Escapees May June 2015 Demo

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18 .ESCAPEES |May/June 2015 |
RV
Personal and Financial C onsiderations When
Buying an
By Shawn R Loring, Esq #76442; CM #13
The decision to acquire an RV is a weighty one, as the RV, for some, is a
replacement for a brick-and-mortar home. The purchase requires significant
thought, as it not only requires economic considerations but also personal
notions of comfort.
The best way to not only know the
ins and outs of the RV lifestyle, but
to also understand what kind of an RV
works for that potential lifestyle, is to
do extensive research on purchasing
an RV before ever stepping foot on
a dealer’s lot. Salespeople are moti-
vated by moving their inventory, not
necessarily by moving their customers
into RVs that are best suited to their
lifestyle. So, before the excitement
of living on the road overtakes the
reason needed to secure the right RV,
spend some time in an RV. Go on an
RV road trip with a friend, or rent an
RV before purchasing it. The experi-
ence of living for a short time on the
road in a smaller space will provide
data needed to choose the ideal RV.
If spending days in an RV is not an
option, visit an RV tradeshow, peruse
RV manufacturers’Websites and read
RV-centric magazines where specs
and photos are available.
when deciding whether and how to
purchase an RV.
Finance or Pay-in-Full
Deciding to finance or pay for the RV
outright requires research. Paying for
the RV outright has its appeal, partic-
ularly for those who derive a sense of
fulfillment from living debt free; and,
if paying for the RV does not strain
the budget, perhaps that is the more
prudent option.
On the other hand, financing an RV
has some benefits, as the RV could
be paid in smaller amounts over the
course of years. When making a down
payment, it’s important to calculate
how much capital should be invested
in an illiquid, depreciating asset. It’s
possible that the down payment may
not be recouped.
Interest Rate
It should also be contemplated wheth-
er the terms of the financing provide
for a level, or fixed, interest rate, or
whether that interest rate is variable.
There is current speculation to suggest
that the Federal Reserve will raise
interest rates in the future. An increase
in interest rates has the potential to
cause the interest rates charged on RV
loans to increase. This could cause
the total cost of the RV purchase to
increase substantially.
Moreover, when the terms of the
RV loan are variable, meaning they
can increase or decrease, it may
Depreciation
Beyond deciding on the ideal RV,
consider how to finance the purchase
of it. An RV, which may play the role
of a full-time home, is, with few ex-
ceptions, a depreciating asset—it loses
considerable value almost immediate-
ly after it is driven off a dealer’s lot.
For financial planning purposes, an
RVer might engage in a straight-line
depreciation of the RV, which would
allow for the depreciation of an RV in
equal amounts over 10 years. Other
options include taking a more signif-
icant rate of depreciation early on in
the lifespan of the RV or shortening
the number of years over which the
depreciation occurs. Factors that
would help determine the appropriate
rate of depreciation include where the
RVer is domiciled and whether the RV
is used as a residence or for business.
The advice of a financial planner and
an accountant could be invaluable
“…whether an RV is financed or purchased
outright, contemplate buying an extended
warranty protection plan which could aid in
reducing the costs of RV repairs.”