Loans on RV's ... gulp

[Lisablue69]

It was easy to get "loped" in on a long long term RV loan (but at a good rate) from dealer on new 5th wheel.

Please tell me we are not alone being crazy enough to fall for something (long term load) that depreciates so fast....

[Pmedic4]

Originally Posted by Lisablue69

It was easy to get "loped" in on a long long term RV loan (but at a good rate) from dealer on new 5th wheel.

Please tell me we are not alone being crazy enough to fall for something (long term load) that depreciates so fast....

I definitely believe anyone, should never have a loan and payments for longer than the useful life of the item we are buying. It doesn't make sense to purchase food on a loan, since we'd likely consume the food before we'd make the first payment (we'll disregard the argument of the value of food lasts as long as I'm alive, because without it I'd be dead).

While depreciation on an RV is significant, that decline in value doesn't really factor in, as the book value of an item doesn't affect our intrinsic value. Essentially, even if the RV we purchased drops in value from $100,000 to $1, the service it provides to us hasn't changed from the initial price. Even if it starts to show dirt, wear and tear, it still provides the same service to us as the day we bought it. We don't use the RV up, it still remains what it was when purchased. Sure we may have pay for repairs to keep it useful, but this is the cost of usage, just like you pay for fuel, oil, and tires for your vehicle to make it useful beyond that drive off the lot.

So how long is that RV going to provide the use (and enjoyment) you expect? Three, five, ten, twelve or fifteen years? Then what is it worth to a buyer at the end of it's expected life to you? I'm certain there are some leases available for motorhomes, but I'm not sure there are for pull behind RVs. So say you know your RV costs you $100,000 and it will lose value to $50,000 over the three years you plan on using it. The problem is no one will loan you just $50,000 on speculation your RV will be worth that residual value, so you have to borrow the entire cost (less your down payment).

The answer is many people have an RV loan, I for one. I will say I have financial reserves that I could pay outright for the RV, but I also understand there is a 'cost' to me use that money. If I leave that money in my investments, I may earn 6-10% return on my money, or I could also lose money too. However, if I have a 5% loan, and return 1% above that on my investments I've come out ahead, not counting tax implications, but that affects it in many ways, so simply consider it in this simple terms. Perhaps you have money in tax deferred accounts, and you'd have to pay 20% income tax to withdraw it, you can claim the mortgage deduction for a second home for the RV on your income tax, personal property tax deduction, sales tax deduction, or income tax on the gain of your investments, capital gains on sell of stocks, etc., so it depends on your personal situation.

At the end of the day, it's a personal decision and choice we have to make regarding the value of our RV. And it's a great deal more than just the cost of the loan. I store my RV at a lot that has fairly modest cost, so that factors in to my decision, and why I mention this is the other day when picking up my RV, right next to me is a boat that has been sitting there for a very long time, on flat tires. The license plate sticker shows a last valid registration of 2000, eighteen years ago. Even if the person paid cash for this boat, which was a nice boat at one time, they have probably continued to pay $25 a month for many years, costing them $5400 for this time, for something they don't even use, and truthfully probably can't use any longer, as there is a tree growing up in the middle of the boat!

Now that is really a waste of money!

[MarcS]

You are not alone!

Sent from my SM-G935V using Tapatalk

[Lisablue69]

For us, we are thinking snow birds in 5 years so we got a luxury 5th wheel that we can start paying on at an affordable monthly payment. We were thinking, if we can easily afford the monthly loan then why not. Then, when we do go somewhere in the winter for 4 months, at least we have room to roam....like a vacation home for us...
We also want cash flow all the time, so we don't want to deplete our savings..

[Lisablue69]

Marc, how does your gasser do with pulling your 3350? Is that a 35 footer?

[KCSA75]

We purchased our Cougar used so don't have as much invested as a lot of folks. I financed through a local bank that the dealer worked with. It was a simple interest loan with no prepayment penalty. Three months later, I took out a loan against my 401K. Cut two years off the term and 3 percent off the rate.

[Lisablue69]

And, we live so close to many many beautiful spots here in NW Wyoming. Many places you can camp for free on National Forrest areas (14 days). So with this camper, it's like we have our own cabin in the woods ( a luxury one at that ...lol). Doe it sound like I'm trying to talk myself into the fact that what we did is Ok...lol

[sourdough]

To piggyback on something Ed said;

Something you have to look at with a RV, or anything else that costs money, is the intrinsic value. What does IT give you? What is that worth? For many, me included, the joys that the RV give me more than make up for the depreciation. It's all in how you look at it.

We have a vacation home in the mountains that I got a really good deal on. We've had it 23 years and we are going to sell. When last appraised (2009) it was worth 3 times what we paid for it. I told my financial advisor we were going to sell and he was all gung ho talking about how much we would get and how "he" would put it to use. I told him he/we didn't need it in his hands and I didn't care if I sold it for a 1/10th of what it was worth. I have received far more from it than I paid for it so I am happy getting anything back from it. Just a different way to look at things I guess.

[goducks]

Depends on your income and life style. I'm retired with SS and a Carpenters Union pension for life. I'm not into the same living standards as those in their 30's and 40's that need to save for retirement. I get the same money every month for the rest of my life. Makes no difference to me whether I pay $100 or $300 for 5 years or 15 years. As long as I can enjoy the RV thats what I'll do.
BTW Medicare rocks.

[notanlines]

Not to sound all Dave Ramsey, but why would someone with good sense be paying for toys on a loan and be retired? Toys should NEVER be financed.

[Ken / Claudia]

Well, I could have paid cash for this current RV, looking back thought my life the loan rates were the lowest I ever seen. I paid half in trade in and cash, took a 10 year loan for the rest. Knowing I will likely not have the trailer in ten years. I took a gamble that at the time of sale the RV will still have value. I take really good care of my my stuff and expect this will not be trashed out.
So, I still have the money I did not spend on the RV still working for me in other ways and can easily make the low payments and not feel bad writing the checks as it sits in the driveway.
I did find that on a large boat purchase, all I dealt with loans treated it like it is a motor vehicle and 60 or 72 months was the terms. None for 10 years.
The payments would so damn high, I waited until I could pay cash and do so. Again another thing that sits in the driveway and gets used maybe 30 days a year.

[JRTJH]

Originally Posted by notanlines

Not to sound all Dave Ramsey, but why would someone with good sense be paying for toys on a loan and be retired? Toys should NEVER be financed.

Everyone's financial situation is different and for some people, it makes "financial sense" not to disrupt investment earnings by withdrawing funds to pay cash for a toy. Depending on the toy, it can be considered a second home and qualify for mortgage deductions. With interest rates at 3.5%, every tax break helps and my investments this past year ranged from 18% to 30% depending on how aggressive the funds manager is. So, why use 30% money (plus have to pay income tax on the withdrawal) to pay for a 3.5% loan that I can deduct as a mortgage investment on my income tax????

Seems I'd lose a significant amount of money by paying cash rather than financing it at the low interest rates that are available..... YMMV.

I do agree that someone should seriously consider not buying a "toy" if the purchase would require using money that should be saved, invested or otherwise is required for day to day living expenses.

[goducks]

Originally Posted by notanlines

Not to sound all Dave Ramsey, but why would someone with good sense be paying for toys on a loan and be retired? Toys should NEVER be financed.

Because the house and cars are paid for. No bills other than the usual, Dish, heat water elec ins, etc. Why should I be saving still saving well into my retirement? Did that already. If you can't afford to buy anything in retirement then you did something wrong. Isn't retirement to be enjoyed.
Tell me sir, should I pay $250-400 a month for a 5th wheel and go camping and traveling when I want as opposed to spending more on hotels and eating out all the time?
My incomes not based on a 401K or Roth type retirement plan. I get a check from SS and my Carpenters Union every month and will till I die. What should I do whith all that money? Stick it in the bank and stair out my front window all day?

To add to that I would never buy a $60K-100K RV. Talk about throwing money away. My 5er was lots cheaper so at least I'm not losing a huge amount of money.
It's also quite ironic that on an RV forum people are talking about losing money.
RV's and all toys are the biggest money pits there are.
Buying an RV probably goes against everything DR says.

[chuckster57]

Originally Posted by notanlines

Not to sound all Dave Ramsey, but why would someone with good sense be paying for toys on a loan and be retired? Toys should NEVER be financed.

I’ve had a trailer payment for the last 25 years. Been enjoying a trailer since 1989 so the current payment was already factored into the “retirement” budget.

[notanlines]

I knew I would take a pretty good beating on that statement. Americans are an "instant gratification, I want it now" people. We push credit cards on our young people, even before they are gainfully employed. Saving is not the answer, MasterCard IS the answer. We are in an RV park with any number of 65-70 year old people who don't have their house paid for, and are making notes on their Class A's. There is simply something wrong with that situation. I can take it, load up on me!

[goducks]

Originally Posted by notanlines

I knew I would take a pretty good beating on that statement. Americans are an "instant gratification, I want it now" people. We push credit cards on our young people, even before they are gainfully employed. Saving is not the answer, MasterCard IS the answer. We are in an RV park with any number of 65-70 year old people who don't have their house paid for, and are making notes on their Class A's. There is simply something wrong with that situation. I can take it, load up on me!

100% agree about no bills when retired. Like I said my 5er is the only one. I am amazed at the number of people in their 40's or latter that buy a house on a 30 year loan. What do they think will happen when they want to retire around 65. I was lucky enough to be able to retire at 56 even though I still had a house payment. Getting all your bills paid off before retiring should be everyone's goal. My wifes still go 13 months to go. I've been retired for 9 years Feb 28th.
Of course there's a lot of people with a lot of money that can afford many of lifes luxury's. Good for them. I don't think it's always cut and dried for everyone. One size does not fit all. How a person managed their retirement savings and what their standard of living is has a lot to do with it.
I like having as few bills as possible.
I also feel sorry for people buying homes right now. Prices are through the roof. (pun). When the next big recession hits it's going to be 2008 all over again. Best thing IMO is to have your house and cars paid for. Can't reposes or foreclose on what you own.

[Frank G]

In the real world...

It is easier to finance a RV with a simple credit check and small to no down payment than a house of equal value that requires 20% down and all the attached federal requirements.

If the financing for a RV followed the same rules as housing, the industry would dry up. Look what happened when they took financing away from the single and double wide housing industry. The mobile home parks are full of 5th wheels and larger TT. "Look Ma no 20% down required"

[66joej]

Originally Posted by notanlines

I knew I would take a pretty good beating on that statement. Americans are an "instant gratification, I want it now" people. We push credit cards on our young people, even before they are gainfully employed. Saving is not the answer, MasterCard IS the answer. We are in an RV park with any number of 65-70 year old people who don't have their house paid for, and are making notes on their Class A's. There is simply something wrong with that situation. I can take it, load up on me!

We are in a RV park (it's called a resort) here in Bullhead City AZ.
If you saw the size and I'm sure prices of these huge rigs they cannot all be paid for. 45' class A's and Toyhaulers along with 5 slide 5ers are common. Our 24' Cougar sure looks insignificant but on the bright side it's paid for.

[sourdough]

Originally Posted by notanlines

I knew I would take a pretty good beating on that statement. Americans are an "instant gratification, I want it now" people. We push credit cards on our young people, even before they are gainfully employed. Saving is not the answer, MasterCard IS the answer. We are in an RV park with any number of 65-70 year old people who don't have their house paid for, and are making notes on their Class A's. There is simply something wrong with that situation. I can take it, load up on me!

I'm not loading up on you.

I think all folks are in various places in life.....no matter how old. Some folks believe in "pay cash" or pay nothing. Others believe that if you can afford the credit line....use it. Even others believe if you can get the credit, even if you can't pay for it.....use it.

Folks retire in various financial states. If you can pay cash for it, and it doesn't hurt your portfolio, do so.....unless, as has been mentioned, your money is making 10-30% and you are going to pay a 3-4% interest rate. In that case it wouldn't make a lot of sense to expend the money that's making money on a depreciating toy and lose 6-24% gain on your "other" investments. (except filling out that dang IRS form on all the capital gains is long and laborious).

This may or may not be hard to believe but we were looking at a very nice 5th wheel and I was talking to the finance guy. We were talking about interest rates, length of loan etc. We were talking about a 10 year loan or something and off the top of my head I asked "what if I die, my estate has been spent down and there isn't enough money to pay off the RV - what happens?" (he was encouraging me to spend, spend, spend - sort of like...if you can pull it out of here you're good to go). His reply....don't worry, you're dead so it's the bank's problem....??

We don't have any financial worries but I wonder, with that statement, if some might find that an acceptable path? You work all your life, you want to be able to go do "something" after you retire and you have that option; you can pay the payment but not have the reserves to pay for it if you die? After working 40 years living a lifestyle that never allowed a lot of luxuries maybe a person just wants to go have some fun. Can I fault them for that? I understand it....I just think you should have the resources to cover your bases no matter what befalls you....including death. I've watched a lot of folks work all their lives "waiting" to retire at 65 or later then never get that experience because they die.

I've counseled lots of folks young and old on financial matters just using common sense. I find it hard to fault anyone that has worked 40+ years "trying" to get to a comfortable retirement spot then can't, then they use whatever means to experience the retirement life so many of us on here speak so highly of. Sometimes you have to shake your head but for them they are trying to find a way to happiness. I think I'm OK with that.

[sourdough]

Originally Posted by goducks

100% agree about no bills when retired. Like I said my 5er is the only one. I am amazed at the number of people in their 40's or latter that buy a house on a 30 year loan. What do they think will happen when they want to retire around 65. I was lucky enough to be able to retire at 56 even though I still had a house payment. Getting all your bills paid off before retiring should be everyone's goal. My wifes still go 13 months to go. I've been retired for 9 years Feb 28th.
Of course there's a lot of people with a lot of money that can afford many of lifes luxury's. Good for them. I don't think it's always cut and dried for everyone. One size does not fit all. How a person managed their retirement savings and what their standard of living is has a lot to do with it.
I like having as few bills as possible.
I also feel sorry for people buying homes right now. Prices are through the roof. (pun). When the next big recession hits it's going to be 2008 all over again. Best thing IMO is to have your house and cars paid for. Can't reposes or foreclose on what you own.

Excellent thoughts.

I retired pretty young at 55 almost 13 years ago. We were lucky with work, life and investments so money has not been an issue.....unless I wanted to buy a new King Air....I would then have to watch my spending.

I have to say to anyone thinking of retirement that paying off your debts...house most importantly, is the easiest way to find a way to an easier retirement. I don't know of anyone, with normal financial means, that doesn't struggle trying to do anything with a house payment. As my wife told me; we aren't going to retire unless she has a permanent paid for home, and no, an RV or mobile home ain't it.