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What to Know About RV Financing

Buying an RV is the second most expensive purchase most of us will make in a lifetime, second only to the cost of a home.

Financing an RV, be it new or used, is the way most people can swing it.

But there are a lot of ins and outs when it comes to RV financing, which is why I thought it would be great to talk to an expert — someone who could talk about the differences between new and old, interest rates, depreciation and much more.

Jeff McLeod, connected to the RV finance industry since 1994, started his career off with Thor Credit, a division of Thor industries.

He currently specializes in Recreational Financing for Newcoast Financial Services, based in Clearwater, Florida, working with dealers and manufacturers and independent brokers, helping them match consumers to the best financing packages.

The first thing I asked him: What do people need to know about financing a recreation vehicle versus that they’re familiar with, which is financing a car?

“A car is something that you need. Most people have to have a car to get to and from work, whereas an RV or a boat or recreation type of vehicle is used as a pleasure, as something that’s a luxury if you will, and that’s how lenders view that,” McLeod said. “So when they look at the folks that are applying, of course, the underwriting guidelines are much different than applying for an automobile. And in that case, lenders have certain things and requirements based on the dollar amount.

He explained to me more about those differences besides the dollar amount

“We usually like to tell folks that are looking to finance to expect on a $25,000 amount up to $99,000, a 15-year term, and over $100,000 and 240-month, or a 20-year, term. And when you start getting over the six figure amount, the underwriting criteria changes a little bit.”

McLeod explained the difference in financing between new and used RV.

He said generally speaking, the same terms apply.

“The main thing that you want to be cognizant and you want to know about used RVs versus new is when you get past, let’s say, two or three years old, the rates can go higher just because it’s used versus new,” he explained. “So don’t be surprised if you hear of a rate that might sound like a quarter or half a point higher. But in fact, if you’re looking at something that’s a few years older than that’s how the bank’s pricing risk for a used RV.

I also asked McLeod about whether it’s worth the effort to shop around when it comes to finding a lender.

“(Lenders) are pretty much all going to be the same. Rates are going to be the same. Rates are based on your credit score, so most lenders will tier rate based on scores and they may look something like this: 690 to 719 would be the the highest rate tier. Let’s just say hypothetically 720 up to 749, 750 to 800, and 800 above which would be premium or super premium. And so rates are all pretty competitive no matter what different lenders are out there. They’re all trying to be competitive in this market because this is really our RVers traditionally are great. That’s great paper for lenders because RVers, the demographics of our RVers are such that they’re usually a higher credit scores, have the capacity and the capital and have good track history on previous RV loans, so it’s very attractive paper to a lender, attractive loan.”

McCleod stressed the importance to “know before you go.”

“When you are looking at an RV…you should be prepared when you’re ready to start shopping. And when you finally select an RV and you’re ready to go through the finance process, if you’re looking at something over $100,000, the lenders are usually going to want to see two years tax returns, most recent.

“They will want to see proof of income via any award letters from disability, VA. They’ll want to see last two years of social security, 1099s, and they will want to see a personal financial statement with corresponding statements to verify the amounts you might list on a personal financial statement.

McLeod said it’s important to note that buyers won’t start seeing those kind of requests until they’re looking at RVs that cost more than $150,000.

He also stressed the importance of trying to provide a large down payment, if possible.

“People should understand that if you go into a loan, a 20-year loan and you have a good interest rate, your interest is going to be calculated on the outstanding balance just like a home mortgage is,” he said. “So every month you make a payment, part of that payment goes to interest and part goes to principal.”

McLeod said a good figure to use is 20 to 25 percent down.

“Now that may not be in everybody’s budget and you might be in a different place in five or 10 years from now, where you paid it down and up. But the one note of caution is, if you do choose to go with a 10 or 15 percent down payment, which is perfectly acceptable and you can get a loan that way, just know that in two to three years, you’re most likely would not have paid enough down to be in an equity position, if you will.

I also asked him if it made a difference if RV buyers are full-time or part-time. In short, yes.

“It is a different ballgame altogether,” he said. “As we talked about requirements from lenders and the way that there are a little bit more stringent on RV versus auto, even more so for a full-timer.”

He said the banking crisis in the late 2000s changed things in that it became harder for full-time RVers to get a loan.

“(Lenders) want a really solid borrowers, high credit scores, and you would expect to pay probably 30 percent down payment if you were looking for a full-time versus… a weekend warrior, who is just using it and still owns a home or has a residence, and so there are options available.”

To listen to my discussion with McLeod check out this RV Lifestyle podcast.

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