Let’s face it: the best financing terms are no financing terms. But few of us can slap down the full amount in cash for a new, or even used, RV. As picking a good loan isn’t as simple as selecting the lowest interest rate or monthly payment, here are some guidelines to help you get the best RV financing terms.
Practice Fiscal Common Sense
Don’t let anyone tell you what you can afford to borrow. Your financial situation is unique—yours alone—making borrowing “rules of thumb” unreliable. Take a good, hard look at your circumstances. Consider both your current debt load and any large, foreseeable upcoming expenses (college tuition, for instance).
Next, research RVs of different types, sizes, and prices to see which suit your preferences, lifestyle, and budget. It’s good to plan for at least a 20% down payment. From there, loan term (amortization) will depend on the amount borrowed. For example, you might qualify for a 5-year loan to purchase a pop-up camper but a 20-year loan term to buy a Class A motorhome.
In addition, ask a dealer to help you estimate the expenses—loan payment aside—associated with operating and maintaining various types of RV. Things like storage fees, upkeep costs, gas, and insurance can run from a few hundred dollars to $1,000 a month, depending on the size of your unit and how much you use it. Finally, set a conservative limit on your borrowing capacity, and research and compare your financing options before signing on the dotted line. In other words, use discretion.
Talk to Your Bank
Banks and credit unions are usually willing loan sources, especially if you have an established relationship via a savings or checking account, investments, or even a loan. (Of course, a solid track record and a good credit rating also help.) Tap your banking contacts for information on who to talk with about RV financing.
Bank terms can, however, be more conservative than dealer-arranged financing. For example, the interest rate at your local bank might be a little lower than that elsewhere, but the bank might require a shorter loan term, resulting in higher monthly payments. What’s more, sometimes, you’d be better off speaking Swahili when discussing types of RV with a local lender. After all, who outside of the RV community knows what a fifth-wheel or a slide-out is? This lack of understanding can lead to road blocks: some local lenders won’t finance a given type of RV or a used one; others require more-restrictive terms on used models.
Talk to Some Dealers
As they often depend on financing to close sales, dealers can have the most generous RV financing terms. They also know about and understand a variety of financing options. Sometimes they can even help arrange financing when your credit score is a little low. And not only is dealer-arranged financing often competitive with area banks, financing through a dealer simplifies the whole buying process greatly.
Note, though, that some lenders pay dealers—not just RV, but also auto, motorcycle, and marine dealers—who generate loan business for them. Costs associated with this could be built into your loan and monthly payments. They typically run 2% of the total loan amount. On a $50,000 loan, this equates to $1,000—not exactly chump change. What’s more, these costs can vary widely (in general, the higher the interest rate, the higher the costs). The upshot? Don’t assume that a dealer-arranged loan is the least-expensive option. Comparison-shop to ensure you don’t overpay.
Don’t Hesitate to Negotiate
Armed with knowledge of various financing rates and terms, you’re in a great position to negotiate. You’ll be able to confidently cite different financing options, perhaps getting better terms from a preferred lender. Remember, too, that no one makes a profit until you’re satisfied. In terms of financing, this puts you in the driver’s seat. Happy RVing!