RV Loans with Billy and Sandra Hanson
1 comment December 24th, 2008
Billy and Sandra both love the great outdoors and both love to travel and this is their story about their purchase of a brand-new RV and the details of the RV financing they required.
They could never afford to buy an RV with cash like most Americans wishing to begin a new adventure in a motor home. They went to all of the RV lots and researched dozens of different RVs at different times. In the summertime, actually as soon as spring started, they can be found in the RV lots walking in the above the different recreational vehicles for sale. The dealerships had their own financing and they were tempted to bite the bullet and borrow the money.
This went on for two to three years before finally one day they broke down and bought an RV. They bought a Forest River 2300 and they loved every minute of it. However, there is a price to pay for such a luxury. The RV was bought brand-new for just under $70,000, and the total bill after extended warranties and all of the extras came to a whopping $80,000.
So as usual I have to pull out by RV loan calculator and do the math on this little excursion or should I say purchase. On our home page you will notice a handy little loan calculator which I use almost every day and our visitors use quite often. You can enter the principal amount of the loan, the interest rate, how many years in the term, and how many days between payments (four example bi-weekly meaning 14 days, monthly meaning 30 days, weekly meaning seven days – or whatever other number you wish to enter). This will give you the total amount of interest you are paying on your RV loan, the monthly payment you will have on the loan, and the total of the principal loan in the interest combined.
So for our example with Billy and Sandra they had an $80,000 principal amount so let us enter that into our calculator. They had an interest rate with their financing from the RV dealer of 7%, and they plan to make payments once a month – so let us enter that into the calculator is well. Furthermore, the term of their RV loan with the dealer was for 20 years. So after entering all this information we find that Billy and Sandra are actually paying over $136,000 for their 23-foot RV. I have put the complete numbers below.
Total Amount to be payed: $136230.35
Total amount of interest $56230.35
Payments: $559.85
As you can plainly see they are paying as much interest as they paid for the principal amount of the RV, meaning that in the 20 years of their RV loan they are actually paying for the RV twice. This is the reality of banking, lending, and RV financing. This may sound very discouraging but the same rules apply for home mortgages, and at least you have the fun and the pride that comes with owning a motor-home. You may think that Billy and Sandra may regret their impulsive purchase but they don’t. On the contrary, they told me they would rather sell their house to get rid of their mortgage than sell their precious RV.
When they are cruising down the road in the summer, and finding a peaceful spot on the edge of a river or lake, they don’t think about the extra $560 they pay a month (actually close to $700 a month after insurance and expenses). They think about life, freedom and the peace and quite they get being outside the city.