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This is an email I recently received  and I am posting it so the info may help others make the decision about whether to pay cash for your unit or finance it.

Q: Dear Peggi and john

 

I read your story in a recent RV gazette where you explain why to finance an RV. Very interesting but I don't understand!  You write the downside of paying cash is that the value of the rRV begins to decrease as soon as you drive off the lot. in my opinion it starts to decrease for everybody if you pay cash or not! 

When you finance an RV, it is a lot more expensive over 10 or 20 years because you have to pay interest. Is interest for a loan not always higher than a secured investment. I'm not talking about stocks etc., i talk about GIC's or other investmens. Can you explain your calculation to me?

 

Thank you very much in advance, Yours sincerely.

A: My answer may help you with your decision.

My reference comes from a financial advisor at an RV show several years ago.  He stressed that if you finance $20,000 for an RV for five years at 4% and invested the 20,000 for five years at 4% compound interest your investment will grow faster than the interest accumulates ass you pay off your mortgage.  RVs depreciate like a car but hopefully your investments will continue to grow.  A house investment continues to grow but for sure RV's depreciate at a rapid rate especially if they are purchased new. RVers buying a pre-owned unit then the major depreciation is decreased.  I hate to tell you that numerous high end RVs on the road are mortgaged.

 

There are many types of financing available and with the fall in the market the past few years the above may not be as good an example. BUT everyone has a different route that is right for them.  I strongly suggest you talk to a financial expert who knows your financial situation. That comment was a suggestion to get people thinking.   For sure once you spend the money for your RV it is gone and it will never earn any interest again.

 

In another instance at an FMCA (Family Motor Coach Association seminar)  the instructor stated that many wealthy RVers financed their units because it cost them less to finance at today's low interest rates. They prefer to have their investments continue to grow - many times with wise investing they will earn more than they pay.  I am not an advisor but I do listen when the experts tell me something. 

 

Hope this is of some help and PLEASE talk to a financial counselor who knows your situation.  Dealers usually can offer you considerable lower financing than most banks can.  It is called a Conditional Sales Agreement and they will shop for an equitable loan for you.  These CSA's can be life insured and/or paid off in full with no penalty.  Depending on the cost, year and condition of your unit, mortgages are available for 20 years.  

 

Even though the mortgage will be covered for the 20 years, this type of lower interest financing may and may not be carried over beyond the five years.

 

Again I hope this helps, but I STRESS that you contact an expert in the field for advice on your individual situation.  Take care P&J

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