posted on Apr, 13 2019 @ 03:06 PM
Over the past year I had been looking into buying a small travel trailer (20'-23'). I wasn't looking for anything fancy, and just wanted something
small enough that I could take it anywhere including the back country. I was perfectly fine with buying something used, but I didn't want junk.
When I began my search I was astounded by the resale prices for used trailers! In some cases people were asking more for their trailers than you
could buy the same trailer for new. As the trailers got bigger, the prices got even more crazy. It made absolutely no sense. Then I found out a
dirty little secret about the RV industry which, according to an attorney I spoke with, could ensnare just about anyone (including even an attorney,
he said). Consequently, I thought I'd share here on ATS, just as a warning.
The RV industry is not what it seems.
RV sales are at an all time high right now as more and more people want to 'get away' from the concrete jungles. But even this didn't explain the
crazy pricing I was seeing on used RV's. So what was going on?
Turns out most people who buy an RV do so on credit, and virtually all of the RV companies have a financing arm. BUT...Most RV loans don't work the
same way most other loans do. Take a car loan for example; if you finance a car for $25,000 and put $5,000 down you are financing $20,000. Each
month you make payments, part of which is interest and part of which goes against the principle, right? So let's say you own the car for a year, and
in that year you pay down the principle $2,000 (the rest was interest). You now owe $18,000 on the car (i.e. $25k purchase price - $5k down payment -
$2k in principle payments = $18,000). If you decide to sell that car at the end of the first year, you'll need to pay the bank $18k to get out from
under the note.
Well, that's NOT how most RV loans work! (and it's hidden in the small print of the contract with all sorts of extremely devious language). The
way these loans work is like this (let's use the same numbers from above). The RV costs $25k. You put $5k down, leaving a finance amount of $20k.
Let's say the interest rate is 10% APR, and you finance it for 5 years. I won't get into an amortization table here, so let's just say the
interest over the period of the loan is $2,000 per year or $10,000 total over 5 years (again, I'm just keeping the math simple to illustrate a point,
and yes, I get it the principle drops each year). So you financed $20k, and the example interest is $10k. You owe $30k, and you will pay $30k, not a
dollar less. So in our example above, we paid $2,000 against the principle in the 1st year. At the end of that year we decide camping sucks and we
want to sell our camper. The payoff amount of that camper is NOT $18,000 (like it was for our car), the payoff amount is $28,000! Fully $3,000 more
than the selling price new, but our trailer is a year old.
Another way of saying all of this is, there is a huge early pay-out penalty which is the full amount of the interest for the full duration of the
Now here's where it gets really shifty. If you read some of these contracts, and/or even talk to sales people, and ask them directly if you can
early-out on the contract, they all say yes. If you ask if there's a penalty, they'll say no, it's all in the contract. Technically, it's not
actually a "penalty" because it's all part of the original loan, and this is how they can get away with it. (this is what I asked my attorney
friend). What these sales people are not telling you is, you can early-out, BUT... you're going to pay the full amount of the note at maturity. The
language these contracts use to do this is so flowery it almost sounds like they're doing you a favor when you read it. Most would never recognize
it for the onerous series of clauses it is.
I did some more research on this subject and I found out that many of the RV companies are actually losing money on RV sales, but they're making this
money back up (and much more) on the financing side...which is why they have a finance arm / partner. Now, if you go look at new RV prices you will
see two prices. One price, the discounted price will be if you use their financing. Then there's a higher price if you don't use their financing.
So, in a nut shell, some of these companies are not actually in the RV business...they're in the shady financing business! RV's are just a
Are they all like this? No, probably not, but from what I found there are more who are than there are ones who are not. Most people don't have
enough cash to fork out on a big RV purchase (luxury item), so financing is a lot more likely on an RV than even on a car. It's predatory, and it's
wrong, but people are suckers sometimes and PT Barnum's old adage of a 'Sucker being born every minute' is in full force with RV's.
If you do buy an RV, talk to your bank or your credit union. They may have similar terms (and many do because RV's are a big loan risk), but at
least they'll tell you up front. (and interest rates on RV's are not very favorable for the same reasons too).
In any case...BUYER BEWARE!
P.S. I hope this helps someone.