It’s often said that there are two kinds of people in the world, those who think in numbers and those who think in words. The problem is that the strange beast of motorhome finance requires a canny understanding of both to make any sense and the myriad of confusing and conflicting information can be a real and very expensive problem to consumers. Here’s a quick and easy guide to assessing your finance options and deciphering what it all means…
Interest: The Price of Cash
The first confusing principle to get your head around is the supposed ‘cost’ of money. It seems mad initially to think of money as having a cost other than its face value, but it does, and it’s called interest. Think of the interest on a finance deal as the ‘price’ of being able to hold on to your cash a little longer and thus delaying the payment on a part of your motorhome.
APRs, OTRs and Other Acronyms
The financial world loves to make things short and easy but often leaves the rest of us in the dark. The ‘APR’ is, the annual percentage rate, in short, the interest (price) you pay for your borrowing yearly, OTR stands for ‘On the Road’ and usually is an overall price including things like registration fee, tax and often motorhome insurance, and never be afraid to ask about other acronyms. Financial institutions have a responsibility to make sure you know what you’re buying.
Finance Calculators and Other Tools
A quick online search will show you a range of tools which can be used to calculate your payments monthly, annually and over the duration of your finance deal. The figure that really matters is the ‘overall repayment due’: this less the upfront cost tells you the real amount of interest you’ll be paying and the effective price of this deal.
There’s no right or wrong answer to what is a ‘good’ finance deal, but usually the lower the APR and the more deposit you put down the better the deal you’ll get. Never, ever enter into a contract you don’t understand and always take the numbers away and look at them: a large, monthly repayment can be a real drag if you don’t know what you’re getting into.