Financing an RV

By Samantha Lemna  | 
10/17/19, 8:52 AM
    

Hauling a new trailer down a wooded road in the afternoon.

An RV opens up a whole new world for outdoor adventures. You can extend your camping season, stay warm and dry during wet weather, and spend even more time exploring and spending time with the family. An RV can make camping easier, more flexible, and is a much cheaper alternative to hotels. Plus, it’s way easier to bring your pets! 

 

While RVs can be very affordable, the perfect RV may be more than you can pay for at one time. Luckily, it’s fairly easy to finance an RV. We’ll discuss things to consider before financing an RV, the pros and cons, and how your RV insurance is affected when you finance. 

 

Things to Consider Before Financing an RV

You’ll want to think of the following before you decide to finance an RV:

  • What do you want in an RV?
  • Your budget
  • Terms of financing
  • RV Insurance

 

What do you want in an RV?

Knowing what you want in an RV before you buy or finance one is a good idea. It helps you stick to your budget when you know the difference between what you really need versus what would be cool or nice to have. You should consider:

 

  • Type of RV
  • Hitch type (if a trailer)
  • Tow weight and tow vehicle (if a trailer)
  • When you plan to use the RV
  • How long you plan to stay in the RV (i.e. weekend trips or living full time)
  • How many people it needs to sleep
  • Bathroom facilities
  • Kitchen facilities
  • Storage
  • Exterior features like a kitchen, television, second door, etc. 
  • Maintenance costs

 

Make sure you consider your ideal camping setup, too. While a massive luxury motorhome would be cool, it also won’t fit into many campsites. You’ll also want to factor storage and fuel into your decision as well. 

 

It’s a good idea to check out different types, brands and models of RVs online and in person. RV shows are a great idea for this, as well as dealerships. Sometimes what’s good on paper won’t be as great in person - and vice versa. 

 

Your Budget

Your budget is critical, whether it’s the full upfront payment or your down and monthly payments. Particularly if you’re planning on financing, it’s important to account for how much your RV will cost you each month. This includes:

 

  • Monthly payment
  • Fuel
  • Maintenance (repairs, oil changes, et cetera)
  • Storage (during the winter or in between camping trips)
  • Campgrounds
  • RV insurance payment

 

Then you’ll have a real idea of what the cost will be each month and what you can truly afford. Try calculating your monthly payment with this handy tool.

 

Terms of Financing

Terms of financing include:

  • Down payment
  • Interest rates
  • Loan term
  • Payment frequency 
  • Payment amount
  • Lender required insurance

 

The terms of financing will depend on your individual circumstances and the lender. For example, some will require a certain percentage of the asking price as a down payment, while others won’t need a down payment at all. 

 

Interest rates will also depend on the market and your eligibility. The better credit you have, the more likely you can get a lower interest rate. You may want to shop around as different lenders will offer different interest rates. 

 

The loan term is the expected length of time for you to pay off the debt. This varies greatly by lender and the amount of the loan. Generally, the maximum is 20 years. 

 

Payment frequency and amount are how often you’ll need to make payments and how much those payments will be. Generally, these are weekly, biweekly, or monthly. The amount will be the overall loan (plus interest) divided by the loan term and payment frequency. 

 

You’ll also want to find out if you can pay off the loan ahead of schedule or if there are any penalties to paying it down faster. 

 

It’s important to note that some lenders will have restrictions on the RV itself, such as how old it is. Ask the dealer if the unit is available for financing before you get too invested.

 

Finally, most lenders will require you to have comprehensive damage protection on your RV in order to protect your investment. 

 

RV Insurance

As mentioned above, if you finance an RV, you will likely be required to have comprehensive damage coverage on your RV. Exactly what’s required will be outlined by the lender in their terms and conditions. Generally, you’ll need to provide proof you’ve insured the RV. 

 

We recommend a separate RV insurance policy (rather than adding it to your home insurance) as this protection is usually better and offers more. Plus, if something does happen, you won’t need to make a claim on your home insurance. 

 

Pros and Cons of Financing an RV

The pros of financing an RV include:

  • Getting the RV you want
  • You are building equity
  • You can build (or rebuild) your credit
  • You’ll own an RV - it just might take a bit longer

 

The cons of financing an RV include:

  • RVs lose value after you buy them (especially if they’re new) thanks to depreciation
  • You’ll have to make regular payments
  • You’ll be paying interest
  • Your RV is collateral for the loan - if you fail to pay, you could lose it
  • You may still need to have a down payment

 

In the end, it will depend on your individual situation if financing an RV is right for you. 



The Impact of Financing an RV on Insurance

As mentioned above, if you finance your RV, your lender will likely require you to have specific insurance coverage on your RV. This will generally include comprehensive physical damage that covers:

 

  • Fire
  • Smoke
  • Explosion
  • Lightning
  • Falling object
  • Wind
  • Hail
  • Vandalism
  • Theft
  • Malicious acts
  • Sewer backup
  • Flooding (known as overland water)
  • Driving accidents

Keep in mind that coverage will depend on your insurance company and the policy that you choose. This is just a general guideline for what can be included.

Your lender may also require you to opt for a replacement cost or guaranteed replacement cost loss settlement option if it’s available. This will give you the MRSP of the trailer if it’s destroyed and the claim is covered. The other common loss settlement option is actual cash value, which would give you the trailer’s fair market value or MRSP minus depreciation. 

 

You can also get “interest party rate protector” coverage, which will help cover your costs to refinance your RV if interest rates go up in certain circumstances. 

 

Talk to your RV insurance broker for more details about the impact of financing your RV on your insurance.

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