Recreational Vehicle Financing Rates and News
If you have been searching for RV loan rates in 2018, you may have noticed the recent wave of RV rate increases. While the hikes of 2017 were only .25% to .37% on average, they have increased by .50%, (from their lowest point), or more so far this year. This makes it different from other upturns we have seen over the last several years, that quickly reverted back to the previous levels. This "sticky" spike leads us to conclude that rates had likely hit rock bottom in December of 2016, or very early in 2017.
All the RV news isn't that bad; after a number of years of declining RV sales, financing and other RV related services, many economic indicators have been heading in the right direction for the industry. Most of the dealers surveyed expected an increase of 12% to 17% in orders of new units from RV manufacturers; reaching for greater sales levels than the last several years of higher than anticipated totals.
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Lower Interest Rates May Have Bottomed Out
Much of the new business may be coming from buyers who have been "on the fence" in deciding when to purchase. With rates currently on the rise, this trend should continue. The "Fed" will have to start raising rates sometime fairly soon, and the smoke signals we're seeing now could be read like a neon sign later in the year.
The improved economy and growing consumer confidence should continue to stimulate more sales of motorhomes and other types of recreational vehicles. RVs are even becoming "Cool" with the emerging baby boomer market.
The RV financial service providers indicated that interest rates for RV loans had hit bottom late last year, and we were in a rising interest rate economy. Our own research shows that rates had continued to hold at record low rates for most of last year, with some minor, short-lived spikes in recent months. (These increases have been confirmed as of 2017 with a quarter to half-point increases holding after the first couple months of the year.)
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We can also finance older used RVs and motorhomes, (from 10 - 12 years old), so you can easily find seven to ten-year-old luxury motorhomes from $60,000 to $80,000, or even less. So if you've been thinking of taking the plunge, come on in - the water (and rates) may be rising soon.
The banks, as well as online RV loan brokers, felt the trend could very easily reverse course if the economy began to sputter - or even if things began to heat up and jump-start a new ripple of competition between RV lenders. (That seems less of a chance now, as there are so few national RV lenders even in the market.)
The head of RVIA, the Recreational Vehicle Industry Association said that he expects shipments of new RVs to continue to increase this year. We agree that this will be another year with increases of 5% to 6% higher than last year. RV manufacturing, much of which is located in Indiana, is an $11 billion dollar industry, now employs close to 300,000 people, with mergers of existing manufacturers and new brands emerging at an increasing rate.
And Now, a Word from the Government
Although current economic conditions have improved, uncertainty in government policies may still dampen spirits if political leaders continue to keep their focus on their own interests above those of the American people. (Or vise versa, depending on your own opinion and current developments. This seems to be a common topic in recent events; and in the opinion of many people surveyed at recent shows, the industry news and media, and RV events across the country.)
At some point the Fed will have to begin to increase interest rates - however, with inflation remaining stable, that may not be enough to derail the recreational industry's current "freight train" momentum. The recent election instability has begun to confirm our theories that we are beginning to enter a rising rate environment.
But Wait - There's Still More
All government and political issues aside, the RV market is being "buoyed" by the ever-increasing demands of retiring, or "soon to retire" baby boomers. The Gen X'ers and Millennials are falling in line right behind them.
With these higher numbers of potential RV buyers entering the market, forward-thinking RV manufacturers are continuing to engineer and produce lighter and more efficient units at virtually all price levels. This is helping keep the younger, entry-level buyers engaged with more economical and easier to purchase RVs at most all levels.
These gains in innovation are also keeping older, or should I say "Seasoned" RV'ers in the game by helping reduce operating costs, making more maneuverable units - and even lightening up the Big Boys. What are ya gonna do, but keep on rolling!
Continued gains in the job market, and higher household incomes and the current record-low interest rates, would seemingly project an extremely favorable outlook for the recreational industry in the foreseeable future.
Regardless of the outcome, the near-term months and approaching years are widely projected to be the best time to purchase and/or finance an RV. If you are in the market but may have been waiting for the rock bottom. That time could very well be now. Stay tuned for updates, or just get it out of the way while the getting is good.
Internet RV Loans vs. Dealer Financing
You've just signed a purchase agreement with your local (or not-so-local) RV dealer. You know the drill... Your next stop will be the Finance & Insurance Office, (a.k.a. F&I) for your RV loan, financing rates, warranty, insurance, etc.
Your salesman does the "hand-off", and suddenly you are faced with a decision that seems simple, but can cost you many times the profit made on the "front end" of your transaction; the "back end", or Finance and Insurance office.
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As I always try to convey to my clients: "The dealer is NOT the enemy." In fact, he can be your best friend when your RV is in need of service or repair. He has laid out literally MILLIONS of dollars to allow you the opportunity to browse a good selection of units. He has paid his dues and continues to pay them on a daily basis. Keep his - and your best interests at heart when deciding on your source of any potential RV or motorhome financing.
There is one hard and fast rule that applies to RV Dealer provided financing. He must "pack" (inflate) the "buy rate" (interest rate) on the financing he provides to his customers to earn a profit on the transaction. Once again, he uses this profit to pay overhead, commissions, etc.
1. Should you consider the benefits of financing through your RV dealer? Yes.
2. Are you stuck with the financing and interest rate he quotes? NO.
3. Should you consider alternative sources of financing? Definitely!
4. Should I check Internet RV Loan Rates First? You MUST know the current rates!
Most RV buyers are so frazzled by the time they finish the negotiation to finalize the purchase of a new RV that they fold under the pressure of the F&I office. This can be a costly mistake.
Shopping for your best interest rate and terms can be just as important as shopping for the right RV, and negotiating your best price. In fact, you stand to save literally THOUSANDS of dollars by simply lowering your interest rate by a quarter to a half of a percent.
Information is the Key to Financing RVs Online or Offline
Online RV finance companies normally use many of the same lenders that RV dealers use. It's simply a matter of overhead and the cost of doing business. Since the Internet-based companies generally have lower operating costs, they are able to pass the savings on to you.
Most Internet RV finance sources have online rate quote forms and loan applications which can be completed in a matter of minutes. Normally, credit approval can be obtained the same day you apply.
When you submit your online application, you should also be prepared to send some additional documentation, which is necessary for your approval.
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Required RV Loan Approval Documents
If you are EMPLOYED (work for someone else), you will normally be required to fax or email proof of income. This is usually a recent pay stub and your last 2 year's W-2 forms. (For each applicant)
If you are SELF-EMPLOYED, you will normally be required to send your last 2 years tax returns and any attached schedules.
If you are RETIRED, you will need to provide documentation of social security benefits, pensions, dividends or other sources of income.
Once your loan is approved, your loan processor will help you in obtaining additional documentation, such as:
A copy of your purchase agreement with the seller.
A copy of the title. (MSO on new units).
Proof of insurance with the lender listed as "Loss Payee".
Copies of all the applicant(s) driver's licenses.
Most onine RV loans take from 4 to 6 business days to complete. Information must be collected, and documents must be sent by overnight mail for your signatures, and then sent overnight mail back to the lender.
When arranging the purchase of an RV, you should typically allow a week or so for your scheduled delivery date. This should allow plenty of time for rate shopping, loan approval, and closing. When your loan closing is completed, funds can be sent to the seller by overnight mail, or simply wire transferred. To save time, you may also choose an RV loan pre-approval so you're ready to close as soon as you find the right RV.
Which Type of Financing is Best?
If you want EASY? Let the dealer handle it.
If you want the BEST RATE? Do a little work.
Sure you will have to do a little more work, but if you break down your long-term savings into the actual time you have spent researching and completing your RV loan... You could be making a VERY short-lived hourly wage roughly equivalent to that of Bill Gates.
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RV Shopping and Financing Online
The "ritual" of shopping for a new RV or Boat, and even recreational vehicle financing, has changed dramatically in the last decade - especially within the last 5 to 8 years. Gone are the days of driving hundreds of miles, from dealership to dealership; always at the mercy of time and distance - and the pressure of the sales office.
Granted, the Internet has been in fairly common use since the early 90's, but only in the last few years have we seen the majority of Recreational Vehicle buyers doing most all of their most focused and "actual purchase" related research and shopping without driving a mile. They are doing their homework at home, (and at work), on the Internet.
In the earlier days of the Internet, potential buyers had been slow to embrace major purchases, such as RVs and Boats - especially without seeing and inspecting the unit in person. But, smaller online transactions on websites like Amazon.com, eBay.com and other increasingly popular web-shopping sites, have increased consumer confidence and slowly matured into much larger and more expensive online purchases.
With the introduction of eBay Motors in the early 2000's, people began buying and selling all types of motorized vehicles, but the sale and purchase numbers for RVs grew faster than anyone had anticipated. By 2004, the search term "RV" was in the top 10 search terms on the (relatively new at that time), search engine Google.
In the following years more and more people began using the Internet to search for "Bargains", and the numbers of RV buyers and sellers have increased exponentially, year after year. Our experience has shown that online RV sales and online financing to be increasing even faster than expected.
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Today, the "new generation" of RV and Boat buyers span the entire spectrum of recreational-related demographics. Every age group from young families buying their first camper for occasional outings, to retired full-timers in super-luxury units, are joining the online recreational vehicle purchase revolution.
These buyers tend to do their initial research by driving to the dealerships in their comfortable driving area, usually a 50 to 500-mile radius, or by making periodic stops along their travels and adventures over time. By doing this type of initial shopping, they are able to see, feel and drive the types of units available. They can learn the pros and cons of the various styles, sizes and price levels by seeing these units in person at the dealerships they visit - hopefully leaving their checkbook and credit cards in their vehicle. (Lest they meet a salesman, and buy something.)
Once they have narrowed down their general types or units of interest, they can begin their online price shopping. They can slowly narrow down their search to a particular year, make and model, with specific options. From there on out, they simply call each dealer and/or private RV seller with a unit that matches their needs. Sooner or later, they find the right deal - at the right price. Distance seems to be no problem if they feel they are saving enough money, or finding the right unit.
At WaveWallet, we have seen our percentage of online, and/or out-of-state purchases grow to more than 50% of our RV financing customers. And, because they are normally unfamiliar with long-distance or private-party sales procedures, we provide them with an easy roadmap to a safe and successful transaction.
The new online RV and motorhome "Private Sellers" are wary of their exposure to unscrupulous or fraudulent buyers, so we help guide them through the complete transaction as well. Our RV pre-approval and loan processing, title research, and closing departments coordinate virtually all aspects of the RV purchase, finance and loan closing. A smooth transaction can be crucial to help guide the purchase and sale process from start to finish, with all parties satisfied with the outcome.
So, now you are able to easily find the best price and financing for just about any type of recreational vehicle. The thousands of dollars in savings normally cover more than the cost of driving or flying thousands of miles to take delivery of your new toy or home on wheels, or on water.
While most potential buyers' interest in saving money intensifies during the frenzy of shopping for a new boat or RV, they should remember those industry related businesses they may need after their purchase. Your local Dealer may be much more likely to go out of their way for "post-sale" related activities like service, troubleshooting, etc. if you purchased the unit from them. As you travel further and further from home, the savings in actual dollars become more and more important.
The rapid rise in the use of the Internet for RV shopping has closed more RV dealerships than any other factor, even the extended economic recession. However, the fortunate dealers with deep enough pockets to survive the recession, and those adaptable enough to survive the Internet, have evolved with the changing times.
Now that much of a dealership's income from unit sales has been reduced, they rely more and more on the increased income produced by other areas such as the parts and service departments. They have added new avenues of income such as rental fleets, consignment sales and other products and services.
If you decide to take the Internet leap and save money by researching, shopping and buying online, remember to give your local dealers a chance at earning your business. If not the sale - be it for service, parts or repairs; a little more money spent locally can go a long way in good relations over the long term.
And don't forget to remember that a "Great Deal" can be found just about anywhere if you look hard enough and smart enough. So start close to home, then go from there.
"For every buyer flying from New York to California to save a little money, there is another flying from California to New York to do the same thing."
Basic Factors Involved in RV Loan Approval
Lenders look at several factors when underwriting each RV loan. Every lender is different and stronger areas of your credit profile can help outweigh weaker ones. There are several consistent factors that each lender will pay careful attention to when considering a potential loan.
1. Credit Score - When evaluating the purchasing of a car or even a home, lenders commonly grant an approval based on factors and credit scores lower than those required to purchase an RV. These items, RVs and boats, are considered luxury items. If you were to lose a job, become disabled, or become unable to pay your normal bills, then it is common sense to assume you will stop paying "luxury" items first.
RV lenders normally require a credit score of approximately 700 or better, with no visible credit history of bankruptcies, repossessions, foreclosures, liens, etc. Even late payments as recent as the last several years can be reason for them to decline a loan
2. Debt-to-Income Ratio - Your debt-to-income ratio is the percentage of your monthly revolving debt in relation to your gross monthly income.
Revolving debt is generally considered to be expenses such as monthly mortgage payments, auto payments, credit card debt and other things that may contribute to your monthly debt obligations. Monthly expenses like utilities and other personal items such as cell phone bills are not considered in computing debt-to-income ratios.
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Currently, lenders are limiting the maximum debt-to-income ratios at 42% to 45%. As little as an additional percent or two can be cause for a decline. You can figure your own debt to income ratio by dividing your total monthly revolving debt by your gross monthly income.
For example, to figure your own ratio, use a calculator as follows: $4,000 (monthly debt) divided by $10,000 (monthly income) equals 40% (debt-to-income ratio). Your own figures won't be as simple as this example, but be sure to use "monthly debt divided by monthly income" to get the correct percentage.
3. Liquidity - Liquidity is basically your total amount of readily available cash. Things that are considered are checking accounts, savings accounts, securities and investments. Company retirement accounts that are inaccessible or cause serious penalties for withdrawal are normally not regarded as "liquid assets".
In other words, how much money do you have available to pay bills if your income is interrupted, either temporarily or permanently? There is no set amount or ratio that can be computed. Each lender and situation is evaluated on a case-by-case basis. Excellent credit could allow a lender to accept lower liquidity and vise versa.
4. Loan Value - As with nearly every type of loan, the value of the item being purchased is a consideration. An RV's value is normally determined by its "book value" as listed in the N.A.D.A. valuation guide. Some lenders add value for optional equipment while others do not. Each has its own formula for determining the loan value of a particular RV.
You can look up RV values at NADA RV Values website, but be cautious of how many options you check as applicable. Many of these options are considered standard equipment by both the lender and the unit's manufacturer. For example: A refrigerator is always standard equipment, but a larger, side-by-side with an ice maker would be considered optional equipment.
Since the loan value of a particular RV is a major factor considered in the approval of each RV loan preapproval, you will need to provide basic information on one specific unit, no matter if it is for an actual loan approval or a pre-approval.
It's normally advisable to wait until you have narrowed down your choices to a particular type, year and price range. You can then provide a subject RV's information for the pre-approval. As long as you stay close to the subject vehicle's basic information, the lender can simply switch the collateral (RV information) on the same approval.
Pros and Cons of RV Loan Pre-Approval
You should be wary of "shopping" your RV loan pre-approval to multiple brokers since each one will pull your credit report from one or all three credit bureaus several times. Each broker's loan processing department will need to pull your credit for their own records and information as well as any lender(s) the loan is sent to for potential approval.
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Multiple credit inquiries can lower your credit score by several points per inquiry, although lenders realize that some inquiries are part of any loan approval and consider a few to be normal. Excessive inquiries, 3 to 4 or more in a very short period of time can damage your borrowing ability. Multiple credit inquiries or "Hits" as they are sometimes called, may appear as if you are shopping for loans because you have been turned down elsewhere, even if that isn't the case.
By applying with a single broker or lender you can avoid the problem of multiple financing inquiries on your credit report on the three major credit-reporting agencies. Also, by having your RV loan pre-approved you are able to close on your purchase much faster than if you wait until you find the exact unit you decide to purchase. This is especially helpful when buying on eBay, from other online sources or from a seller who may have other potential buyers who could "beat you to the punch" while you wait for your loan approval.
Just as you shop for the exact RV you may decide to purchase, it is wise to do your homework and check the rates, fees, and terms of various lending sources before you apply for your loan pre-approval. Once you have narrowed your choices down to one or two sources, then you can proceed with your RV loan pre-approval application. Once approved, you will be prepared and ready to purchase the RV that's just right for you.
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