Accounting for depreciation

[cbgenrich]

I'm comparing costs of stick & brick lifestyle vs. full-time RV lifestyle.

Assuming I get a 2 year old rig without the steep initial depreciation, what percent of value would I expect the RV to lose in a year?

 

[Shayne]

No set percentage.  It's all relevant to the market and what unit you purchase, the condition now and after.  It's like asking how many rain drops will fall in the next shower.  The recovery of the dollar spent for Rving can't be figured in dollars and cents.  It's the freedom, life's values and self-satisfaction of engrossing oneself in the life of choice.  At least that's the way I view it, others may feel differently, but that's what makes it so great.  Dollars are only dollars, but RVing is a lifestyle.  JMO

 

[Jeff]

If you only keep it one year at least 10-15%.

 

[chrisrice]

I've researched this for a while now. What the numbers told me is:

If you buy new, and get MSRP-25% you can expect a 18% drop in the first year. The second year another 20%. So at year 2 you are -38% less than what you paid for it.

This doesn't factor in tax. That would make the numbers worse.

I arrived at these numbers by looking at various DP's. I took the low NADA value over a 3 year period for each model, and compared that to the MSRP-25%.

Best,

Chris

 

[cbgenrich]

Chris, that's helpful info.

Say I get a nice 5er with MSRP of $66,666 at 25% off for $50,000.  And I'll just use 18% of the previous year's value:

Year 0:  $50,000
Year 1:  $41,000
Year 2:  $33,620
Year 3:  $27,568
Year 4:  $22,606
Year 5:  $18,537
Year 6:  $15,200
Year 7:  $12,464
Year 8:  $10,221
Year 9:  $ 8,381
Year 10:$ 6,872

Assuming it was taken care of and maintained, would I be able to get $7,000 for this 5er after 10 years?  More?  Less?

 

[Ned]

Nobody buys an RV as an investment.  The depreciation cost is just a cost of enjoying the lifestyle.  However, it's good to know that going in, not everyone does that research.

Ignore taxes in any depreciation calculations, it will vary considerably based on the state where the unit is registered.

 

[Ned]

The value of a 10 year old RV will be more dependent on its condition than its age.  I don't think you can use any depreciation formula past about 5 years.

 

[Gary RV_Wizard]

I pretty much agree with Ned - after maybe 7 years it's all strictly condition and imponderable market factors, such as how obsolete the features and styling have become. For example, when multiple slide units became available they were so wildly popular that no slide and single slide units plummeted in value almost overnight.  Full body paint has had a similar effect on older rigs.

On the other hand, once you reached the year 9-10 level, the value is likely to be fairly constant as long as the rig is in decent working condition. And at that price level you have a lot of potential buyers, much more so than at the higher levels.

I actually think you would have the hardest time recovering your money at the 1-3 year level. You won't get those prices from a dealer, who is buying at wholesale (if at all!) and retail buyers would generally rather have a new rig if they are going to pay close to new price. New RV warranty, dealer service and peace of mind are big purchase factors, whether justified or not.

 

[cbgenrich]

My Fidelity Investments retirement calculator web page says 25% of us live to 93 years of age.  To me that means I may need to stick it out for 40 years!  I gotta know where my dollars are going.

I hope to estimate annual depreciation, then figure it on a monthly basis like other costs.  It seems reasonable to figure it as percent of the value of the RV lost in a year.  Since I don't know that percentage very accurately, I use a high depreciation rate and a low depreciation rate.

I'm also trying to compare it to the stick & brick alternative.  I might be willing to spend more on the full-time RV lifestyle, but I would want to know the costs going into it.  The range of depreciation rates for the RV turns out key in that comparison.  Which is why I'm probing around for guidance.

If the RV costs less than the stick home, that's money I can put in the bank and earn interest on, which helps to balance the equation.

I'm going to try to get fancy here.  I'm using Excel to help me model the comparison.  I'm going to try to like to a copy I've uploaded somewhere and hope folk can access it...

http://home.comcast.net/~cbgenrich/referenced/RV-Depreciation.xls

The alarming fact is that with just 10% per year depreciation, figuring 5% per year return on that bank account, break even is a 3 to 1 ratio - $300,000 home equates to a $100,000 RV.

I've considered other budget factors and they tend to be comparable and/or cancel each other out.  And of course you can't place a value on the time spent with the wonderful folk out there...blah, blah.

Still, I would appreciate it if some people would check out this analysis and comment on the assumptions and calculations.

 

[Kenneth]

RV verses Sticks and Bricks ?  I'll give you one example; The House taxes and utilities, pool maintenance,yard maintenance add up to $2400 per month ,thats gone every month, except for a year end tax deduction of from the IRS.

The appreciation of a home in MY area is approximately 8% per year. By selling the house, the proceeds would be placed into a conservative fund, then finance the RV. A conservative 5% annual return will generate enough to pay the payments on the RV and leave a little extra for living expenses . Interest paid on RV loan is tax deductable. The extra $2400 per month will be placed into a fund. The RV depreciates over the next 10 years 75%, just the extra savings alone grows to over $500,000. Am I missing something here ? 

 

[Jeff]

We find that we are spending more living in the RV than a stick house so the $2400/mo would not be available to us.

We are enjoying the ride though. :

 

[Shayne]

Every time I pass my Son are Daughters home  in the MH  I honk the horn until they come out and lower the window and yell to them  Here's your inheritance Rollin down the road.  I had to earn mine.  They can earn theirs.  Came in this world with nothing, have never had anything, so I don't miss it, and will leave with nothing.    My Ways to go.    JMO

 

[Darold]

I love your atitude. I'll bet you really enjoy life. Don't you?

 

[Shayne]

Darold  if your referring to me  Yep you bet your bippy on it.  If I can't laugh and have fun and help some one,  then I don't want to be around and it's time to look for greener pastures.  Son was upset some time back because I bought a 2nd Park Model and asked Why?  Because I can  was my answer  He never questioned it again.  Now if I can laugh off these surgeries coming up  all will be fine.  Fraid the ask the Doctor for a 2nd opinion,  had one once when I asked, looked at me and said you're ugly too.  Had no recourse  and told him lets get it over with.    LOL

 

[Darold]

Shayne, thats a hoot. What kind of operation do you have to have. I have had 5 back operations.

 

[Shayne]

Just had my back realigned and all is well there, but still had the pain.  Well starting with cardiovascular  Had a 3 bypass 19 years ago and now having troubles again.  After cat scan and MRIs they've decided I have pushing against the lower vertebrae and Sac  in a tumor and a cyst, in addition the lower Aorta in the same location has an enlarged aneurysm and they think I also have a problem with the stomach or Colan in the same place  This they have to go in from the front all the way to the back and do what they have to do.  Doesn't sound as if I'm going to be enjoying this procedure.  but they got to do what they got to do cause I'm not ready to concede to them yet.    For many years the Good Lord don't want me cause he sure had his chances  and I wasn't to found of the other guy in the red suit  SO I chased him down and took the pitch fork away from him and now have him on the run  .  Hope to keep it that way but at 73  my chasing is slowing down drastically.  Oh well  we all got to go some time and I've certainly had a good run and I'm at peace with myself just not withthe Boss aka Wife.

 

[blueblood]

I'm comparing costs of stick & brick lifestyle vs. full-time RV lifestyle.

Assuming I get a 2 year old rig without the steep initial depreciation, what percent of value would I expect the RV to lose in a year?

Take a look at this article.

http://www.rversonline.org/ArtNewUsedRV.html

 

[cbgenrich]

blueblood,

Thanks for the link to that article.  At the end it has a link to a spreadsheet so you can play around with the assumptions,  but the link is dead.  I couldn't find any of it on the parent site.  Don't happen to have that spreadsheet, do you?

I started by modeling a "depreciation curve", where I would put in a different percentage each year.  Using the depreciated ending value of one year as the starting value for the next year seemed to have the same effect so I went with that simpler model.  Plus, I can't come up with any hard numbers to use for any of it anyhow.

He says he's looked at NADA and Kelly Blue Book a lot, but I don't quite know what to read into his page, which is why I would love to have the spreadsheet.

Thanks again.