Motorhome loans are a serious consideration if you don’t want to use existing equity to buy your travelling house. A loan could mean that you can take the long road trip you have been planning, head to more destinations or upgrade your RV without having to save first. As usual, when considering a loan, prudence is the key.
But we have discovered that the availability of RV finance depends a lot on where you live. Quite apart from your credit rating, there are some countries that simply don’t do motorhome finance or refinancing.
That said, there are some basic principles that apply to motorhome and RV finance just as they do to home finance. We’ll outline some of them here.
Motorhome Financing in North America
If you are in the US, you’re in luck. There are several possibilities and the thing that astonished us is the low interest rates: Good Sam Full-timer loans at less than 4% at the time of writing… You can see more about refinancing rates here: https://www.goodsamrvloans.com/rates/#rvrefinance and the full table of their full-timer rates is here: https://www.goodsamrvloans.com/rates/#rvfull-timer
Read the small print as there can be some interesting restrictions. For a refinance loan, for example, one company insists that your RV must be a 2004 model or newer. For a purchase, the motorhome must be not older that a 2006 model. We’re pretty sure this is driven by the 30-40% depreciation in value when you drive the RV off the showroom floor. The maximum loan term is 20 years for a motorhome from 2011 or more recent on loan amounts of $50 000 or greater.
If you are Canadian, you need to hold dual citizenship with the United States. You will need a United States social security number.
Other companies do not finance full-timers, defined as someone who does not own a home and lives in their motor home full time.
In Canada, Canada RV Finance provide RV, Marine and Power-sport financing exclusively to residents of Canada purchasing from a dealer or privately. https://canadarvfinance.com/
Motorhome Loans in the Southern Hemisphere
In Australia there is some choice but they still baulk at the full-timer.
360 Caravan Loans, http://www.360caravanloans.com.au/ offer a free online quote. They are a broker with access to over 30 bank and non-bank lenders and offer rates around 6% at time of writing.
Two points worth considering, if you are planning to use your caravan for permanent accommodation they will be unable to help you and, because the caravan is an asset with an average lifespan generally longer than motor vehicles, their motorhome loans can have terms of up to seven years.
NRMA use their Car Loans facility to finance motorhome purchases. They offer low fixed-interest rates with terms of up to 7 years, no monthly fees and they provide funding for Caravans and Motorhomes as well as their usual new and used cars.
In New Zealand, Credit One Finance specialises in loans for RV’s, campervans, camper trailer and motorhomes. They provide finance New Zealand-wide for all types of recreational vehicles. You can reach them through their site http://www.creditone.co.nz/caravan-finance or phone 0800 300 500.
Marac Finance, http://www.marac.co.nz/, is a division of Heartland Bank which itself is the result of the merger of three finance companies and credit unions. Like most non-bank lenders, they regard the asset being purchased as the security for the loan. They are recommended by Kea Campervans.
Your motorhome is not an asset! Really? While we would like to think so, it is not an asset that will appreciate in value, like shares or land. Instead, this asset depreciates rapidly in the first year or two then stabilises and this should have a significant impact on your decision to refinance.
There’s little point in refinancing a motorhome if you don’t intend to hang on to it for a few more years. And many RVers won’t because TIAABB (there is always a bigger boat). Lots of folks change RVs every three or four years, usually moving to a bigger unit.
So if you’re planning on selling your motor home in the next year or so, you might as well stick with your old RV loan and find other ways to save those extra dollars per month.
Remember what we wrote about assets? If you purchase an brand new RV, in two years time you could find that you owe more on your motor home than it is currently worth. It is, unfortunately, a common scenario because in the first year of ownership the value of a new motorhome can drop by up to 40%, just by driving it off the lot. That is value you’ll never make back so… don’t sign on for long-term loans with a small deposit. You can do that with a house because the idea is that you’ll get capital growth over time. That doesn’t happen with a motor home.
Yet, terms on RV loans can range from 10 to 15 years with less than a 20 percent down payment with many lenders requiring less than 10 percent. There are even some zero-down or no-deposit motorhome loans. This could be financially disastrous!
Signing on for long-term motorhome loans with little money down may seem like a good idea at the time, it means that “living the dream” becomes reality a little sooner but it can quickly put you into a situation called negative gearing – when you owe more on a loan than what your RV is worth. Property developers do this deliberately so they can run a tax loss but motorhomes are not the right asset class to be trying this tactic.
Refinancing a motorhome loan will not be easy in this situation because banks and non-bank lenders (credit unions and the like) base their calculations on the current value of the RV, not how much you owe. Many lenders will finance as much as 80 to 90 percent of the RV’s current value but if your home on wheels has just lost 40% of its value, the picture is not a pretty one.
What is your Motorhome’s current value?
Not sure how much your current rig is worth? North American RV pricing data can be found in the NADA Guides. Pricing guides are also available from Woodall’s, Kelley Blue Book and RV Buyers Guide.
So, who should consider refinancing their motorhome loans? And what questions do they need to ask? First, the interest rate must be lower than the initial rate. Obvious, really. Second, they must have equity and plan on keeping the RV for a few more years.
As for any loan, be sure to shop carefully. Avoid lenders that charge big fees for refinancing an RV loan. They could easily cost you more than you save on interest payments…