Why are RV Loan Rates So Looooooong?

[repacs0103]

Originally Posted by goducks

The stated value is not what you would owe if you had an upside down loan. Thats fine if the ins pays you what your RV/vehicle are worth, but that may not be what you owe. assuming you have a loan.

Well in my case it is because I intentionally stated an elevated value much closer to MSRP than I paid, considerably higher than my initial payoff. My insurance company let me choose my own value since all it does is affect my rate.


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[64osby]

Everyone can do what they want regarding debt.

I have been through many tough times. It has taught me to be very conservative with money. The only debt we have is a mortgage, less then one year to pay that off.

If you have ever been without or unable to work, starting up a new company, had a business go under debt is not your friend.

A little over a year ago one of our kids was in a major auto accident we spent 14 weeks with our child in rehabilitation hospitals. For months after that we spent 4 to 8 hours a day with therapists, doctors and various other appointments. To this day we spend several hours a day to assist with continued recovery. I did not work for over six months and my work schedule is very open to allow time for my child. Thank goodness I am self employed.

I have cars, boats, campers, and many other toys that are paid for. If they weren't paid for I might not have them anymore. My stuff might not be new but it serves the purpose.

[Atlee]

Cost has been increased by $8,840, but not sure the "value" has been increased by any amount.

Originally Posted by 64osby

A 12 year loan at 6.49% (Good Sam) on a $20,000 trailer will cost $8,840 in interest.

You have just increased the value of your TT by 44%.

I'm of the opinion you pay cash for toys, buy what you can afford. I like to buy used so someone else takes the big hit on depreciation.

[lightcs1776]

Originally Posted by Hohenwald48

I think borrowing for luxury items is the very definition of "living beyond your means".

I agree. We took the long loan, but paid it off in just over a year and a half. I hate having debt hanging over me.

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[Atlee]

Plus 1. This, I believe, is the single best answer to the question.

This is the reason many, many folks buy using long term loans. They want what they want, and they can make a payment that is low. A low payment only comes two ways. 1) a low priced RV, which means either an older larger trailer, or a newer small trailer. Or 2) a new big trailer with a very long note attached. What many of these people don't realize is after 2-3 years, if they don't want to be RV'ers any longer, the RV they have is close to lemon status, or 3) their needs have changed, or 4) They want bigger and better, they find to their horror, they are very upside down with their current trailer.

Of course this is true for automobiles, houses, or other big ticket items also.

Originally Posted by farnik78

They know a lot of people shop based on monthly payment amount so the longer the financing the lower the monthly payment so they can sell a 40k rv for a 12 year note for the same monthly payment as a 15k rv on a 5 year note


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[rodro123]

Originally Posted by bansai

Being upside down is usually only a problem if your financial situation changes and you need (or otherwise want) to sell your depreciating liability..
Just look at the housing collapse that happened 9 years ago to confirm the dangers of going upside down. Nothing insurance is going to do about that. Of course there is also gap insurance available for people that don't have an RV policy that covers full replacement cost. Drop the gap insurance when you are 'right side up' or just get a better policy to begin with.

I stay out of other peoples business when it comes to financing luxury items. If your retirement picture looks good, and you have the monthly cash flow to buy something today that will bring you and your family joy, I say go for it. My grandfather spent his whole life saving money for tomorrow, and he died before he had the chance to enjoy any of it.

You pay $40k for the RV and wipe it out in an accident. At time of loss you owe $38k but insurance company looks it up and says it worth 22k that's what they pay out. but your loan company wants the $38k that's where gap comes in to pay the difference. With out gap you pay that amount. BUY Gap

[FeatherFam]

Originally Posted by wags999

I guess some of us "older" members were brought up in a different climate. Consumer loans use to be based on "rules of 72", rather than simple interest, as most are today. Under rules of 72 you pay most of the interest first, than you pay the principle. If you took out a longer note, you paid more interest no matter how fast you paid it off. I won't bore anyone with the explanation of rules of 72 and how they work, but, they didn't work for the consumer. One thing it did, was teach people to save and pay for what they purchased rather than finance everything. I can see benefits to both. Instant gratification was not yet in our vocabulary. I'm happy we can all make our own decisions as to what we feel is best for ourselves.

Very true - So much has changed. In the '60's-'70's, my dad raised 7 kids, paid cash for new cars, owned a Santa Fe travel trailer, and financed homes for 15-20K on 6-10K annual salary as a salesman with an 8th grade education (no HS diploma).

Credit and dual income households changed it all. My wife and I make what a wildly successful, "wealthy" doctor made back in the day, and we make ends meet. We would live like lonely monks without financing. We do as others have said. Use our outstanding credit rating to get little to no interest and aggressively pay things down to reduce the note duration. We would be lost without "same as cash" financing for our home repairs, appliances, and maintenance. Everything is insanely expensive. It is just the economy that we are in today. The days of paying cash for everything are a memory. In theory, we could pay cash, but it would take us so long to save the exorbitant costs of goods that we will die before we leave the house or clothe ourselves.

It is pathetic. Our "'60's rich man salaries" do not buy Dad's life - Cannot even get in the mix without the "banker." We have to deal with the devil to make purchases on poorly made, designed to fail junk and live in dangerous communities and a debased culture that has forgotten civility and morality. I would take Dad's days any day. To quote an '80's Sunday NFL game commercial, featuring Don Shula behind the wheel, "This is not your father's Oldsmobile." Can't even get an Oldsmobile. As caboose boomers, we thought Dad's life would be ours - Not so. Even with master's degrees, tons of experience, and old school serious work ethics - It ain't gonna happen. The gig is up. It was a nice ride - Post War Era, 50's - early '70's. We often wish we would have never tasted Mayberry and the "Dream."

[TCNashville]

I insured mine for the purchase price. If it gets destroyed that's what I'll get and I'm happy with that.

[Dober2004]

As someone who is in health care, I know all too well that there are WAY too many people who never get the opportunity to enjoy that nest egg that they worked so hard for by sacrificing "unnecessary purchases". We live for both today and tomorrow. We finance our luxury toys, and we have pensions and 401Ks for the future. I think it is all about personal preference.

[TCNashville]

Originally Posted by FeatherFam

It is pathetic. We have to deal with the devil to make purchases on poorly made, designed to fail junk and live in dangerous communities and a debased culture that has forgotten civility and morality. I would take Dad's days any day. The gig is up. It was a nice ride - Post War Era, 50's - early '70's. We often wish we would have never tasted Mayberry and the "Dream."

So true. Today's society is somewhat scary.

[suzieshome]

If no one ever financed large purchases we would all be renting our accommodations and taking the bus. Besides, who else is going to help the banks make their billions every year.

[NC Roamer]

Originally Posted by Woodworker

2 words, credit union

I concur! We've been very happy members of the NC State Employees Credit Union since 1975.

[Bookemdanno]

I can't get over the loan rates that y'all are mentioning?? I just purchased a new truck last month and got 1.9% for 60 months and my 5er is at 2.1%. The only debt we have is the new TV, House, & 5er. Credit cards are paid in full and we managed to pay off the DW's car 2 years early...we will probably do the same with the new TV, house, & 5er. Our house is a 15 yr mortgage and we are half way there! I say to each there own...do what makes you and your family happy and make some great memories.

[TCNashville]

Originally Posted by Bookemdanno

...do what makes you and your family happy and make some great memories.

In the end, this is what it's all about.

[wags999]

It's called instant gratification... people don't want to work and save for something, they want what they want when they want it.. Government would love to get rid of cash for many reasons...most bad. How often do we see someone go for a cup of coffee and it's on the credit card.. I prefer cash, If I have paper in my pocket I know how much I can spend, it also is mentally different pulling actual cash out and plopping it down on a desk, compared to signing your name. I always liked the feeling you got on pay day when you were counted out cash, much more than when you see a number on your electronic device. I used credit cards but have never paid a dime in interest. I use them because I get money back. Did finance our home for 15 yrs, but all repairs and upgrades were/are cash.

Try living on SS when you saved when minimum wage was $3 an hour and now it's over $10.. everything is more expensive, it's really easy to get in a hole you can't get out of. With cash, that can't happen....no cash don't get it, no issues.

Thank God we live in a land where we can each do what we feel is best for ourselves.

[Crabman]

I have financed RV`s before, but would never consider the 10-12 yr note deal but that`s just me. Everything in moderation. And I agree with wags999 about the credit cards. They can be a valuable tool when used properly and balance paid off every month. Some cards now pay 2-3 % cash back for those with good credit.

[Bookemdanno]

Originally Posted by wags999

It's called instant gratification... people don't want to work and save for something, they want what they want when they want it.. Government would love to get rid of cash for many reasons...most bad. How often do we see someone go for a cup of coffee and it's on the credit card.. I prefer cash, If I have paper in my pocket I know how much I can spend, it also is mentally different pulling actual cash out and plopping it down on a desk, compared to signing your name. I always liked the feeling you got on pay day when you were counted out cash, much more than when you see a number on your electronic device. I used credit cards but have never paid a dime in interest. I use them because I get money back. Did finance our home for 15 yrs, but all repairs and upgrades were/are cash.

Try living on SS when you saved when minimum wage was $3 an hour and now it's over $10.. everything is more expensive, it's really easy to get in a hole you can't get out of. With cash, that can't happen....no cash don't get it, no issues.

Thank God we live in a land where we can each do what we feel is best for ourselves.

Originally Posted by Crabman

I have financed RV`s before, but would never consider the 10-12 yr note deal but that`s just me. Everything in moderation. And I agree with wags999 about the credit cards. They can be a valuable tool when used properly and balance paid off every month. Some cards now pay 2-3 % cash back for those with good credit.

Definitely different stokes for different folks...I'm just the opposite. If I have cash on me, it's burning a whole in my pocket and I'm more inclined to spend it. For instance, if I'm stopping for gas in the morning and I have cash on me, I will go inside and buy a cup of coffee...no cash, no coffee! I hardly ever carry cash (mainly only when traveling). So therefore, if I have to take out the credit card, I think long and hard as to whether or not I really need to buy what I'm looking at...and if I can't afford it, I don't buy it.

[Crabman]

Originally Posted by Bookemdanno

Definitely different stokes for different folks...I'm just the opposite. If I have cash on me, it's burning a whole in my pocket and I'm more inclined to spend it. For instance, if I'm stopping for gas in the morning and I have cash on me, I will go inside and buy a cup of coffee...no cash, no coffee! I hardly ever carry cash (mainly only when traveling). So therefore, if I have to take out the credit card, I think long and hard as to whether or not I really need to buy what I'm looking at...and if I can't afford it, I don't buy it.

I carry both, the cash and credit card and spending one or the other its the same to me you just get the rewards with credit. I have no tendency to spend one faster or more reckless then the other and neither one gets to burning in my pocket but like you say everyone is different. Right about now I could use a little more cash though.

[RayPayne]

I think the long term loans are there because almost all people buying a new RV are not making a sound financial decision to begin with. (Yes, my RV was bought new.). It's going to depreciate like a rock. It's going to have perpetual things to fix and maintain. It's an outright horrible financial decision. So you know your target market is buying based on emotional drivers. That means you'll get a lot more people willing to pay more interest over more time to get that object. To me it just makes sense that lending institutions would offer longer terms as long as the math supports the profit vs the default rates. Unlike some other big ticket items, RVs are perceived as affordable by a much wider audience. I see lots of people with RVs that cost more than a Porsche Panamera, but think the Porsche would be a purchase they could never afford. Yet the RV is ok. Go figure.

[jloco]

I rarely use cash these days with the introduction of debit cards. Money comes right from the bank account. I haven't stepped inside my bank for years. Pay gets direct deposited, which gets me free banking. I love the electronic world with paypal, etransfers, etc. It's all MY money, but I prefer the newer ways of getting it and spending it. Plus I monitor my bank account more than ever now with instant alerts of what could be fraudulent activity. As a software engineer that actually helps create some of this stuff, I enjoy the convenience and security of it all. Credit cards? Not so much. Sometimes I use my AMEX because of the extra product protection it provides, or simply because of the points, always pay it right away and do not carry a balance. To each his own.