The RV boom is undeniable.
For some, the pandemic and quarantine life in early 2020 provided a final push to adopt a more nomadic lifestyle. For others, a lower-cost life of adventure offers a draw too good to pass up.
Some people have even decided to hit the road full-time, and a quick look at the #RVLife hashtag on Instagram highlights the appeal of a life on the road.
But first-timers tend to think about purchasing an RV in the wrong way, says Brandi Stephens, founder of the blog RVersity and YouTuber by the name of Bloggin Brandi. Stephens has turned her own experience and website into a mission to help people learn how to get in on RV life — she says she’s purchased three RVs over the years since she started living mobile full-time five years ago.
“I always say it’s like shopping for a house but getting financed for a car,” Stephens says.
There are notable differences between auto loans and RV loans, and nuances to the process that those without experience might not pick up on. With so much variability in size and type, an RV can cost as little as $10,000 on one end and hundreds of thousands of dollars on the other, so it’s important to understand what you’re getting into.
RV Buying Options: Cash vs. Financing
Even if you have enough cash on hand to cover the RV’s sticker price, there are reasons you may want to consider financing anyway because RV life comes with a host of unexpected upfront costs.
Dealer fees, warranties, and taxes all factor into the final price. And some of these fees don’t amount to just a couple hundred extra bucks. Stephens says she’s known people who ended up having to pay as much as $30,000 in registration taxes on more expensive RV purchases.
Regardless of where you buy an RV, you’ll have to register it in the state you consider to be your primary residence (think: where you get your mail and file your taxes). “When I purchased my RV out of state, I had to pay the taxes in Georgia to register it, and you don’t think about the taxes to register it and get your tag,” says Stephens. “On my last RV I think it was $5,000.”
These fees can make a big difference when deciding whether to finance your RV or not.
“You may not want to pay for those things out of pocket because that’s your cash, and you could use that to actually use the RV,” says Stephens. The operating costs for an RV can be hefty as well, especially in the beginning.
Stephens estimates her ongoing monthly RV budget comes out to about $700, and depending on the month could look something like this:
- Gas: $150-$200 to fill up her 80-gallon tank, which will get her about 600 miles
- Propane: $60 to fill up her 26-pound tank, which needs to be filled more frequently in colder months for heat
- Water, electric, sewer: about $30 a night on the cheap side at an RV park. Stephens currently pays $400 a month for a long-term stay
- Electricity so Stephens can stay connected if she’s not in an RV park: $40 to $150, and more expensive in warmer months to run AC
- WiFi: $100 a month for her hotspot
Similar to the advice many first-time homebuyers are given, Stephens says you should expect a new RV to have a year of unexpected expenses on things as basic as the RV’s microwave. And similarly to when you buy a new house, a warranty can help by covering some of those common first-year expenses, so you don’t have to pay for them in full out of pocket as they arise, Stephens says.
Outside of operating expenses, there are a lot of costs you’ll want to think about in advance, like those registration fees. Financing the cost of the RV can give you more room to accommodate them by freeing up your cash reserves if things go wrong. But depending on your circumstances and what type of RV you buy, it might make more sense to pay upfront.
NextAdvisor reached out to four RV loan lenders who say demand for RV loans has definitely been up this year. They also offered some advice to make your approval process as smooth as possible.
First of all, an RV loan is the route you want to take when financing an RV purchase. While they are similar to auto loans, you can’t use an auto loan for an RV purchase since the underlying collateral — the RV, in this case — is so different. And while many people do use RVs as their primary residences, you can’t get a mortgage for an RV either.
You could potentially get a personal loan for an RV, but depending on the total cost of the RV it could be difficult to get a personal loan with a high enough loan amount, says Brian Sharapata, senior manager of credit product strategy at Chicago-based Alliant Credit Union.
The main difference between an auto and RV loan is the length of the terms — they can go up to 20 years in some cases for an RV loan. Most RV lenders also require 10-20% down payment for an RV, but if you put more you could qualify for a better rate thanks to a more favorable loan-to-value ratio.
Ask your lender if a shorter term will qualify you for a lower rate.
How to Qualify for an RV Loan
RV lenders look at several factors to determine your eligibility for an RV loan:
- Credit history and reports
- Payment history, particularly as it relates to installment loans (like auto loans)
- How much debt you have and your debt-to-income ratio
- Some require references
But even if you don’t have a stellar credit history, that’s not to say you won’t qualify for an RV loan.
Assuming you haven’t “been a habitual delinquent,” you could still qualify for a loan — although likely with a higher APR, says John Haymond, senior vice president of business development at Medallion Bank, a Salt Lake City, Utah, bank that focuses on recreational vehicle financing.
A prospective lender will likely look at some or all of the following documents before approving you for a loan:
- Proof of income: W-2s, paystubs, tax returns
- Proof of assets: investment account statements, 401(k) statements, savings account statements
- Social Security number (for a credit check)
If you’re thinking about getting an RV as something to do in retirement, you’ll want to plan ahead. “You might want to buy your RV before you retire,” says Stephens. “That way you can show proof of income and it’ll make the buying process easier.”
Choosing an RV Lender
Not all banks offer RV loans, but Stephens recommends starting at a bank you have an existing, good relationship with. Another option is to go to a dealership that can shop around for rates at various lenders. One perk about dealerships is they’ll often factor trade-ins into the final price.
“They’ll take trade-ins for anything,” says Stephens. “I’ve seen them take people’s cars, guns, grills. Some take antiques or anything they think they can sell on their lot.”
The lender you choose will also play a role in what rate you can get for an RV loan at the moment, but your personal financial situation— like your credit history and debt— will carry more weight.
Buying an RV isn’t quite as simple as purchasing a car, but if you have all of the correct information you can make sure you’re getting the best deal.
“It’s a great opportunity for people to go out and enjoy the outdoors,” says Haymond. “And it provides a safe environment and way to do that with the current pandemic situation.”