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Old 10-03-2011, 12:53 PM   #1
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Depreciation, Trade-ins, RV Loans, and being upside down

What is the typical period of an RV loan?

I can see due to other messages in other discussions that RV's tend to lose about 50% of their Fair Market Value in 5 years or so. If you take out a 20 year loan on an RV that loses that much value that quickly, how do you deal with selling the old RV in 7-10 years and getting a new(er) one later on?

What goes into making the decision on how long to have an RV loan for you? What did you do? What would you not do again? Help out a n00b. Wifey is concerned about being upside down on the loan (RV worth less than remaining loan) and sees potential financial disaster in the future....

Can you help open our eyes with your experiences?
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Old 10-03-2011, 01:09 PM   #2
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In early 2007 we bought our new DP with 10% down and a 20 year loan.

We knew we would be under water from the time we drove it off the lot... probably up to the point when we sell it. That doesn't concern us. Placing a large amount of money down doesn't change the depreciation by one dime. I'd rather write the check at the end of the coach's time with us rather than at the beginning so I have use of the cash instead of putting it into a depreciating asset.

Everyone has to make their own decision based on their personal finances and on what helps them sleep at night. Many would never consider buying a "toy" like an RV until they can pay cash for it while others (like us) could pay cash but prefer not to. There's just no single "right" way to go about it.

Best of luck to you.

Rick
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Old 10-03-2011, 02:56 PM   #3
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Quote:
Originally Posted by RickO
In early 2007 we bought our new DP with 10% down and a 20 year loan.

We knew we would be under water from the time we drove it off the lot... probably up to the point when we sell it. That doesn't concern us. Placing a large amount of money down doesn't change the depreciation by one dime. I'd rather write the check at the end of the coach's time with us rather than at the beginning so I have use of the cash instead of putting it into a depreciating asset.

Everyone has to make their own decision based on their personal finances and on what helps them sleep at night. Many would never consider buying a "toy" like an RV until they can pay cash for it while others (like us) could pay cash but prefer not to. There's just no single "right" way to go about it.

Best of luck to you.

Rick
Thanks RickO

How does it work to do that? Do you end uputting cash in on the old RV AND the NEW one too? Do the dealers have any way to encourage you into a new unit if you are in that situation?

BoogieMan
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Old 10-03-2011, 03:26 PM   #4
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A financial adviser would probably tell you not to finance the RV for a longer term than you planned to keep it. Same as a car or truck.

In today's world almost everyone who buys a "Brand New" home is upside down on their mortgage as soon as they get the keys. Also true for many other home buyers.

BoogieMan writes "Do the dealers have any way to encourage you into a new unit if you are in that situation?" YES, at some dealers there would be 'creative" trade in values
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Old 10-03-2011, 04:04 PM   #5
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I guess I'm not a financial genius, I just don't see the advantage of buying a new coach under almost any circumstances.

We paid (as in wrote a check) for our gorgeous 2002 Journey a few months ago. Original owner paid $167k, we paid $49k... Like many, we could have bought new and still paid cash. Instead we chose not to pay interest, or have worries about future value, future payments, nothing. We only owe money on our house, and still have a good 50% equity in today's market. Helps that we bought a premium house in a super premium neighborhood.

Cars, bikes, boat, race car, trailers, motorcoach, all paid for. Still have a good chunk in the market, 401k, etc. With the stock market so bad, the little return I'm losing out on is far exceeded by the peace of mind not having to worry about future payments.

You guys keep buying those nice new coaches though. We'll probably want to replace the Journey in a few years...
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Old 10-03-2011, 04:07 PM   #6
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Thanks RickO

How does it work to do that? Do you end uputting cash in on the old RV AND the NEW one too? Do the dealers have any way to encourage you into a new unit if you are in that situation?

BoogieMan
If you mean, if I wanted to buy another new coach after only 4 years, would I have to write a check to get out of the old one AND another check as a down payment for the new one... yep, probably so but I have no intention of doing that.

As for financial advisors, I would think that good ones would take each client's financial situation into account when making recommendations. In our case, our financial planner proposed we minimize the cash put into the coach. Financing $200K allowed us to keep that money invested and we write off the interest on the coach. In hind sight, considering the market melt down, we might have made a different decision but if I had such good foresight I could have played the lottery instead.

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Old 10-03-2011, 04:19 PM   #7
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we write off the interest on the coach.


Rick
Hi, Rick

We asked our F.A. about doing this and he says we can't...
I'm not sure why- any tips as to how to write that money off ?

Thanks!

Francesca
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Old 10-03-2011, 04:32 PM   #8
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Quote:
Originally Posted by BoogieMan View Post
What is the typical period of an RV loan?

I can see due to other messages in other discussions that RV's tend to lose about 50% of their Fair Market Value in 5 years or so. If you take out a 20 year loan on an RV that loses that much value that quickly, how do you deal with selling the old RV in 7-10 years and getting a new(er) one later on?

What goes into making the decision on how long to have an RV loan for you? What did you do? What would you not do again? Help out a n00b. Wifey is concerned about being upside down on the loan (RV worth less than remaining loan) and sees potential financial disaster in the future....

Can you help open our eyes with your experiences?
Seems to me the smartest thing to do* is to buy a 5 year old RV, that is EXACTLY what I did 2 months ago. Prices are depressed in this economic climate they are many deals out there! Or if you buy new, have a short term loan, 10 years or less.

(*The smartest thing for me anyway! )
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Old 10-03-2011, 05:20 PM   #9
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Hi, Rick

We asked our F.A. about doing this and he says we can't...
I'm not sure why- any tips as to how to write that money off ?

Thanks!

Francesca
You are getting incorrect advice. All the interest can be written off when the RV is self-contained and is used as a "2nd" home. You write it off on your federal income tax return every year.
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Old 10-03-2011, 05:24 PM   #10
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Quote:
Originally Posted by Francesca
Hi, Rick

We asked our F.A. about doing this and he says we can't...
I'm not sure why- any tips as to how to write that money off ?

Thanks!

Francesca
As I understand it you must have a stick home and this would be your 2nd home. Mortgage interest deduction.
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Old 10-03-2011, 05:25 PM   #11
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Hi, Rick

We asked our F.A. about doing this and he says we can't...
I'm not sure why- any tips as to how to write that money off ?

Thanks!

Francesca
Hi Francesca...

My understanding is that the law it pretty clear on writing off the interest on our first and second homes. The coach is a second home for us now. However, the bank financing the coach doesn't issue 1099s at the end of the year so each of the past three years I've received a letter from the IRS telling me I deducted too much interest and every year my tax guy sends them a copy of my year end bank statement, a copy of my coach registration and a letter explaining that it is an RV used as a second home. Every year I get a letter back from the IRS thanking me and wishing me a nice life.

I'd probe more with your FA.

Good luck...

Rick
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Old 10-03-2011, 05:27 PM   #12
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You are getting incorrect advice. All the interest can be written off when the RV is self-contained and is used as a "2nd" home. You write it off on your federal income tax return every year.
Good grief-

I'm calling "Mr. UBS" right now...either I'm missing something or he is!

Thanks!

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Old 10-03-2011, 05:27 PM   #13
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As I understand it you must have a stick home and this would be your 2nd home. Mortgage interest deduction.
I don't believe that to be true. We were full time for two years and wrote off the coach interest as our only home interest.

Rick
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Old 10-03-2011, 05:33 PM   #14
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I don't believe that to be true. We were full time for two years and wrote off the coach interest as our only home interest.

Rick
Good to know. I'm such a newbie at all this
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