Whether you’re a first-time buyer or a long-term camper looking to upgrade, the excitement of potentially owning a new camper trailer can be palpable. A new home away from home with which to hit the road in search of adventure with the wind in your hair — what could be better?
Sadly, such excitement can become overshadowed if you struggle to afford it. You may have over-extended yourself on the purchase price, decided to finance but not received the best deal on interest rates, or perhaps you’re having trouble meeting repayments.
Buying a new RV with finance, that is taking out a loan for some or all of the purchase price, makes a lot of sense if you don’t want to put off living the lifestyle until you have saved the whole amount. But how do you know what you can afford, what a budget looks like and how to rein in your spending?
Wayne Park, a business development manager with finance broker Credit One, works with customers every day who are itching to get out on the road, whether it’s in a camper trailer, pop-top caravan or high-end motorhome. He helps them to work out what they can afford to buy, set a budget, and then finds a tailored loan to suit each individual. Here, he offers some top tips on being able to afford a new or secondhand RV.
SETTING A BUDGET
The above is a well-trotted-out phrase, but it’s oh-so important and not always straightforward. Sure, you may know what your annual salary is, or what you have in the bank, but there are thousands of RV options out there. You need to go back to basics, says Park, and really think about what you want from a new camper.
“You need to find the right unit to suit what you want to do,” Park tells Camper. “One of the first questions we ask is how will you use it, if you will take it offroad or on-road, where you want to travel and how often, what is your family situation — is it mum and dad and two kids or a couple? All of these things will affect the purchase price because of the size of the RV and inclusions you might need.”
And, of course, the cost of the camper is only the beginning. There’s the annual insurance premium, registration, servicing and maintenance and, the obvious one, travel costs.
“The quote I generally use for people who are purchasing is ‘campers can become extremely expensive driveway ornaments if people can’t afford to use them’,” says Park.
His tip is to plan an itinerary for trips you’d like to do during the year and work out the costs for fuel (check your tow vehicle’s fuel consumption with the manufacturer or through your own experiments, and fuel costs via apps such as Fuel Map Australia), holiday parks en route, food, and sundry costs such as sightseeing. Average that out to a weekly cost and factor it into your overall budget.
THE CAMPER VS. THE TOW TUG
As well as looking at your travel budgets, any consideration of a new purchase must also include the tow vehicle. Your budget will need to incorporate this as well. Park says it’s not uncommon for buyers to go about this back-to-front.
“Some people do it the wrong way around,” he says. “They will buy the car first and then go and look for an RV, but then realise the RV they want is too heavy for the car they have just purchased.
“The right way is to do it is to look for the camper, then go and look for a different car if you need to upgrade.
“If you don’t have that financial capability, then you need to find the trailer you can tow comfortably and safely with the car that you have.”
Towing limits are extremely important, especially considering the current trend is for RVs to be more laden with creature comforts and thus heavier to pull around.
MAKE REPAYMENTS WORK FOR YOU
Clearly, understanding the actual cost of your new purchase isn’t as simple as looking at the initial price, and for those who choose to finance their purchase, it can make much more sense when they get into the nitty gritty of what they have to pay back, and when.
Getting pre-approved for a loan can be the simplest way to establish a budget baseline. Chatting with financial experts about your income, your assets and your existing outgoings (i.e. what you spend each week) will determine how much you can borrow. Factor that in with any considerations about your tow vehicle and projected travel costs, and you can get a much clearer picture of what your purchase price should be.
And then comes the interesting part — considering different loan options and how you can make these arrangements work best for you.
“Looking at affordability, most people have a reasonable idea of what they want to spend, but at least 80 to 90 per cent that we have a conversation with wouldn’t have a clue what repayments looks like,” says Park.
Unlike personal loans which are unsecured and thus carry greater risk and higher interest rates, loans for an RV are considered an asset loan, so the rate is generally much lower. Park says loan terms across institutions can vary from one to seven years, can be paid weekly, fortnightly or monthly, and can be either be very stringent about payment terms and loan length or more flexible and allow extra repayments and early termination. Many also use direct debit set-ups which helps you to manage your money, too — set it up for the same time as your payday so you never actually ‘see’ the money (or have the opportunity to spend it on something else).
You should consult your financial advisor for detailed advice, but if you have a lump sum of savings it is worthwhile putting some or all of that toward the purchase of your new camper. It means lower repayments on a loan, less interest paid overall and perhaps a shorter loan term.
KEEP A LID ON IT
Once you have your budget in place it’s time for the main attraction to begin — searching for your RV. This is the fun part, but that doesn’t mean there aren’t pitfalls. Park’s tip is to try to check your excitement at the door, especially when you visit camper trailer shows with their myriad displays of campers of all shapes and sizes — and great deals.
“It’s a trap a lot of people fall into,” he says. “They walk through something in their price range and the next thing they are looking at the next RV and it’s $20K dearer.
“They need to sit back and re-evaluate their repayments, choices, and capabilities.”
WATCH YOUR SPENDING
Of course, we all like to splash the cash when we have it to spare. But, as with any debt, loan repayments have to come first or you’ll be in danger of defaulting on the loan and losing your new lifestyle.
Setting household budgets on a spreadsheet or any one of a number of budgeting apps available on your smartphone can help, and direct debit loans timed to each payday is a good idea to stay on top of it. Limit your outlay on frivolous or unnecessary expenditures (especially large purchases) and cut back on expensive dinners or spending on personal items (do you really need that Rolex or would you rather be kicking back at Kakadu?).
Park says you need to be comfortable about your financial commitments and pass what he calls the ‘sleep test’.
“If you put your head on the pillow of a night-time and you think ‘what have I done? Have I over-committed myself?’ then that’s not a good thing,” he says.
“If you put your head on the pillow and you are actually excited about your new purchase because you know you can afford it and you are settled with the decision you have made on the RV and the commitment, then you are in a good place.”
TOP TIPS FOR BUDGETING
- Decide on the type of RV you want that will suit your travel goals
- Calculate your current weekly or monthly expenditure
- Work out a rough itinerary for planned trips and expected costs of fuel, site fees, food and sightseeing
- Do your homework on registration and servicing costs and the best insurance deal
- Get pre-approval for a loan so you know what you can spend at a show, dealership or private sale
- Consider tipping in your savings to reduce the amount you borrow
- Do the math on repayments based on your current income to judge your affordability
- Get a loan that suits your lifestyle, i.e. standard repayments or flexibility to pay early
- Get the direct debit repayment option each payday
- Don’t overspend your ‘free’ cash on unnecessary items
To find out why more Australians are choosing Credit One for all their finance needs, phone its experienced consultants for an obligation-free chat on 1300 CREDIT (1300 273 348) or head to www.creditone.com.au to get an instant finance quote.