RV repossessions are continuing to grow as people face uncertain times and financial challenges. No one wants to go through one, but that does not mean you should not by an RV for fear of what may occur. You can, however, be smart about it so you are less likely to face repossession in the future.
1. Carefully look at your finances before you take out a loan. While it can be tempting to buy the most expensive RV the bank will let you get, it does not always make sense. Be sure you can realistically make the payments each month. Try putting that payment amount into savings for at least three months to verify you will not miss it. The last thing you want to do is to get into financial problems and have to do credit restoration. This will also give you give you a small reserve to draw from if you do run into some trouble making the payments down the road.
2. Consider the additional expenses of owning an RV. When you are determining what you can afford, don’t forget the extra costs like insurance, maintenance and upkeep, and extra expenditures when you use it like gas.
3. Shop around for the best rates and arrange your own financing before you go to the dealership. Inquire at several banks and credit unions about RV loan interest rates, which tend to be higher than for cars. Sometimes the smaller credit unions can offer you the lowest ones, which will save you money and lower your monthly payment. When you go to the dealership, you can see if they are able to beat what you have already arranged, but likely they will not be able to. Just using the dealership financing usually means higher interest rates, longer terms and paying more than you need to.
4. Buy used instead of brand new. Since a new RV loses around a third of its value once you drive it off the lot, buying used makes a lot of financial sense. It depreciates about 10% each year for the next few years and then levels out. Buying a three or four-year-old motorhome is not just cheaper, it also makes it easier to avoid RV repossessions. Since new ones depreciate so rapidly at the beginning, you will likely owe more on the loan than the RV is worth, making it difficult to pay off the complete loan even if you sell the RV. Used ones lose their value more slowly making it easier to sell it for the amount you still owe if you need too.
5. Think about what it would be like to resell the RV when you are trying to decide which RV to buy. While it may seem a little odd to think of resell value before you have even bought one, it can make a big difference down the road whether you are trying to avoid repossession or looking to upgrade your motorhome. You do not necessarily want to sacrifice your own enjoyment of it for a better resale value and you should always pick one that works well for your needs, but think twice about an odd color or unique layout that may not appeal to many others.
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