RV Financing: Is It Real or Is It a Ripoff?
Predatory lending schemes abound in RV sales and financing so proceed cautiously before financing your new RV.
Should I Apply For Financing Before Selecting an RV to purchase?
The answer is yes. Rather than allow the dealer to arrange financing during the heat of the negotiation process, secure your own financing before you begin your negotiations by obtaining a loan pre-approval – just like you would when purchasing a home. That way, you will know exactly how much you can spend, the interest rate you qualify for and exactly what your monthly payments will be. You can also find RV financing companies online that can pre-approve your loan and only require a short application and a little bit of your time. The general rule is that a RV payment should run no more than 12 percent to 15 percent of your after-tax monthly income.
Can I Negotiate a Better Deal if I Finance my RV through the Dealer?
Most RV dealers are going to try to make money off both your sale and your financing. There are no web sites where you can look up dealer cost and holdback to guarantee you are getting a fair price. Checking prices over the internet or via email can help establish a fair price but to do so, you need to thoroughly investigate the model you are interested in and the price. Don’t pay “sticker price” and don’t be afraid to negotiate! RV dealers would prefer to “help” you with financing because they usually get a secret kickback for sending a bank or finance company the loan. In some cases, the RV manufacturer of the unit you are purchasing will offer financing. The dealer may or may not add a commission to the loan he offers. You will be in the most favorable position to negotiate for the best financing deal if you've shopped for loans from other sources and received a pre-approved loan amount from at least one lender before getting serious about your RV purchase. Armed with that information, then see if the RV dealer can beat your best rate by at least a half percentage point.
What are RV dealer Rip-offs?
The RV dealer may tell you that you do not qualify for an ordinary loan but a “special” loan can be made that includes a significantly higher interest rate and a longer term to spread out the cost of the payments,
The RV dealer will “shop” your loan with several banks and then he, rather than the bank, will chose the interest rate you will get because the size of their kickback depends on the size of your interest rate. If you decide to finance through an RV dealer, then be sure to ask how many banks were given the option to finance your loan and if you are getting the best interest rate.
If a trade-in deal sounds too good to be true, it probably is. If you have a RV that is worth $10,000, and they offer you $14,000, you ought to be wondering why. The dealer may be adding the trade-in cost to the price of the new RV. What that means is that a few years from now, when you want to trade the RV in, you may owe more on the loan than the RV is worth. This happens all too often with cars and we are seeing this trend with RV’s as well.
Don’t buy “add-on features or products” that dealers add on themselves, such as window etching, rust proofing, fabric protection, theft guard, etc. Avoid them because they are unnecessary. The dealer may be willing to negotiate the purchase price only to sell you high profit - low cost items that they use to make money on and these unnecessary features or products can add thousands of dollars to the purchase price and ultimately the amount of money you finance. Don’t allow yourself to be “up-sold” to models with features you don’t need or want.
Does every lender finance RV’s?
Most banks and credit unions finance RV’s but you should shop around for the best loan rate because even a quarter of a percent lower than another loan rate can save you hundreds if not thousands of dollars over the life of the loan. There are lenders who specialize in RV loans and their rates may be lower and more flexible than those offered by traditional banks or credit unions.
How Long Is a Typical RV Loan Term?
Depending on the price of an RV, most RV’s are financed for 10-15 years. No matter how young or old you are, be certain you really want to spend the next 10-15 years making payments on a vehicle that depreciates very rapidly - typically 20% or more the first year. If you don’t believe that number, just ask anyone who had to sell theirs.
Is the Interest Paid on an RV Loan Tax Deductible?
Many RV’s qualify as second homes by the Internal Revenue Service and in some cases, the loan interest paid may be deducted. However, it is wise to consult a tax professional before purchasing an RV to evaluate your personal situation.
What Can I Do?
If you have a problem RV or believe the dealer who handled your financing may not have acted in your best interest, call or email Ron Burdge for the solution. We have been making RV manufacturers and dealers buy back bad motorhomes and pay compensation to RV owners for more than 25 years. Check out our free case review. Your solution to a bad motorcoach is only a click away.