The RV boom is undeniable.
For some, the pandemic and quarantine life in early 2020 provided a final push to adopt a more nomadic lifestyle. For others, a cheaper adventure life offers a tie that is too good to pass up.
Some people have even chosen to go all day and a quick look at the #RVLife hashtag on Instagram highlights the allure of life on the street.
The hustle and bustle doesn’t seem to subside anytime soon. According to the RV Industry Association, 2021 is set to be the best year on record for RV transport due to intense consumer interest.
But beginners tend to be wrong about buying an RV, says Brandi Stephens, founder of RVersity blog and YouTuber named Bloggin Brandi. Stephens has made her own experience and website a mission to help people learn how to get started in the life of a RV – she says she has bought three RVs over the years since she started five years ago, to live mobile full-time.
“I always say it’s like buying a house but financing a car,” says Stephens.
There are notable differences between car and home rental loans and nuances of the process that those with no experience may not understand. With so much variability in size and type, an RV can cost as little as $ 10,000 on one end and hundreds of thousands of dollars on the other end. Hence, it is important to understand what you are getting yourself into.
RV Purchase Options: Cash vs. Finance
Even if you have enough cash to cover the sticker price of the motorhome, there are reasons why you should consider financing because the life of the motorhome comes with a myriad of unexpected up-front costs.
Dealer fees, warranties and taxes are included in the final price. And some of those fees don’t just add up to a few hundred extra dollars. Stephens says she knows people who had to pay up to $ 30,000 in registration taxes on higher-priced RV purchases.
Regardless of where you buy an RV, you’ll need to register it in the state that you consider your primary residence (remember, where to get your mail and file your taxes). “When I bought my RV out of state, I had to pay Georgia taxes to register it, and you don’t think about the taxes to register it and get your tag,” says Stephens. “I think my last RV was $ 5,000.”
These fees can make a huge difference in your decision on whether or not to finance your RV.
“You may not want to pay for these things out of pocket because that’s your cash and you could use it to actually use the RV,” says Stephens. The operating costs for a motorhome can also be high, especially at the beginning.
Stephens estimates her running monthly RV budget at around $ 700 and depending on the month it could look something like this:
- Gasoline: $ 150 to $ 200 to fill her 80-gallon tank, which will get her about 600 miles
- Propane: $ 60 to fill their 26-pound tank, which needs more frequent refills in colder months because of the heat
- Water, electricity, sewage: around $ 30 a night on the cheap side in a RV park. Stephens is currently paying $ 400 per month for extended stay
- Electricity so Stephens can stay connected when she’s not at a RV park: $ 40 to $ 150 and more expensive in the warmer months to run the air conditioning
- WiFi: $ 100 per month for their hotspot
Much like the advice many first-time home buyers get, Stephens says you should expect a new RV to have unexpected expenses for a year on as basic as the RV’s microwave. And much like buying a new home, a warranty can help by covering some of the usual costs for the first year so you don’t have to pay for them out of pocket right away, Stephens says.
Aside from running costs, there are many costs that you should think about beforehand, such as: B. the registration fees. Financing the cost of the RV can give you more room to accommodate them by freeing up your cash reserves if something goes wrong. However, depending on your circumstances and the type of RV you are buying, it may make more sense to pay in advance.
NextAdvisor reached out to four RV lenders who say the demand for RV loans has definitely increased this year. They also provided some advice to help make your approval process as smooth as possible.
First off, an RV loan is the route you will want to take when financing an RV purchase. While they are similar to car loans, you cannot use a car loan on an RV purchase because the underlying collateral – in this case, the RV – is so different. And while many people use RVs as their primary residence, they also cannot take out a mortgage on an RV.
You could potentially get an RV home loan, but depending on the total cost of the RV, it could be difficult to get a personal loan with a large enough loan amount, says Brian Sharapata, senior manager, loan product strategy at Chicago Allianz Credit Union.
The main difference between a car and a motorhome loan is the length of the terms – they can be up to 20 years in some cases with a motorhome loan. Most RV lenders also require a 10-20% down payment on an RV, but as you invest more, you can qualify for better interest rates thanks to a cheaper loan-to-value ratio.
Ask your lender if a shorter term qualifies you for a lower interest rate.
How to qualify for a RV loan
RV lenders consider several factors to determine your eligibility for a RV loan:
- Credit history and reports
- Payment behavior, especially in relation to installment loans (such as car loans)
- What is your debt and your debt to income ratio?
- Some require references
But even if you don’t have a great credit history, that doesn’t mean you don’t qualify for a RV loan.
Assuming you weren’t a “habitual delinquent,” you might still qualify for a loan – albeit likely with a higher APR, said John Haymond, senior vice president of business development at Medallion Bank, a Salt Lake City, Utah bank . focuses on recreational vehicle financing.
A prospective lender will likely look at some or all of the following documents before approving you a loan:
- Proof of income: W-2s, pay slips, tax returns
- Proof of assets: investment account statements, 401 (k) statements, savings account statements
- Social security number (for a credit check)
If you are thinking of getting yourself a motorhome when you retire, plan ahead. “You might want to buy your RV before you retire,” says Stephens. “This way you can provide proof of income and simplify the buying process.”
Use a loan calculator to see what your monthly payment could be. Make sure the payment fits your budget so that you can make your payments.
Choosing an RV Lender
Not all banks offer RV loans, but Stephens recommends starting with a bank with which you have an established, good relationship. Another option is to go to a dealer who can search for rates from various lenders. One advantage of retailers is that they often include trade-ins in the final price.
“You are taken in payment for everything,” says Stephens. “I’ve seen them take cars, guns, and grills from people. Some take antiques or anything they think they can sell on their property. ”
The lender you choose will also play a role in what interest rate you currently can get on an RV rental, but your personal financial situation – such as your credit history and debts – will carry more weight.
Buying a motorhome isn’t quite as simple as buying a car, but if you have all of the correct information you can make sure you are getting the best deal.
“It’s a great opportunity for people to get out and enjoy the outdoors,” says Haymond. “And it provides a safe environment and a way to do so in the current pandemic situation.”