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Buying a new (or new to you) RV, travel trailer, or camper can be hugely exciting. The thoughts of hitting the open road, seeing gorgeous scenery, and enjoying time with your family and friends outdoors can make it difficult to slow yourself down and take a measured approach to buying an RV.
But buying an RV is not something you should do in haste, especially considering how expensive they can be. For many people, their RV is the second-most expensive thing they own, trailing only their house. Being that it’s such an enormous financial decision, you should consider some financing tips first, before you sign on the dotted line.
Make a Wish-List
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Approach buying an RV like you would buying a house. Make a list of needs and wants, and use that list to narrow your search to RVs that only fit those criteria. This process serves two purposes…
First, it eliminates a lot of inventory, which will make your search all the more easy. After all, it’s simpler to compare 25 RVs that fit your criteria than looking at 100 RVs that may or may not fit the bill.
Second, it also ensures that you get what you want. Again, this is a huge purchase, so why would you want to settle for something that doesn’t tick most, if not all, the boxes? If you’re patient, you’ll find the perfect RV for your needs.
Financing Tips for Buying an RV: Check Your Credit Score
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Buying an RV requires that you have a certain credit score, just like buying a car. Typically, the lowest credit score lenders will even consider is about 650.
But, if you have a score in the 650-720 range, you’ll likely pay a higher interest rate than someone whose score is 720 or higher. So, while you might be likely to get financing with a lower score, you’ll end up paying more for the RV over time. It might be worth putting off an RV purchase until you can get your credit score higher, that way you can take advantage of a lower interest rate.
You should understand that your credit score alone isn’t going to qualify you for an RV loan. Lenders look at other factors like your gross monthly income, your debt load, your payment history, and if you have any open collections. While you might have a great credit score of 780, if your monthly income is only $2,500, you aren’t going to qualify for that $80,000 RV loan!
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Consider Your Financing Options When Buying an RV
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Some of you might be able to pay for a new RV out of pocket, which is great! Others might not have the ability to do so, and therefore need to explore financing options that are available.
Many RV dealers have in-house financing that might offer some incentives, like a certain amount off the sticker price or a lower interest rate than what your bank can offer.
Then again, you might be able to get a good rate with your local bank or perhaps a national chain bank that beats whatever the RV dealer can come up with. Just be aware that seldom, if ever, do RV dealers offer zero percent interest like car dealerships. Your interest rate will be much higher than that, so be prepared!
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Another option to think about is using equity from your home to finance your purchase. Though this isn’t a possibility for everyone, if you’ve got a lot of equity in your home, using a home equity line of credit (HELOC) could mean that you can get a lower interest rate than you could from a dealership or with a traditional RV loan.
When buying an RV, you can often choose to extend the repayment period, sometimes even up to 15 to 20 years.
While this will help reduce your monthly payments, the extended repayment period means you’ll pay more in interest – much more. For this reason, be wary of focusing solely on the monthly payment and instead consider how much you’ll end up paying for the RV once the loan is paid off. While the sticker price might be $50,000, if you extend the loan term for 15 or 20 years, you could pay thousands and thousands of dollars more in interest.
Buying an RV: Rent or Borrow First
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Before you plunk down tens of thousands of dollars on an RV, rent a similar model first, that way you can experience camping in it before you actually commit to buy. While a unit might look and feel right on the lot, it might actually not be a good fit at all once you’re out camping in it.
If renting an RV isn’t an option, see about borrowing one from a friend or family member. Even if it isn’t exactly like the RV you’d like to buy, you can still get a sense of features that you need or want for your camping adventures.
The important thing here is that you plan, prepare, do your research, and then go about buying an RV. Doing so will help you identify what you really need and want and will minimize the possibility that you have massive buyer’s remorse!