right now and lower than your return on your retirement money. A loan will run somewhere around $10.00 per $1,000.00 or $600.00 to $900.00 per month for 10 years. When your house is paid you may have other options to pay the loan off early.

Miss Mermaid has the best advice so far. Most beginners don't get it right the first time. You really don't know what you really want until you have some experience at being an RVer for a year or so. Get one around $20k and then after a year you will know what you really want and you won't loose much money trading it in or reselling it. Here is an example of what I am talking about:

http://www.pplmotorhomes.com/classa/2000-Holiday-Rambler-Endeavor-30367.htm

Sellerbird and Miss Mermaid have it right.  Buy a starter motorhome and take it from there.  I bought a 1999 Aerbus, 2008 HHR and all the towing gear for $22,000.  After a year and a half, we're ready to move up.  Have a much better idea of what we want and should be able to sell the motorhome for close to the purchase price.  Motorhomes depreciate quickly at first and then taper off.  After maybe 12 or 13 years the price will not drop significantly.  Value will be based primarily on condition.  Do not refinance your house.  Do not take money from your 401K and pay cash.  Unless you have no retirement income or your retirement income is not subject to tax, any withdrawal from your 401K will be subject to income tax. 

You have received some very good advice about buying something older and less expensive to see if you really like RVing and that won't be a financial burden if it doesn't work out.

Absolutely do not use a reverse mortgage for this purpose - or any other for that matter.  Too many pitfalls.  You could find yourself in serious problems which retirees don't need.  That wouldn't even be on my list of possible financing solutions.

I don't believe in large loans for RVs.  If anything goes wrong, you're liable to find yourself upside down and still have to pay the loan so you don't risk getting a bad credit rating.  By wrong, I mean serious things like illness that might significantly reduce your assets which can never be replaced because you're no longer able to work.  You might find that RV sitting in your storage area permanently even though you can't make payments on it.  What do you do then?  Sell it at a huge loss or return it to the bank/lender who really doesn't want it and won't negotiate?  Lousy things like this have happened to a lot of good people who were comfortable until a stroke or heart attack changed everything.  You don't ever want to be in their shoes!

Don't use 401Ks for buying RVs.  That money should be used for your retirement day-to-day expenses or emergenices, not for buying big ticket items that might be considered a luxury.

Don't use debt financing to buy something you can't afford.  That means no big loans, no second mortgage, no mortgage refinancing.  Why on earth would you want to get a second mortgage and have more or larger payments right at the time you will be reducing your income?  None of these make financial sense.

Some people do sell their stick and brick homes and basically make the trade to a mobile lifestyle, but both the people have to WANT to go fulltiming.  So selling your home is out because your wife apparently isn't interested in that solution.

So where does this leave you?  It means downsizing your expectations to something more realistic and financially viable.  Your original question on how to pay for an RV "that makes the most sense and saves money" is an oxymoron.  Borrowing to pay for an expensive toy just as you retire with less income does not make sense.  And no RV purchase is ever going to save you money!

DutchEagle, this probably isn't what you were hoping to hear, but please do yourself and your wife a huge favor and don't buy something you can't afford.  There are plenty of decent RVs out there that won't break your wallet but will still provide the experience you want.  A lot of people here on the RV Forum have started small and moved up to a better or nicer RV once they determined their true needs and wants.  We did that with our first house - which was far from my dream home - but it served its purpose and I even grew to like it after we fixed it up to suit us.  You can do the same thing with an RV.

ArdraF

ALL VERY GOOD ADVICE. 
Do you really want to risk losing your house by refinancing the house to buy an RV, then have the economy go belly up?

There is a very recent thread here about a couple that bought a TT on a 100% financed, 20 year loan.  They lost their jobs.  The dogs damaged the TT while they lived in it.  Now, the camper is worthless and they still have 18 ? years of payments left.  You do not want to go there - or anywhere close!!

I don't buy anything unless I can pay cash for it.

Seems to me your cost estimate is very high !

I could well afford a $100,000 Rv, but instead have a nice 25 foot travel trailer, (that we love) and a nice Dodge Ram to pull it with  and a nice hedge left over

You'll never get out from under by financing and refinancing!

Jack L

I would tend to agree with the  advice given. If you cannot cash it out from discretionary income, do NOT finance the thing. It will be like a lead weight around your neck.

I wouldn't use 401k funds, or mortgage the house - not good things to risk just to save a few bucks.  Having the house paid for and a solid nest egg is extremely important to your retirement years.  I would consider financing via a normal RV loan, if your income (cash flow) can handle it.  The rates are reasonable now and your 401k income should equal or exceed the interest payment. Make enough down payment so you are NOT "under water" on the loan. I don't think financing is anathema, but you do have to manage it well. And your retirement years are not the time to get in deep.

Shop for a used coach in the price range that leaves you financially comfortable. If you buy in at a modest price, you can trade up later without a major depreciation loss and the experience gained will be worth the price.

Gary RV Roamer said:

Make enough down payment so you are "under water" on the loan. I don't think financing is anathema, but you do have to manage it well. And your retirement years are not the time to get in deep.

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I think Gary meant to say NOT "under water".  At least I always think of "under water" as meaning owing more than the RV is worth.

I guess the option to rent, rather than buy new or used, is not really on the table?

If you accept the premise, which I think is a good working premise, that "Most beginners don't get it right the first time. You really don't know what you really want until you have some experience at being an RVer for a year or so. Get one around $20k and then after a year you will know what you really want and you won't loose much money trading it in or reselling it."

And gee whiz, I have actually learned all about that without owing or renting a motorhome. 

So, why spend the $20K in the first place? And what is the chance that buying very old used will mean putting in another $10k or $20k to keep it on the road? There are a lot of threads on various forums of inexperience people with no or minimal expertise (experience and expertise are not synonymous) that buy an old junker and then find out they have major chassis repairs or water damage repairs right out the door...call it the cost of cluelessness.

And what does one years experience mean? Does that mean full timing for one year or taking it out on a 2 week vacation once your first year, or just what?

You can buy a lot of rental time and motorhome experience for $20 to $40K, and let someone else worry about the repairs and maintenance, AND rent a variety of rv vehicles, and still be able to buy further down the line.

And guess what, you won't have to worry about unloading that old junker!

And if you play guitar you can sell RVs in California!

And guess what, I have just eliminated all your financing concerns...just rent with the cash in your checking account! You will probably be better off in the long run and you can take some overseas vacations as well!

I think Gary meant to say NOT "under water".

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Thanks for catching that - I fixed it!

The rental price for a Class A is so staggering that many people reject that option out of hand, but an analysis of rental vs cost of a trade-in upgrade might prove otherwise. I think, though, that you have to rent for a month or so and use it seriously during that time to learn very much.

Figure something like $6300-$8800 to rent a Class A for a month. A 32-36 foot gas rig at the lower end and a mid-range diesel pusher at the upper end. Here's one place to get a feel for what is available and prices:
http://classamotorhomerentals.net/

The number of threads on various forums where buyers report their remorse in having purchased their rv is actually quite high. But like writing a monthly magazine, we have to work harder to read or hear about the successes as if you are having good time one is focused on that and not writing to ask how to solve a problem.

I know from working at a rental operation, that not everyone was happy, but there was a steady stream of return customers...and that is worth a thought and yes there was a mix of some business customers with the personal travel customers. They also had many people renting who had come in from other countries and wanted to rv around, rather than stay in hotels...particularly families trying to minimize the cost of their vacations. Those rvs were well past their warranty issues, for the most part, and when it left, everything on the rv worked and the renters had been given a basic road use education, and they had support options if something happened while on their trip.

And when they finished their trip they dropped it off and they were done. It then was left to techs like myself to inspect the rv and then get it road ready again for the next family. And yes, many renters were not gentle with their rented rv, and yes I got good at doing a wide range of repairs quickly...something the renters did not have to be concerned about taking it in for repairs at some dealership, good or not.

One more thought. If you live in Ca and want to rv in Florida, you can fly out and then rent on location, rather than driving across the U.S. However, there is some value in driving across the U.S. as well.

And for those of you in the rent rather than buy camp, you can rent something you probably can't afford to buy.  Like a Prevost Marathon.  That will set you back $63,000 a month. 

Someone wanting to rent a Prevost Marathon would not be likely to want to spend $20k on some old junker.

Another advantage of renting is you don't have to worry about storage fees and insurance.

Unless you are gonna live in a motorhome full time, why buy it in the first place? Just to play devils advocate.
Especially when the trend is to buy and sell several times anyway.

RodgerS said:

Unless you are gonna live in a motorhome full time, why buy it in the first place?

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Because unless you buy one you don't get the full experience of owning a motorhome. That includes storing, repairing, maintaining, washing and caring for the RV. Some of these things are not very attractive but necessary to see if the RV life suits you. It is also very helpful not having to load and unload a motorhome every trip. And renting is extremely expensive.