Financing An RV
There are several things to keep in mind when financing an RV.
- Be sure to know what your credit report says about you and what your credit score is so you can get the best financing terms available. By federal law you may receive a free credit report from each of the credit reporting agencies - Equifax, Experian, and Trans Union - once each year. This does not include your credit score. You will have to contact the agencies separately for those scores and you may have to pay a fee or sign up for a service.
- Since the value of an RV depreciates rapidly, it is best not to finance more than say 70% of the MSRP or list price of the RV. In fact, it's best to finance as little as possible. If you finance too much then as the RV ages and time to trade for a new one rolls around, you will find yourself "upside down" on the loan or owing far more than the RV is worth. Furthermore, RVs purchased new can easily depreciate up to 50% during the first four years of ownership and unless you have a very short term loan or less than 50% financed, you will be "upside down" on the loan.
- You will likely find financing an RV older than 5 model years (e.g., a 2003 model in 2009) very difficult, but you will pay much less for the older model because it loses a good bit of value when it turns 5 model years old. Dealers are reluctant to take an older model in trade because they are hard to finance and thus hard to sell.
- RV loans are typically limited to 15 years or 180 months, although some are going to 20 years or 240 months. Longer term loans, although lowering the monthly payment, are likely longer than the life expectancy of the RV in many cases and thus contribute to the "upside down" situation.
- In many cases, the interest paid on an RV loan is tax deductible as a second home. An RV must meet the requirements of a second home - kitchen, sleeping area, toilet, etc. - and the loan amount must be below the original purchase price. Since there are several conditions that have to be met, check with your accountant before attempting to deduct the interest on your taxes to make sure your situation qualifies. See IRS Pub. 936 - Home Mortgage Interest Deduction for detailed information.