Don't Make These Common Motorhome Loan Mistakes
Quick Summary
Before jumping into the world of RV loans, ask yourself a handful of questions to make sure you’re ready for this big step. Take a look at our top three questions to ask before you finance an RV.
As with other vehicles, shopping for an RV in the off-season can result in amazing deals that can ultimately save you money. However, when it comes to financing for an RV—including boats, fifth wheels, campers and certain trailers—it’s good to know how much you can afford before heading to the dealership and making this significant purchase. Before jumping into the world of RV loans, ask yourself a handful of questions to make sure you’re ready for this big step. Take a look at our top three questions to ask before you finance an RV.
How is My Credit?
Having a decent credit score always proves to be helpful in situations where payments and financing are involved. When it comes to RV loan rates, financial institutions may be more stringent than they are with auto loans. “RVs tend to depreciate much faster than other vehicles. But, because they can cost just as much or more than a regular vehicle, they’re often financed for longer terms,” says Jade Beckman, vice president of consumer loans at Mountain America Credit Union.
Your credit profile will play a significant role in your interest rate and the total cost of the loan on your RV. Lenders use your credit score, as well as your credit history, to gauge whether or not you qualify for an RV loan. It also will be considered when determining what interest rate you can qualify for on the loan. This is a good place to start when considering your options. If you can access your credit score through your financial institution, it’s much easier to check where you stand and see what the possibilities are for you moving forward.
Where Can I Find Financing?
Banks, credit unions, and independent finance companies all offer financing for RVs. As with autos, preapproved RV financing is important, since it will largely determine which RV you can afford. Beckman suggests using Mountain America’s online RV financing calculator to determine a monthly payment and purchase price that are within your budget.
Already own an RV? Lenders also offer refinancing to reduce your monthly payment. If RV loan rates have dropped, this is the perfect time to consider refinancing and getting that lower interest rate. Give yourself some peace of mind with a lower payment so that you can better enjoy your RV adventures!
How Much Should I Plan for in Maintenance Costs?
Do your research on RV insurance, fuel, and maintenance costs to ensure the upkeep fits within your budget. Insurance rates and RV maintenance costs will vary depending on what kind of RV you have, so keep that in mind as you move forward. “An RV needs to be safely stored when not in use. In cold climates, it also needs to be winterized or you will risk major damage to the unit, resulting in large repair bills,” Beckman notes. You might consider looking for a storage unit where you can keep the RV while not in use or, if you’re good with your hands and you have space, you may even consider building a large shed where you can store it on your property.
For consumers wanting to make vacationing more practical and affordable, an RV can be a great solution. This is an investment you can use for years to come and it’s an incredible way to bring people together to make lasting memories. A recent survey by the Recreational Vehicle Industry Association of America indicates that 90% of RV owners take three or more mini-vacations each year, and that travelers can save up to 62% in travel costs with recreational vehicles. Just make sure you’re taking the right steps and the proper precautions as you consider this purchase.
Buying a motorhome, or any other type of RV, is an exciting time in your life—one that will let you and your loved ones enjoy countless adventures and create cherished memories. Take steps to avoid the complications that come from disreputable lending practices or poor financial planning.
Whether you buy a new or used RV, the purchasing process should suit your individual needs. Here are the most common mistakes to avoid when buying an RV:
Overestimating what’s in your budget
Before you begin shopping for RV loans, it's important to establish a budget—and stick to it.
Start by creating a spreadsheet or keeping a simple list of your income sources, as well as what you spend each month. Once you've compared the two, you'll want to look at your overall financial picture—including what you want your retirement years to look like.
Add in a comfortable, estimated monthly payment for your RV loan. Use an RV loan calculator to help you determine what you can afford.
Not getting your credit score in check
Once you know what you can afford, look into improving your credit score.
Credit scores are calculated from several different pieces of data in your credit report. The two largest categories are your credit payment history, which accounts for 35% of your score, and how much you owe, 30% of your score. The rest is based on how long you've had your accounts (15%), whether you have new credit (10%) and the different types of credit you've accumulated (10%).
If you want to increase your score, look at each factor and make a plan to improve it. Some positive behaviors include maintaining a low balance, paying your minimum payments on time and not using more than 30% of your available credit. Tracking your finances can also help you make responsible decisions, which can increase your credit score.
The standard credit score range for RV financing is 600-700, but check with your lender to see what they recommend.
Not shopping around for the best loan
Owning an RV requires a significant financial commitment. Most buyers will need to get a loan. Not all RV loans are created equal, though, so check out a few financial institutions to find the option that suits your individual needs.
Most lenders offer flexible financing terms for new and used RV loans as well as refinancing—shorter financing terms with higher monthly payments, longer terms with lower monthly payments or something in between. Ultimately, look for a financing plan that works with your current, and future, lifestyle.
Failing to negotiate
Negotiating can be both an exciting and stressful part of the buying process. Regardless of the camper you choose, negotiate from the asking price when shopping for any vehicle.
Do your research first—the vehicle price guidelines from the National Automobile Dealers Association (NADA) can help you determine a fair price range. If the asking price is significantly higher than the price guidelines, you have data to back you up when you counter. At the same time, if the asking price is significantly lower than the value guidelines, this could be a red flag. Do some additional investigating before you buy.
Also, an RV or camper may require additional gear to use as intended. Make sure you know which equipment is part of the deal, sold separately or not essential.
Forgetting to get an inspection
Before you sign any official paperwork, ask the seller to have it inspected. A trusted mechanic should look at the following:
- Tires
- Battery
- Refrigerator
- Engine
- Transmission
- Brakes
Owing more than the RV is worth
Finally, structure your loan for success. Some experts estimate that a new RV can depreciate as much as 30% the moment it’s driven off the dealer lot. That's bad news for a new buyer.
The last thing you want to do with your motorhome is owe more than it’s worth. Avoid this by making a sizable down payment. Another option is to start with a smaller, less expensive RV. Pay off the loan and then trade up for a bigger or newer model.
The simplest—and most important—strategy, however, is to stay on track with your payments without falling behind. Stick to your budget and communicate your needs to your lender—you'll be well on your way to owning your dream RV.
