By Chuck Woodbury
I was alarmed by the results of our reader survey last week, when we asked, “If selling your RV today, would you need to come up with money to pay off the loan?”
Of the 650 RVers who are still paying on their loans, close to half – 46 percent – would need to pull out their checkbooks to pay off the loan if they were to sell their RV today. They did not report how much they were “upside down,” but I’d guess that $10,000 or $20,000 would be common.
A woman wrote me years ago in a panic. Her husband had died suddenly, and she could not afford the payments on their luxury motorhome. She said if she sold the RV, she would still owe $80,000 on the loan. “Where will I get that kind of money?” she asked.
The fact is, once you buy a new RV it depreciates roughly 25 percent when towed or driven off the lot. If you bought an RV for $100,000, put 10 percent down and financed it for 20 years at 4.99 percent interest, and then got sick or lost your job three months later and needed to sell the RV, get ready to pay up. The RV’s loan balance would still be $89,780, but the RV only worth $75,000. You need to write a check for close to $15,000 to pay off the loan.
I consider it highly unethical for an RV dealer to encourage terms like 10 or 20 percent down with payments for 20 years. Camping World is notorious for pushing these ill-advised loans, even on cheap units that will fall apart well before the life of the loan. But star-struck buyers fall so head-over-heals in love with the idea of the terribly seductive RV lifestyle that they agree to such terms. “Oh, we’ll deal with whatever happens later,” they say.
I dream of being able to reach hundreds of thousands of potential RV buyers to advise them to avoid long-term loans at all costs.
Some of our readers must have bought unwisely for so many to be upside down on their loans. The easiest way to avoid this happening is to buy a well-maintained used unit and pay it off in as few years as you can.
If you need a job, get one selling RVs at an ethically challenged RV dealership. Push 20-year loans to financially unsavvy consumers (an endless supply is out there). You’ll make great money. But good luck sleeping at night.
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