Motorhome finance is just a fact of life for a lot of motorhome owners; it gets paid every month and, one day, it’ll all be settled up. However, some deals are most definitely better than others, and your existing motorhome finance deal could be costing you considerably more than it needs to.
Of course, all motorhome finance deals are personal and the requirements for each individual will be different. For some, the overall cost is the most important factor and accessing cash as cheap is possible is the only factor that needs to be worried about. For others though, it’s about opening up finance you couldn’t possibly access otherwise.
How should you evaluate a finance deal and make sure it works for you?
Calculating Overall Cost
The first thing you should do is calculate the overall cost of any motorhome finance deal. This should be a simple case of multiplying the sum you’re borrowing – that’s the price of the motorhome less your deposit – and the time of repayment. Remember that interest is compounded which makes the maths a little more complicated but most financiers will offer you a full breakdown.
Compare different costs across the various deals on offer and see which is cheaper in the long run. This is much simpler than comparing rates and shows you what you will actually have to pay in total.
The Price of Cash
Total cost however is not the only thing you should consider. The worth of cash is different for everyone and will be dependent on lots of lifestyle factors. If, for example, you’ll be looking to take out a big mortgage in two years’ time, it could be very useful to pay off your motorhome finance before then.
In these circumstances it’s often more cost effective to borrow for a short term, or a longer term, even if it costs you a little bit more. The best way to think of this is to compare it to something like an overdraft: how much would it cost you to take out the difference by some other means?
Putting Down a Deposit
The general rule of motorhome finance is that the bigger the deposit you can put down the better. This means you’re borrowing less, and it’s costing you less, even if you need the credit for a long time. You do need to be a bit savvy with this however, and that’s for two reasons. Firstly, that deposit has to come from somewhere. If it’s coming out of your low interest savings account it’s probably worthwhile, but there may not be much merit in breaking up a successful investment for the sake of finance. Equally, you should be sure to investigate the possible deposit options: some motorhome dealers will limit your maximum deposit
Things like part-exchange deals can make all the difference in a finance deal. If a dealer is prepared to offer you a significant amount for your old motorhome then the additional costs of a relatively poorer finance deal might suddenly start looking much more palatable.
You should be wary of dealers throwing in extras like tax, motorhome insurance or physical accessories such as a sat-nav. Though these might be offered in good spirit, usually the quality is fairly low. That’s not to say you’re not getting a good deal, it’s just that you should be careful about what you accept without first knowing its real worth.
The bottom line with finance deals is that you need to do the maths and put in the effort. Treat the deal with a business brain, but don’t be too clinical with the figures. A cheaper deal is, on the face of it, more cost effective, but you need to spread the perceived benefits over the number of years of borrowing and really think ahead about what you can tie yourself down to. You should also not forget to factor in the intangible benefits of your decision: if something is both affordable and convenient then it often makes sense just to go for it. There’s no shame in this and it leaves you the time free to enjoy your motorhome, rather than figuring out how to pay for.
Many motorhome dealers offer online tools that can help you calculate motorhome finance and can give you a rough indication of your borrowing costs at an APR of 10.3%. That won’t be representative for everyone, but it’s a good place to start.