Issue 372 -- Upside Down RV Loans

[Chuck]

Please comment here about my essay in RV Travel issue 372 about RVers who are 'upside down' with their RV loans. The issue is at http://rvtravel.com/publish/newsletter/issue372.shtml . -- Chuck Woodbury, editor
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Chuck Woodbury is the editor of RVtravel.com

[Bo Walker]

It has been too easy to get the RV we want. Who cares? We will worry about the payment when we get back. Well, that seems to be our attitude.
We often go beyond our means for pleasure. So often we would be happier if we started with something we could better afford. Obligating ourselves beyond what we are able to conveniently afford creates stress.
I think housing is a perfect example. It is far less embarrassing and stressful to stay put for a little longer, plan and save for what we want, than suffering because we made a bad decision.
As long as there is life, there will be wrong people decisions. It is important that we start righting wrong decisions now for a happier freer life.
I would be upside down except that I usually make a $150 payment on principal when I make a regular payment.
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Bo & Jan RVing for fun

[Motor31]

There is another factor to consider on the RV loans and that is the increased depreciation of the RV due to the economy. The loans issue was a large factor in it, but RVs are now dropping in value far faster than before as folks drop the idea of spending what would have been disposable income on a part-time piece of recreational equipment. Face it, no one really NEEDS an RV to live, only to pursue a hobby or a lifestyle of choice. If houses are losing value, you can be darn sure that items not necessary will lose value even faster.
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Mike, Nancy and the Fuzzies
2005 MS 38 RL3
2001 Volvo MH (HDT)
2004 R1150RT (piggyback)
1996 Jeep Cherokee (toad)

[bandit1538]

I didn't get the newsletter again this Saturday and I put my addy back in last Sunday when I didn't get issue #371. Can someone check and see what's going on?
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Pat & Helen
30' 04 Coachman RoadMaster
For NW HOVER-IN updates and info goto
http://bandits-stuff.com

If it ain't broke don't fix it.

[Flair]

I think you should have added another category in the answers to your loans question" "My RV is paid off and I own it free and clear." I'll bet there's a lot of folks who fall into that category.

[jrf]

I suspect that the actual number of folks who are "upside down" on their RV loans is greater than +/- 25%; the number of responses, i.e., 2000+, is statistically too limited to provide an accurate sample.

[tumbleturn]

[macmike100]

I think that it's a crime that RV dealers are allowed to finance these things for 15-20 years. This should be made illegal. There is NO WAY that the payments could ever keep up with the depreciation. RV values went down after the sale even when houses didn't. Now it's even worse. I think some of the folks who buy with financing think they'll die first or something. These contracts are iron clad.
If you can't afford to pay for it in cash outright, then don't do it! You won't be able to just walk away from it like some states allow you to do for houses. This can be a very serious life event that may only be solved by bankruptcy. I would think that anyone and everyone who financed 15-20 years is in this group upside down. A chat with a lawyer on this subject might be in order. What say you, any lawyer comments?

[Flair]

Tumbleturn and I are on the same page (as I imagine many others are too) with respect to purchasing a vehicle, be it RV or otherwise; i.e., get it used so it's value paid for value received, and someone else has worked out all the new vehicle bugs.

That said, I do think it would be appropriate, if one is going to bash someone's article (Chuck's in this case), that you at least read the article. Attacks based on speculation as to what might have been said don't carry much weight in my mind. In fact, in the very limited context of Chuck's short 2-paragraph article, he does refer to the effect on those in over their head. I think that's worthy of greater comment; Chuck didn't. It's his article.

Re: the sky is falling mentality? Well it has been falling, at least where the RV industry is concerned. That doesn't mean, however, that there's no sky left. I believe that when those falling pieces have hit the ground, the industry that is left will have taken the lesson to heart and be more solid than before. This could be good for the industry and for RVers generally.

I agree with the glass half full approach, but I don't ignore reality. Yes, there are many RVers out there enjoying their lifestyle, but what Chuck's article notes is that there is a significant number of RV owners owing more than the vehicle is worth. His article also links to another piece in newrver.com that goes much more into detail as to how that occurred.

Bottom line, I generally like Chuck's articles. Although they are too short and lacking in any real depth of detail, they do get the conversation going, as I have so longwindedly shown here. My apologies for that.

So keep on rolling,
Keith

[Chuck]

To Mike,

This is not yet another "The sky is falling" article by Chuck. I am just reporting the results of our survey. I also talked to two people in the RV industry who understand what is going on, and, too, I have some knowledge of the subject . Mike, before you comment on what I write, please at least read what I wrote. You accuse me of poor journalism, but I think before you make that sort of charge you should at least read what I wrote. All the other people who commented here read the article, and their responses are far more intelligent than yours. -- Chuck Woodbury, editor, RVtravel.com
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Chuck Woodbury is the editor of RVtravel.com

[jrf]

"I think that it's a crime that RV dealers are allowed to finance these things for 15-20 years. This should be made illegal."
---
Why should it be an RV dealer's responsibility to protect a buyer from the consequences of his/her poor financial decisions? For that matter, why should the onus for making an informed, realistic, fiscally responsible decision be on anyone other than the buyer? IMO, too many RV buyers are financially naïve and freely choose to obligate themselves to expensive, long-term loans that they may have difficulty affording; they often overpay for an RV, have no clue about the total cost of the loan and probably do not grasp the startling amount of depreciation that occurs on any RV within the first year or two of ownership. IMO, way too many buyers look only at the amount of the monthly payment on whatever "toy" they've decided that they can't live without; they want it all and they want it now, and when they find that the piper must be paid, they look around for somebody else to blame (and/or to bail them out) for the financial decisions that they made of their own free will! If someone is upside down in an RV loan and trying to figure out whose fault this is, try looking in the mirror. YMMV.

[macmike100]

First, I never accused anyone of bad journalism. Apologies if taken wrong. I merely stated what I felt was the state of the way it is after being upside down in a financial situation with a RV. This has happened to a close friend of mine. I can't do anything to help this person. True, very sad. I did read all of your articles concerning this problem. I still stand by the feeling that financing long-term on an RV is a very bad decision. Dealers who are allowed to do this, I think, know what the results will be. I think this is wrong. This is not your fault, Chuck; no one's blaming you. I just think the whole process of financing an RV long-term is very flawed.

[AC7880]

I'm upside down on my motorhome - and it doesn't bother me one bit!

I bought a high-end 10 year-old used Bluebird coach in 2004 with a 12-year loan with a great interest rate - no money down. (I have a great credit rating because I always pay my bills, always on time). Someone else paid the biggest depreciation hit on my coach.

It still depreciated faster than I would prefer due to the current economy; however, I don't intend to sell it or trade it, so no big deal. A 12-year loan put the payments well within my means to pay monthly. I spent a great deal of time choosing my coach and then upgrading it to exactly what I want. I am a firm believer that it is better to buy a used "high-end" RV than a new "low-end" RV, both for quality, and to avoid the heavy hit of the first 4-5 year depreciation. I just started full-timing in this coach March 2009.

Think long and hard, decide your ultimate use, your ability to pay, choose wisely, and you may also not care if you are "upside down.". I surely do not need a "law" to "protect me" that prohibits long-term RV loans.

Let freedom ring!
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Dan
94 Bluebird BMC 37'
Fulltime USA
http://2toomanycats.blogspot.com/

[sjjacks]

First off, RVs are not priced honestly. How can something new be priced at $5000 off or 30% off? I was at a recent show and saw a $400,000 motorhome at $150,000 off. Just imagine what a turkey you would feel like if you bought this thing at $400K. So problem number one is that the pricing is false to confuse the consumer.

Secondly, depreciation on these things is MUCH worse than on cars. So if you don't want to be upside down, you'd better make a big down payment and swallow that depreciation with the down payment. Don't like that, then you'd better be looking at used equipment.

As for the 10- to 15-year finance deals, that is just crazy. The depreciation is such that you cannot recover it.

In fact, maybe that's why the industry is in such bad shape. They falsely price their merchandise, people are misled, they get underwater, tell their friends and associates, and then people say, "Don't buy an RV, they are a terrible investment." And that is true. These things are not an investment! If you can buy a used rig for $10K or $12K with 50% down that is 3-4 years old, you can probably get 8 or more years out of it and if you use it enough, you have had a lot of fun for $1000/year plus GAS.

Which brings up another point. Dealers will tell you a VW Bug can haul
a 35-foot travel trailer if they think you are gullible enough to believe it.
People should call Ford, Chevy, or Dodge and find out exactly what their vehicle - furnish the VIN to the manufacturer - can tow. Then buy a trailer that when at least 1200# is added to the dry weight is only 75% of capacity. Then you are safe. Also tell people with a gas rig you are going to get 7 to 11 MPG tops. Most of the time, you don't find this stuff out on the front end.

I think you would find most large full-timers upside down, but this may not be as bad as it seems. If they decided to go full-time and bought a big motorhome, and committed to a fixed payment and looked at it as rent (not a mortgage because of the depreciation), then it might not be bad. If they are waiting to pay it off with their final insurance, then that is a sad case.

Just some random thoughts. Happy camping.
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Steve Jackson
1999 Sunnybrook 26ft CKS
2002 F350 Lariat V10 3:73

[Motor31]

Macmike,

First off, you're not the only Mike here. There are several of us. Chuck was responding to Tumbleturn Mike.

I think it's great that some folks can pay cash for their RV. There are a significant number of us, perhaps a much larger majority, that have to finance a purchase of $100k or more. There is no way I could have a cash purchase of our RV based on what they cost, discount or not. If you are of the mind that only the rich should have an RV, then by all means lobby for a law making it illegal to finance one and watch what is left of the RV world disappear in very short order.
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Mike, Nancy and the Fuzzies
2005 MS 38 RL3
2001 Volvo MH (HDT)
2004 R1150RT (piggyback)
1996 Jeep Cherokee (toad)