What does financing an RV for 20 years really mean?


By Chuck Woodbury
I don’t know if you can read the small print in this ad, but Camping World is enticing buyers to finance this entry level motorhome for 20 years. Camping World pushes such long-term loans to anyone it can sucker into doing it. Other dealers offer the same deal to stay competitive.

In this ad, the cheaply built 28-foot Thor Freedom Elite is offered for $76,995 (MSRP $102,300) — $469 a month at 5.25 percent interest. That’s based on 10 percent down and payments for 20 years. At the end of 20 years, the total amount paid on the RV will be roughly $120,000! The RV will be worth next to nothing.

Or how about this — paying that $120,000 for 20 years averages $16.40 a day for 7,300 days. Or, put another way, 68 cents an hour for 175,200 hours!

At the end of its first two years, the RV will be worth roughly $51,000 but the buyer will still owe about $65,000. So if something happens and the new owner must sell the RV, he or she will need to write a check for around $14,000 just to come out even. It doesn’t get much better for most of the loan.

What a deal! Pick up this 1998 Seabreeze motorhome for $5,300 on eBay. What will a similar RV bought today be worth in 2038? And how much will it cost if financed for those 20 years?

Think about that 20-year loan for a moment. Let me try to provide some perspective. If, today, you were about to make your final payment on a loan you took out 20 years ago — that would have been in 1998 — here’s what was going on in the world at the time:

•Google.com was founded by two Stanford University students.
•President Bill Clinton admitted he had an “improper physical relationship” with intern Monica Lewinsky.
•The average price of gas was $1.15 a gallon.
•Seattle quarterback Russell Wilson was 10 years old.
•Pop and country star Taylor Swift was 9 years old.
•Pop star Justin Bieber was still in preschool.
•Camping World and Good Sam CEO Marcus Lemonis was too young to drive.
•St. Louis Cardinals first baseman Mark McGwire broke baseball’s single-season home run record.
•Assembly began of the International Space Station.
•Europeans agreed on a single currency, the Euro.
•Apple Computer unveiled the iMac.
•Frank Sinatra and Tammy Wynette died.

And. . .
•It would be 3 years until the terror attack on the World Trade Center.
•It would be 5 years before the start of the Iraq War.
•Facebook would not debut for 6 years, YouTube for 8 years.
•The first iPhone would not be sold for 9 years!
•And you were 20 years younger!

Do you have an infant child or grandchild? If you take out a 20-year RV loan today, that child or grandchild will be halfway through college before you make your final payment!

Kinda makes you think, huh?

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26 days ago

Never, under any circumstances, allow the dealer to add sales/excise taxes to the amount being financed.
Consider this: If you only pay the 4% excise tax for South Dakota (low cost example) but finance it along with your RV purchase, get ready for a bit of sticker shock… If you paid $100,000 for your RV and financed it for 20 years at 6.99% interest, that $4000 tax bill will balloon to a total of $16,122.86. (Gasp!)
That’s a lot of fuel, food, tires, blah, blah, blah…

1 month ago

I’ve heard if you are planning to pay cash for a car you should never tell the dealer until all negotiations are finished as they make their profit from the financing and if they know you are paying cash you will pay more. I wonder if this applies to RVs as well. One could always finance to get the best deal then pay it off being careful not to get stuck with early payoff penalties.

1 month ago

Chuck, I agree 100 %. I would suggest if you can’t pay cash, at least make a big down payment. I don’t think Chucks article was aimed at buyers that take out 20 year loans and pay them off in a few years. Over 20 years, in addition to the monthly payment, things are going to break down and/or wear out. Tires , propane tanks , appliances, plumbing, wiring etc . If you have money in the bank to cover these expenses when they come up, ignore my comment. But if you don’t , listen to Chuck. Happy Trails.

5 months ago

We have always paid cash for our RV’s. I guess we are old-school. Debt (to our way of thinking) is the new slavery. It was a whole lot easier to save for our Class A motorhome than it would have been to wake up every morning with debt hanging over us. If I need to sell the RV, I’ll just sell it. No worries about being upside down. At our age, it makes little sense to have the stress that comes with debt. We enjoy our 2018 Winnebago, and will likely keep it for three or four years. At that time we can sell, trade, or simply hang on to it, depending on what our lifestyle looks like then.

5 months ago

Gotta wonder about people making payments on a RAPIDLY depreciating item. In your example, you’re paying an extra $40k on a $76k item. If it’s in decent condition it might be worth $15k in 20 years. Many financial advisers preach that if you can’t pay for a vehicle in 3 years, you can’t afford it. That includes toys like Rv’s, motorcycles, boats, airplanes, etc. Would your bank loan you $70-80k for twenty years on an RV? A home yes, because real estate generally appreciates.. Our last home, which was paid off years ago appreciated enough to allow us to pay cash for our gently used RV after we put our equity somewhere that makes a little money. We spent the decades before retiring eliminating debt and we refuse to get into anything that makes us pay interest. We do use credit cards , especially when we travel, but the bill gets paid before any interest applies.
Also, that salesman trying to get you to finance with them is also making some money on that financing. When the salesman wont give up on the financing part, that’s a good sign he’s looking at a commission there, too. If you are absolutely dying for that RV, check into refinancing your home. The interest will be less, too.

Kay Stephens
6 months ago

About financing an RV, not my cup of tea but the younger generation doesn’t seem to mind. Our son Had an RV that WAS financed. It developed the same type leak yours did. Only his sat in storage, uncovered for three years. It was a total loss. Insurance paid for the loss plus a couple of thousand to him. He was lucky but if the unit had not been financed, would he have come out as well financially?

6 months ago

I think it’s a great idea to finance as long as possible with the smallest down payment allowed. That way when the thing falls apart in 3-5 years you can just give it back and be out far less than the unit would have depreciated during that same time.

Norval Chan
5 months ago
Reply to  Randy

You signed a promissory note for the amount you borrowed with the RV as collateral. If you fail to make the payments, they will repossess the RV, but you will still owe the amount left due minus whatever they sell the RV for at auction plus all costs of the repossession.

Donald N Wright
8 months ago

The salesman told me what a great deal the twenty year payment schedule would be. I agreed with him as long as the RV had a twenty year bumper to bumper warranty. He looked horrified and walked away…

9 months ago

I’m in my 12th year of making payments on my ’05 Itasca Cambria (Class C). I haven’t seen here the upside of this discussion, which is this: the deduction of interest paid yearly on the RV on my 1040. That helps — a lot — and payments are affordable (one has to have at least ONE fun expense in life). I’m not upside-down per NADA. In fact I’m 12,000 to the good. And, most importantly, my RV has NO manufacturing errors or defects. It was built back in the day when there was a Quality Assurance department at Winnebago.
Bottom line: I’m perfectly satisfied and willing to pay the cost of having a perfectly constructed RV.

1 year ago

Chuck, just curious how you purchased your first RV?

2 months ago
Reply to  Chuck Woodbury

We are buying new, ordered how we want it. This will be our first and last RV. Now a days, many people unload their problem RV’s. Examples of the numerous articles I see on poor quality. We always hear how company’s won’t stand by their product. People get fed up and dump their RV’s. Who do you think buys those poor quality RV’s? Yup, the people buying used. As other writers have mentioned, I am not going to put $10,000,00 + plus into a “deal” on a used unit. We are looking at a Grand Design product. The company seems to stand by their work and have gone above and beyond for their customers. I fully understand the cost of money and depreciation. I get great returns on my investments, way better than the interest rate I’ll pay for my RV. However I also understand the cost of poor quality. Not every situation fits every person. And we get to make our own minds up about our purchases. Whether or not it makes sense to anyone else.

1 year ago

What do you recommend if this happens and you want to sell the RV? How to get out from under an upside down loan?

10 months ago
Reply to  CJ

matches,……or suck it up and write the balance check and finally realize your not as smart as you think you are. This is what got our country in trouble before , remember?

2 months ago
Reply to  Brian

No…this is what got some people in trouble. Myself, family and finances were fully taken care of. You can’t sit by and let others dictate your situation. That’s why some people made money while many lost!!

Captn John
1 year ago

Not to take the 20 year loan on my 5er would have been a dumb mistake. I make much more on my investments than the 4% note. Besides, I’ll have it paid off in 3 – 3 1/2 years anyway. Writing a check for $3000 or more each month is easier than seeing my portfolio drop by over $50K.

M Trnka
1 year ago

We just purchased a new 5th wheel. We traded our present 5th wheel in on the deal. The bank that the dealership used offered one half of a percent less interest rate for a 15 year loan over a 10 year loan. We took the 15 year loan, however we will be paying extra and it will be paid long before 10 years. This could easily spell disaster if a consumer only paid the required payment for 15 years.

1 year ago

Borrowing for 20 years on a depreciating asset is in many cases not wise, but as with most things, it depends. It depends on exactly what (make, model, etc) you are buying, it depends on the interest rate, it depends on how you handle both the loan and and asset, and it depends on you & your behavior. We bought our first (and only) RV shortly before I retired. We did very extensive research for many years prior to narrow down RV types & manufacturers. We selected a quality RV, but closer to “normal” than a Prevost type. To this day we have not been even remotely tempted to trade for another. We were planning to fulltime, so used mutual funds we had accumulated for a good downpayment, but we could no more pay in full for the RV we bought than we could for the home we bought 10 years later … selling price for the RV was more than for the home! We got the RV loan at 5.9%. In the first several years of the loan I made 3 or so very substantial payments on the principle. Since those early years, the value of the motorhome has always been more than the loan balance. It is currently 18 months from pay-off and worth at least double what we owe. I realize that 20 year RV loans too often don’t turn out well, but that is primarily because of poor decisions up front and all along the way. We are quite satisfied with how our 20 year motorhome loan has played out, and plan to drive the beast into the ground before the time comes for us to be planted along side. As with most things it life, how it turns out depends a great deal on YOU.

Tom Rastall
1 year ago

This will end bad for businesses and financial institutions. Some years back leasing companies tried to put people into 7 year leases on used cars. When the vehicles started having problems, the customers stopped making lease payments and the businesses holding the leases’s got the vehicles back. The vehicles were now not worth anything and these businesses lost their shirts. Many went out of business. Same thing will happen with 20 year RV loans.

1 year ago

The last 2 cars I bought the salespeople tried to get me to buy based on monthly payment amount. I refused to play their game and would only bargain on out the door total price.

AFTER that was negotiated and agreed upon monthly payments could be discussed. (I arranged my own financing in advance, then gave them the opportunity to offer a better (lower) interest rate).

NEVER buy ANYTHING based on a monthly payment. Only work with total sales price and drive the cost down.

RV Staff (@rvstaff)
1 year ago
Reply to  Darrel

Excellent advice, Darrel! Thanks! 😀 —Diane at RVtravel.com

Bill T.
1 year ago

Hi Chuck. Thanks for the article. My only issue is with folks talking all the time about depreciation. If you are worried about the depreciation value of an RV, perhaps you shouldn’t buy it in the first place. We bought our rig new in 2015, with a 20 year loan and we plan to keep the rig until we are finished traveling. With proper financial planning to pay out the loan in less than twenty years, we have a rig that no one has used before and we didn’t inherit other peoples junk. We paid our rig off this year, but it was nice to have the flexibility of knowing that we could pay only the minimum if we had to, for that month. Depreciation is relative. If you have no intention of selling the rig before its paid for, then worrying about depreciation or factoring it in to your plans is not and issue at all. Common sense prevails, if you can afford to have an RV, go for it. Enjoy it with your family. Life is too short to be the richest person in the cemetery. Again, if depreciation is a factor for you, then don’t buy it.

CWO, USMC, Retired
1 year ago
Reply to  Bill T.

Most of us desire instant gratification. Paying interest on a loan for a “toy” makes no sense unless you are disciplined to invest the same amount of cash so that it returns more than the interest you are paying. Check the internet for the average credit card debt – it was around $8,000 the last time I checked. Lately personal income has increased but personal consumption increased significantly more meaning a lot of people are spending way beyond their means and living paycheck to paycheck. The ease of borrowing encourages people to buy what they cannot afford – I learned this lesson the hard way as a young man. I have a mortgage on my home – which I could pay off if necessary – and that is my only debt. My wife and I refuse to borrow money to purchase anything that depreciates. If that means we don’t have the cash for the RV we want then we do without until we have saved and/or earned the cash. I try to buy the best product I can afford so I don’t have to buy it again, at least for a long time. I find it shocking that someone would finance an RV for 20 years without the means, or a plan, to pay it off in a couple of years. I see car dealers are offering 7 year loans on cars now but I doubt most people keep their car that long or consider how much they end up paying at the end of 7 years. Shame we don’t teach some basic financial management in high school. I’m definitely not a financial guru or smarter than the average person but I am risk averse and detest debt.

1 year ago

Couple things….,First how one manages their finances, or chose not to manage them at all is up to them. Some want instant gratification, some chose to wait and save. I like to balance on what it is I am buying. I know of quite a few wait and savers who died before getting what they saved for! Was their life any fuller, hinged on a dream buy that never came true? Nobody will ever know. Make your own decision and live with it.
Second, car dealers HAVE to finance a vehicle for 7 years! Nobody could afford those types of payments for a $70000.00 truck for 4 years!

1 year ago
Reply to  Louie

There are so many variables to consider when financing an RV. It just seems logical that 20 years on an RV is very risky for most folks. One factor that hadn’t been discussed is owing big money on something that is so poorly built these days as well as the depreciation being so high that for the average person it seems to be a bad risk.

John Holmes
1 year ago
Reply to  Bill T.

Somehow you’re missing the point Bill (stuff happens) and you can’t predict that, taking the 20 year loan sure gives you a buffer in monthly payments in case your income changes but unfortunately most people throw caution to the wind and end up bankrupt . The main reason new RV’s are being sold with 20 years loans is because the financial institutions are giving special financing to the RV dealers most likely getting a kickback for the deal. To finance a RV on your own most of the time the interest is a lot higher and since we live in a want it now and I won’t wait until I can pay cash or pretty close to cash is why the debt levels in North America are off the charts.

1 year ago
Reply to  Bill T.

I could not agree more. After owning two used RVs and paying out the back side in repairs from others neglect. WE decided to buy New We felt the cost of depreciation is less costly then all we paid out in repairs. We paid 17K for and RV, and paid out in two years over 8000 in repairs. We save Nothing, and with trade… I don’t even want to go their. I will Never again advise anyone to buy used to save on depreciation.
I want to also add, as some whom claim to be full timers, that still own their sticks and Bricks home… Sorry I do not agree your claim to being a full timer. Our RV is Our ONLY Home, And if your RV is not your Only Home, You are Not a full timer.

Jacqueline Renna
19 days ago
Reply to  Bill T.

Thank you ditto here. Financed first, had for 18 yrs. brought new one again last year. Financed again. Have mortgage free brick and motor house and 2 paid for cars and not rich. 😊

Sherri Eley
1 year ago

WE bough a used 5th wheel for our last of our life RV purchase. it is in excellent condition, Looks as if it was never used. So we saved a bundle on depreciation. The last new vehicle we bought and will probably be the last one ever is our Ford 250 diesel to pull the 5th wheel. It was purchased in AZ after a week or two of looking. and getting the best deal. I do however have issues with purchasing a used motor home. The one that we bought from Lazy Days in Florida was a mistake, we pumped another 10 to 12 thousand in that thing and it so turned me against ever owning a motorhome again. Before we finally unloaded it at a huge loss, we were afraid to pull it out of the driveway for fear we would not make it to our destination and back without a major breakown. WE went back to a 5th wheel and are happy wth it.

Paul Gerster
1 year ago

Everyone does not fit into the category you continually harp on. I could have paid cash for my RV however, the stock market is going gang busters right now and my financial advisor said I would be crazy to pay cash for an RV. He suggested the 20 year loan at an effective after tax rate of 4.58%. And why not when he is producing returns between 7.50% and 10%.

Ray Leissner
1 year ago
Reply to  Paul Gerster

I trust you are watching your advisor’s rate of return after fees and taxes. And are prepared to pay the loan off should performance wain. I have yet to find an advisor who says the best place to put your money is NOT with him.

Sherri Eley
1 year ago
Reply to  Paul Gerster

I would be looking for a new financial advisor

1 year ago
Reply to  Paul Gerster

Exactly ! Now that’s a good financial move!

Bob Godfrey
1 year ago

Unfortunately people only live for the monthly payments and hardly ever consider the total cost of anything. If you look back at the housing “bubble” that nearly bankrupted many companies it was mainly due to ARMs being offered to people who had no business having a loan to begin with, a house of cards that came crashing down eventually when folks could not make the ever increasing payments. I know a woman who took her car in for an oil change and wound up with a new vehicle because the salesman promised to keep her payments the same, which he did, however the loan was simply made years longer and will probably never be paid off.