Don't get upside down when buying an RV. And we don't mean getting that way through a rollover accident, although don't do that either. "Getting upside down" means owning more on your RV than you can sell it for.
Let's say you buy an RV that costs $100,000 with a 10 percent down payment, or $10,000. To make things really, really simple, let's say you finance the RV for 15 years at 10 percent interest. Your monthly payment will be $967.14 (most of which will be interest on the loan).
At the end of two years, you will still owe $84,500 on the RV. In all that time, you will have paid $16,468 in interest.
So let's say at this point, with 13 years to go on the loan, you lose your job or get sick. Whatever the reason, you can't afford to keep the RV. You must sell it. This is when the problem arises. That RV, once it rolled off the dealer's lot, became a used RV, and lost a lot of value. By the time a year had rolled around, and then another year, it had lost more value. Let's just say that by the end of two years, that $100,000 RV was now worth $70,000.
But remember, you still owe $84,500 on the loan. Congratulations: you are officially "upside down." In order to unload your RV, you must pay off the loan of $84,500 with the proceeds of your sale, which -- best case -- will be $70,000. That means you will need to pull $14,500 from your own pocket to make up the difference.
Many RV dealers these days are pushing "No Money Down" loans. If you got suckered into such a deal when buying a $100,000 RV, you would need to pull about $26,000 out of your pocket when selling it after two years. Ouch!
Here is how to avoid getting upside down: •Negotiate a great deal on the RV. Never pay retail. Shoot for at least 20 to 25 percent off sticker price. In many cases you can do better.
•Get the shortest term loan you can afford. Instead of financing for 15 years, go for 10 years. Your payment will be higher, but you will pay far less interest.
•Always make as large a down payment as you can afford. Never buy a new RV with no money down. Never!
•Buy a good used RV. Look for one that's two or three years old with low miles. There are plenty available. The biggest chunk of depreciation has already occurred on these rigs so getting upside down on a loan is much less likely.
•Shop around for a loan. Do not simply take what a dealer offers. Check online: rates vary. Get your best deal.
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