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by Michael H. Yeaw
Our discussions on starting your RV ownership is
nearing an end. In the past articles, we have looked at type, size, quality,
floor plan and pricing. But wait a minute. Even if you have enough cash
to buy your RV outright, is it a wise decision? Let's take a closer look. One
statistic we found says that motorized RV's lose 40% of their value in two years
and the towables lose between 25% and 35% in the same time frame. On a cash
deal, this would be like throwing your money away.
It's a personal decision, but it might be wiser to use your cash to make the lender's minimum down payment and invest the balance in something that might appreciate rather than depreciate. Consider the down payment somewhat of a hedge against the high initial depreciation so that if you decide to sell or trade after a couple of years you are not upside-down," i.e., owe more than the rig is worth. Yes, that money is still flushed, but the balance is out there making more money for you. It's kind of a delicate see-saw. Ok, so you have decided to go after financing. There are two things we suggest you do before applying for financing. First, pay a few dollars and pull a copy of your credit report from Equifax, TRW etc. Go through it with a fine tooth comb. If there is something derogatory and there is a good explanation, obtain the proof and put the explanation in writing back to the reporting agency. Trans Union lists some good guidelines on submitting your dispute. Give it about 60 business days to be recorded before making any applications for financing. Credit reporting agencies are required by law to investigate your dispute and if not resolved, then include these explanations in their reports to potential financiers. Try these sites to order copies of your credit
reports from the Big Three credit reporting agencies: Second, you will remember that we said earlier that you "think" that you can afford your RV. To most of us, affording something is a matter of what the monthly payment will be and how it fits with the rest of the monthly payments as opposed to income. What you think you can afford and what some financier may think you can afford may be very different. Be that as it may, a good sanity check is using some sort of amortization software. By inputting the principle (don't forget the sales tax), interest rate, and length of loan in months, the software will create an amortization table, indicating monthly payment, interest paid and remaining balance on a month by month basis. Do several iterations of this, varying the down
payment, interest rate and length of loan. This will give you a good idea of
what the effects of the variables are. A rule of thumb is if you can't pay off
the loan in ten years or less, lower your sights Now, when you get all done with this, don't forget to add in the monthly costs for things like insurance, property tax, parking etc. All of this should influence your decision on the affordability of RV life. (Be sure to check out the budget links found in Donna's Financial Issues for Full-timers. We realize that your RV payment is only one piece of the pie when you are trying to go full-time.) What we have discussed here is some suggestions as to where to start. It will give you some idea what you can afford and cushion some of the surprises you may encounter. Next time we'll wrap up the purchase process and give you some resource links to help you along the way. So, until next time, keep on rolling! Some images copyright www.arttoday.com |
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We have asked ourselves a whole series
of questions pertaining to our personal preferences in RV travel and living. We
have picked out our dream RV and "think" we can afford it. Unless you
have a ton of cash around for which you have no immediate plans, you must find
someone to 
a little and
try this exercise again. (This is another personal area keeping in mind that
some folks will opt for 15 years.)