January 7th, 2009
Mr. and Mrs. Dalisay from California wrote in to one of our partner loan sites regarding their RV purchase and the excitement that had when buying it, and they told us the details of their RV financing in the process. Below is an account of their financing and the interest rates they are paying over the term of the loan.
Many non-Rvers look at the money it costs to buy a new motor-home and they question the decadence of it all, but those who love getting out of the city and hitting the freeways and byways would sacrifice almost any financial comfort to have that freedom.
Mr. Dalisay wanted to buy a used RV, which was a 1994 Winnebago Vectra that had a purchase price of $34,000, where Mrs. Dalisay really couldn’t bear the thought of living in the remnants of someone else’s old motor-home. Mr. Dalisay wanted a used RV so that he didn’t require financing and the monthly payment that came with it. He was willing to fix up their Winnebago and looked forward to refurnishing it to new.
They did not need an RV loan actually, as they had the cash to buy it outright, there were other things they wanted to use the money for, such a nest egg for a rainy day. As it turned out they did get financing with a small $5000 payment. So now we can do the math on their purchase and subsequent financing.
They spoke with the finance department at the RV Center where they were buying their used motor-home, and told them of their plans to put a $5000 down-payment on their purchase. As it turned out, they put $1000 down as an initial deposit to hold the Winnebago (Vectra) while they made some last minute decisions regarding financing and storage.
So when they sat down with the financial team at the RV Center the math went down like this. $34,000 for the Winnebago at a state tax rate of 7.25% plus a 1% district tax for the area of California they live in (withheld for privacy). This brings a total tax burden of 8.25% which equals a total purchase price of $34,000 + $2,805 in tax = $36,805.
The RV financing department subtracted the $1000 deposit already submitted bring the total to $35,805, and then the Dalisay’s provided an additional $4000 toward a down payment. This brought the total principal of the RV loan to $31,805. Now we can use our Auto Loan 4u calculator (at the top right hand side of the page) to calculate the interest on their RV loan.
Only fill in the numbers in the fields of the RV loan calculator, and not the commas (,) or dollar symbols ($)
- first field we enter the total principal of the RV loan – 31805
- second field we enter the agreed interest rate of the RV loan – 7.4
- third field we enter the number years in the term of their RV loan – 5
- fourth field we enter the days between payment of the RV loan – 30
Once we have all the fields filled we can press the submit query button to get a new page with our totals all calculated. I have provided the result directly below:
Total Amount to be payed on the RV: $37,785.87
Total amount of interest on the RV loan: $5,980.87
Payments: $621.14 per month
Because the overall price of the RV was a low $31,805 and the term is so short they are not spending a huge amount of money on the interest. This could be a very different scenario however; they could be going for a 20 year term, and if they had a bad credit rating they could be paying as much as 12% interest. So just for fun, lets calculate that:
Total Amount to be payed on the RV: $70,127.99
Total amount of interest on the RV loan: $38,322.99
Payments: $288.20 per month
Quite a shocking difference. From $5000 in interest for the full term compared to $38,000 in interest. Ouch. However, notice the smaller payments. This is why banks make so much money friends.
January 1st, 2009
Lately I’ve been writing about individuals and their experience with trying to get approved for financing. And I mean the kind of financing this is for needs only and not for purely entertainment purposes. Sometimes people will borrow money for holiday which a highly disagree with, because if you can afford to go holiday with what you have saved a very likely can afford a goal a holiday at all. Here on Auto Loan 4u we discuss only boat loans, car loans, recreational vehicle loans, motorcycle loans, and sometimes we may mention all-terrain vehicle loans.
A friend of mine just go to raise the other day and he decided that it was time for him to get a new toy. This new toy was a brand new high-speed boat with the trailer, and even a hitch. His wife was not amused by the whole deal and she felt they could not afford such a luxury. In my opinion the truth is that she was right. Not only did my friend need to borrow the money for a boat, he needed to borrow money for a trailer and a truck that had the power to pull his boat. But no matter what anybody said he was bound and determined to go to the bank asking for a loan. Unfortunately he was really interested in what his interest rates were going to look like, the term of his financing and how much he would pay in total interest by the end of the term.
He went to the bank with high hopes licking his lips thinking about his shiny new boat and when he got into the loan officers office the fun seem to come to an end. Because of some past delinquency is credit rating had slipped to a FICO score of 660 and he had no idea that is credit was that bad. He was actually heartbroken and felt that he would not get what he really wanted for the next summer. This is one of the problems with falling in love with some particular product and going at it with a damn the torpedoes attitude. This is a sure way to spend a lot more money on your financing that if you were careful and pragmatic about your choices.
The loan officer insisted that if he expected to get a loan for this boat he would have to have a cosigner to sign-on to the loan with him, and this was extremely humiliating for him as he is a guy with a lot of pride. But nevertheless, he pushed forward and decided that no matter what he was going to buy that boat. The boat he wanted to buy was $75,000 and he gets saved up a $10,000 down payment. This would leave him with a principal owing of $65,000 with and an interest rate he was expecting to be between 6% and 7%. As it turned out that was not the percentage rate he was going to have for this loan and this also changed the dynamic of a whole situation. Now his wife was even more perturbed by the whole idea of spending $75,000 on a brand new boat which she considered to be decadent.
So if we do the math on my friend’s boat loan we can see how much he would be spending all totaled. With a $65,000 principal owing on his new boat, and the interest rate of 9% which the bank said they would give him if he came up with a cosigner making him eligible for funding approval. As it turned out the term of his boat loan would be 10 years so let us calculate the 9% interest rates into this.
The total amount of interest he would pay by the end of this loan would be $29,490.85, and the total paid at the end of the term would come to $94,490.85. So if you want to include insurance, repairs, and fuel, we are looking at a $100,000 cost. Is payments on this would be $776 which is a big chunk of change when you are trying to raise a family and make ends meet.
My friends wife suggested that he buy a smaller boat that was used for $15,000 from one of the local auctions. These auctions were IRS foreclosure auctions where he stood the chance to save over $50,000 on his boat. Although my friend’s heart was set on getting this particular brand new model he did finally make the right decision and listen to his wife.
In retrospect he looks back on this experience as a lucky experience because the listen to reason and save their family a serious amount of money – the kind of money that could but one of his children through college comfortably. Sometimes a life we have to understand the classic Rolling Stones song when they saying, ” you can’t always get what you want but if you try sometime you might just find you get what you need”.