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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2 months ago

Big thank you Chuck, I was up late last night reading Saturday’s newsletter and just got to this topic this morning. When you finance items like a RV you really have to do your research, don’t let that Impulse be your guide.

BILLY Bob Thronton
2 months ago

Finance 101; the length of term, is your biggest negative factor in the formula Interest = rate x time (term). Rate almost is meaningless in the scheme of things, if you pay attention to the TERM.

5 months ago

Did a video a while back (https://www.youtube.com/watch?v=y7ekF_kgIP0) on just this subject. An $85k loan at 5% cost almost $50k in interest alone! Cutting it down to only 10 years, interest was slightly over $23k ~ less than HALF the 20 year loan. And a 3 year loan has a total interest payback of less than $7k, a THIRD of the 10 year loan and a SEVENTH of the 20 year loan! Put another way, that three year loan saves you about $43 THOUSAND dollars compared to the 20 year loan. You could have bought another half of an RV with that savings!
And what’s worse… if you add just another quarter of a percent in interest, your total is almost $3k more on that 20 year loan! Increase it to 6%? Almost $12k more in interest! Small percentage differences in that loan mean a huge difference in total payments… so buyer beware!

6 months ago

We financed our higher end Winnebago motorhome for 20 years…10% down, the rest financed. We were very careful in selecting our motorhome, rejecting several other mfg’ers in the process. The one we selected was not perfect, but we worked with the mfg’er to resolve the issues that came up. It was our only home for 7 years after retirement. W/o financing we could not have bought the RV. During our full-timing years we were able to pay several thousand $ ahead on the balance. It was paid off at 17 years with a remaining value of apx $50k. We have no regrets whatsoever.

BILLY Bob Thronton
2 months ago
Reply to  Paul

Good for you. That’s the other side of the coin, called peace of mind.

Captn John
6 months ago

If dumb enough to think any Rv will be worth much in 20 years you must be a fool. Even more dumb is the more you borrow for the longest term the lower the interest rate. It made sense to borrow $50 k for 20 years than pay cash. I can easily pay $3500 or more monthly and payoff in 2 years 4 months with my money growing. The real suckers are the lenders that will repo. They are even more dumb than the borrower that cannot afford toys to start with. No sympathy for either from me. I’d not blame ANY dealer for using stupidity to their advantage.

Neal Davis
6 months ago

We considered financing our RV when we purchased it. We would have put about half the purchase price down and made payments for 5 years. However, our salesman angered us during the negotiation of the sale. It was not enough to cause us to walk away, but it was more than enough for us to do all we could to preclude the dealership gaining anything from making a loan to us. So, we paid cash and washed our hands of the dealership (Motorhome Specialist of Alvarado, Texas) forever.

6 months ago

That’s the American way! Everything is on credit. Why even the U.S. government is the largest debtor at 29.27 trillion dollars of external debt, translating to around 45% of the total debt owed. I owe nothing to anyone.

BILLY Bob Thronton
2 months ago

Ah, but you do my friend. You are in for your share of the 29.27 trillion. Guess how their going to get it from you?

6 months ago

A lot of people pay every months for a time share they never use, a lot of people pay every month for a RV to set in their driveway or storage. Me I sold my Motorhome last summer and am on a 2 month car trip staying with friends and relatives and saving money on gas and RV parking spaces. Like they say “It’s your money, spend it like you want to”

Jeanie DeBolt
6 months ago

Keep up the good work. I personally enjoy this letter. There are complainers everywhere. Some people just aren’t happy with anything.

8 months 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…

Dan Child
5 months ago
Reply to  Vance

Not sure how you calculated that, but even at a straight 7% of the total $4000 for 20 years would add $5,600 to the original amount or $9600 over the term. But most loans today are simple interest where you pay interest on the unpaid balance so it definitely makes that cost higher, but you would actually pay about $7900 for the $4000 tax bill. Still a lot, but not as bad as it seemed.

5 months ago
Reply to  Dan Child

Compounded interest.

8 months 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.

Bob P
6 months ago
Reply to  brian

Did you know if you pay “cash” for anything costing more than $10,000 you come under investigation by the government as to where you acquired that cash? Had a car dealer tell me they didn’t want the paperwork involved in a cash deal on a $23,400 truck in 1993, he then explained to me and showed me the law, he told me to put 10% down and 3 weeks later go to the bank and pay it off before the first payment was due. It didn’t cost anything more to do it that way but it kept the government from getting involved. These are the kind of laws lawyers think up when we elect them and send them to Washington to represent us, it makes me think we are sending the wrong people as our representatives.

Judy S
6 months ago
Reply to  Bob P

I didn’t have that experience when I bought my last car for $26k cash in New Mexico. There was no extra paperwork and no investigation of my finances. Maybe other states are different.

Of course, I didn’t give the dealer bags of paper money, which would have raised some eyebrows. I simply got a cashier’s check from my bank, which is the same as cash.

Rich F
6 months ago
Reply to  Bob P

Hi Bob. These laws were put in place not to track the general public, but look for illegal deposits by drug dealers and terrorists. I work for a big bank and we are required to report these transactions. I feel better for it as I have nothing to hide…

Just an FYI.

3 months ago
Reply to  Bob P

Even better would be to pay %5K a month. $9K the bank might report it anyway.

9 months 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.

1 year 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.

1 year 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
1 year 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?

1 year 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
1 year 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
1 year 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…

1 year 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?

10 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.

2 years 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?

1 year 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?

10 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!!