How much $ down on purchase

[flaggship1]

John777Cal - so is buying an RV on credit with a minimum Down payment smart or dumb debt?

[vsheetz]

Originally Posted by tncruiser

i have always preferred the 100% down w/no monthly payments
the few times i havent been able to do that we accelerate the payment as fast as we can
currrent MH 1/2 down have had for a year
will be paid off inn 2012
everything else we have is paid off (2homes and 2 newer cars)
never carry a cc bal
brianj

[RickO]

Originally Posted by John777Cal

"Don't get me wrong, of course I want to be debt free. Don't we all?" Uhm, no, I don't want to be debt free. Don't let Dave Ramsey fool you. All debt is not bad, especially if that debt can be used for an asset that will appreciate or return a rate higher than the borrowing rate. I have a couple of friends who live by Dave's theory of "Cash is King", and have for several years. So while they are building their "baby steps" and refusing to use credit for anything, they have let golden real estate deals pass them by because they could not pay cash. (Like the Pensacola condo we bought during the crash for $37K and is now pushing $120 only 5 years later) They could have bought the unit downstairs but did not have the cash and would not get a loan. That is ridiculous. Don't get me wrong, there certainly is dumb debt, but appreciating assets (real estate) is not a dumb debt.

Ditto. Tying up large amounts of cash in a depreciating asset isn't what many of us feel is in the best interest of our long term future.

Originally Posted by flaggship1

John777Cal - so is buying an RV on credit with a minimum Down payment smart or dumb debt?

IMHO, the question can't be answered yes or no because it depends on who is doing the financing and what their financial status, goals, and tolerance for risk are at the time.

Rick

[John777Cal]

Originally Posted by flaggship1

John777Cal - so is buying an RV on credit with a minimum Down payment smart or dumb debt?

In my particular case, I think it is "smart" debt, but your mileage may vary. I could have paid cash for the MH by using stock held in a Dividend Reinvestment Plan account. (DRIP). My current ROI is 11.8% from this DRIP account which holds stodgy old fashioned stocks like, Procter&Gamble, Johnson and Johnson, Exxon, Wal-Mart, etc. My loan rate is less than that so in theory, I will be netting an unrealized gain percentage by using OPM - Other Peoples Money.
Now for the depreciation of the MH, we plan to hold this one for 5 years as a practice MH until we retire full time and purchase our retirement MH. (Probably won't pay cash for that one either). If I look at the resale values of a 5 year MH of our type, it has dropped about $19,000 in those 5 years. Factor in the loan rate vs the DRIP rate and I can knock about 5-6K which I will be making on the DRIPs during those 5 years. Here's where it gets tricky....if you are a "Glass Half Full" type guy like I am, I think the stock market will go up in those 5 years and allow my stock values to increase more than the depreciation. But, if you are a "Glass Half Empty" guy, and the stock market falls in the next 5 years, then I should have sold the stock, paid cash, and locked in a realized capital gain.
When we sell this one in 5 years, we will not get the loan amount on it, so I will add a little to it to pay it off and hopefully, the DRIPs will be chugging along and more than make up the difference. I've been doing this technique since 1986 and it has served me well. But then again, I started buying Apple stock at $16 a share, so I have a lot of leeway in my calculations. As I said, your mileage (and definition of smart vs dumb) may vary. Isn't this a great website to gain knowledge and ideas from other MH's? I have learned a ton of info for our initial foray into the MH world.

[B Bob]

This subject has been absolutely beat to death on this forum. Wise people use debt wisely and not wise people do not.

That said I think that if you put a minimum down and payment over 20 years that is very likely not a wise use of credit under any circumstances unless the debt at at a rate of somewhere around what the house mortgage rate is. Maybe 3.25%. And you have a similar amount of cash invested in something rock solid that pays more.

Some people go on and on about never using debt. But I would guess that the reasons for saying that have some other basis than logic.

Apple was mentioned in this thread recently. Apple never would have been born without some use of debt. And almost no one would buy a house. Apple certainly turned out well and most home purchases turn out well too.

I will pass on this little story though. When we were looking for a motor home 3 1/2 years ago I met a man trying to sell his Alpine 40'. He had made 101 payments and his motor home was still seriously under water. Makes you think that does.

We paid off our motor home after a year. I bought a new tow car today. Bought it cash.

[89sandman]

if you can't put at least 25% down on what your buying you can't afford to buy it. people still haven't learned to live within their means, always wanting more than they can afford. talk to so many rv owners who wish they could sell their rv and get something else but they owe more on it than it is worth...

[WeatherTodd]

Originally Posted by 89sandman

if you can't put at least 25% down on what your buying you can't afford to buy it. people still haven't learned to live within their means, always wanting more than they can afford. talk to so many rv owners who wish they could sell their rv and get something else but they owe more on it than it is worth...

not for nothing chief but down payments are for suckers.
Has nothing to do with "means" or luxury. Of course if there weren't suckers that take 20yr loans on these things... they might never get off the lot anyways. That and if you cant read a simple finance contract and do some math (not in a closing room) ... I don't feel sorry for you.

[mdo]

Not everyone has the same situation and just because you can't pay cash or put 25% doesn't mean you can't afford it or living beyond your means..... I rarely put down a down payment.... I put 0 down and got 1.9% financing on a Acura TSX when I was earning 15-18% on 120K retirement investment fund.. I was making over 100k a year, owned two houses, one paid for plus investment property that was paid for... it didn't mean I couldn't afford it....

When you finance something with rapid depreciation, or if you plan to put zero down, consider GAP insurance, if available... A few years ago, I bought a GMC Envoy, zero down and purchased GAP, three years later I was involved in a accident and the adjuster told me that if he totaled it, it would cost me at least $3,500 out of pocket to satisfy the loan since I owed more than it was worth.... I told him I had GAP insurance and it paid the difference.... Had I put a down payment on the Envoy, I would have lost it all....

Also, 20 year financing isn't always bad deal. If you know that your income will increase or in case you will have to start drawing from a supplemental retirement fund, or social security in the near future, and you aren't relying on that income, you can make extra payments as your income increases and reduce the term of your loan... If you go the 20 year route and don't make extra payments, you will be upside down for a long time....but that doesn't matter if you are happy with the purchase you made and you are enjoying RV'ing....

For some, if they waited until they could pay cash or at least 25% down, they may never get to enjoy the experience of owning a RV...

[dsbear]

Why would I want to put 25% down when over the last 7 years my rate of return on my portfolio has averaged 15+% and I would have to pay 30% in taxes on the gain of the liquidated assets?

[RickO]

Well said mdo.

I continue to be amazed at how many people feel free to paint everyone with a single brush and even resort to name calling when those in financial situations which are different from their own make decisions they don't agree with.

Rick

[Genset]

Geez, I had no idea everyone was wealthy, we all have our needs & wants. As I see it, too many wannabee types try to act like they really are wealthy.
Me, I am just a poor dumb slob, have not had any debt for 30 years, paid cash for our home, they tell me my credit rating is 826, not real sure what that means, when I purchased my Foretravel, they wanted me to finance it, that is when they claimed the 826 rating. Nope cash is king and I would worry if I had payments. Being 72 is good.
But if your happy, I sure as hell are happy for you, just not my cup of joy.
Seems most folks at Walmart are spending my tax money with their welfare card, hell everything is free, them dumb tax payers cover it.
Dave M

[Genset]

Ever knowanyone who acted like the government, spending more than they could afford, but unlike the govt. they lost everything when the repo folks show up.
You also have the crowd, retired, sell homestead, great investments, great retirement, gone full timing, soon after, the DW says he wants to go home, she is tired of living like gypsies. Opps !
Home is gone, the fancy RV they over paid for, is now worth 30% of what they paid, it is not free & clear, they move into an apartment, too old to hold a regular job away from Walmart, but they are still young and need some income.
Sad way to wind up because they got in over their heads and the grand plan did not work out
Our grand plan is play the RV game, but come home, the home is off limits to any big schemes and we only pay cash, not over hanging worries.
Just saying
Dave M

[smack2020]

I sure am glad we all don't have the same ideas and all do the same things. What a boring world that would be.
Put down as much as you want or as little as you can get away with. Remember, life is short.
Trust in God.

[flangley]

I don't like financing either but some people can't come up with cash. I always spend a lot of time looking for the best deal and when I bought mine I got it for $17,000 below book value so I didn't have to put anything down. I financed it for 5 years and pay double the notes on it so I can have it paid off as soon as possible. I don't touch my retirement money to buy anything.