What happens when a vehicle is upside down?

[afb]

I am interested in buying an RV. I visited a dealer and was shocked to see how quickly they depreciate. When combined with the 15-20 year loan terms that are required to make them affordable, these vehicles will in short order, be upside down. What happens when someone's life circumstances change and they no longer want their RV but owe more on it than its worth? What choices are available to them?

I don't want this to happen to me, so I started thinking about alternatives. Is there such a thing as buying an RV by taking over someone’s payments? It seems like this might be a win-win situation: a good way for someone to get out from under their payments and a financially sound way for me to acquire an RV. Am I being naive or overlooking anything?

[booster]

Originally Posted by afb

I am interested in buying an RV. I visited a dealer and was shocked to see how quickly they depreciate. When combined with the 15-20 year loan terms that are required to make them affordable, these vehicles will in short order, be upside down. What happens when someone's life circumstances change and they no longer want their RV but owe more on it than its worth? What choices are available to them?

I don't want this to happen to me, so I started thinking about alternatives. Is there such a thing as buying an RV by taking over someone’s payments? It seems like this might be a win-win situation: a good way for someone to get out from under their payments and a financially sound way for me to acquire an RV. Am I being naive or overlooking anything?

You can have somebody take over payments if they can get approved by the lien holder, but nobody smart will buy something that is already upside down, so you will need to put in cash to make up the difference in most cases.


You can always give it back to the lien holder and take the credit hit, assuming it is a secured loan.


All this is why many buy used, to eliminate the big initial drops in value. You really need to know you will keep it a long time, or get a really good deal on the new RV to financially justify a new one.


My personal opinion is the an RV is a totally optional expense, so I would never even finance one at all, especially for a ridiculously long time, but that is just me and others will disagree with that.

[Winston]

Originally Posted by booster

You can always give it back to the lien holder and take the credit hit, assuming it is a secured loan.

Booster, are you assuming the lien holder won't come after the debtor for the balance? Certainly not guaranteed.

[booster]

Originally Posted by Winston

Booster, are you assuming the lien holder won't come after the debtor for the balance? Certainly not guaranteed.

I think a lot may depend on how much it is and where you are. Personally, I really haven't heard of that happening much at all, but I certainly haven't seen lots of it going on. I have seen more of the folks in trouble doing the responsible thing and working with the lender to give it back and pay some of the difference in value with understanding there won't be a severe credit score hit or a forcing into bankruptcy, which can often happen if they would come back for the entire difference, I would think. The lender would probably win a settlement in court, but that costs money to do, and there is not any guaranty that they would be able to ever collect anything, so quite risky for the lender.

[Winston]

Originally Posted by booster

All this is why many buy used, to eliminate the big initial drops in value.

As it appears AFB's objective is to avoid difficulties should life circumstances change, your original wisdom to buy used makes a lot of sense. We've been polling 'campground people' we meet and have been surprised at the great deals that some of them got . . . buying a like new, couple of year old 'rig', with low mileage for less than 1/3 what the original buyer paid. Hard to lose ones shirt, changed circumstances or not, when you can save 2/3 on the purchase.

[Jon in AZ]

If financing is part of the picture, start by finding out from your lender where the “break points” are for interest rates vs. age. Often there’s a jump in rates beyond 4-5 years. That’ll give you a rough idea of what to look for to take advantage of initial depreciation without paying a financing penalty.

Set aside a sum for a pre-purchase inspection., and leave room in your budget for repairs. You’re maintaining both a vehicle and a house in a rolling earthquake zone.

And of course, pay as much down as you can afford without jeopardizing your lifestyle or emergency preparedness. Upside down is a vulnerable place to be with a depreciating asset, Since it’s an uncertain economic future at the moment, I would be even more conservative.

Two years old, low miles, and 1/3 of MSRP seems rather optimistic to me. No doubt there’ll be some fire sales due to the current crisis, but I’m seeing a lot more Class A’s and large fifth wheels on the market than Class B’s. Supply and demand...

[Jon in AZ]

Late thought, obvious, but I’ll say it anyway. Don’t take a 20 year loan on a depreciating asset. They are common in the RV industry and inherently predatory. If a short-term loan (5-7 years) is unaffordable, lower your price range.

Perhaps for a few people, the long-term loan might make sense for the interest deduction. A Class B qualifies if it has a permanent kitchen, toilet, and bed. You could still make a large enough down payment to be right-side up.

[jrobe]

Originally Posted by booster

My personal opinion is the an RV is a totally optional expense, so I would never even finance one at all, especially for a ridiculously long time, but that is just me and others will disagree with that.

This is the best advice here. It is hard to imagine a worse financial decision than taking out a 15-20 year loan to buy an RV (or a loan on any kind of a toy for that matter). Hopefully you will rethink this. Your best option is take the time now to to start saving for an RV for when it is affordable.

[Ron J. Moore]

I am interested in buying an RV. I visited a dealer and was shocked to see how quickly they depreciate. When combined with the 15-20 year loan terms that are required to make them affordable, these vehicles will in short order, be upside down. What happens when someone's life circumstances change and they no longer want their RV but owe more on it than its worth? What choices are available to them?

I don't want this to happen to me, so I started thinking about alternatives. Is there such a thing as buying an RV by taking over someone’s payments? It seems like this might be a win-win situation: a good way for someone to get out from under their payments and a financially sound way for me to acquire an RV. Am I being naive or overlooking anything?


I read this and think of many folks who want the RV life, really cannot afford to pay the cash payment, and don't want that long time loan usually involved....of which many wouldn't qualify. These folks are buying vans, be they new or old, and outfitting them to use now...improvements are money flows in. I really believe this is a great alternative to being trapped in a loan of a depreciating item, but being able to get out and enjoy the lifestyle. Ron

[SteveJ]

When one looks at a normal amortization schedule it would appear that you would be out 15 years + or- before you not be up side down. It would first occur once the paper work is signed.

[GeorgeRa]

We set a specific limit for cash out to get a camper van and we stayed below. Got a new van, drilled a few holes here and there without heart attack, added a few gadgets, some aluminum, some stainless steel, some plastic, some wires, nuts and bolts (no Lithium batteries) and Voilà – we got a new van within our preset financial limits.

We witnessed once a conversation between a young couple and a salesman when we were buying a car. The question was – “I don’t care how much cost – what is the monthly payment”, sales guy was very happy.

[booster]

Originally Posted by GeorgeRa

We witnessed once a conversation between a young couple and a salesman when we were buying a car. The question was – “I don’t care how much cost – what is the monthly payment”, sales guy was very happy.

That is an interesting, but all too common thing, it appears. Once when we were looking at new cars, and one in particular, the sales guy said "I can put you in this for $XXX a month". We just asked him how that had anything to do with a cash sale?

[peteco]

Many years ago a friend worked in a loan office. A guy wanted to buy a car, but when told it would be $200 a month he said he couldn't afford that. My friend then asked: "Can you handle $50 a week?". The guy quickly said yes, no problem. So people have many different levels of understanding, viewpoints, timeframes, and priorities.

[<<B-Guy>>]

Originally Posted by booster

That is an interesting, but all too common thing, it appears. Once when we were looking at new cars, and one in particular, the sales guy said "I can put you in this for $XXX a month". We just asked him how that had anything to do with a cash sale?

Only problem with that is that you could have jeopardised your chances of getting the best deal!

As I understand it, these days dealers make more money on the financing than they do on the sale price of the car itself.

That being so, if you tip the sales person off that you will be paying cash then they know they will get nothing at the tail end of the sale, so will be that much tougher in getting what they can when negotiating price.

I just watched a video on that very aspect and the fellow presenting it seemed pretty familiar with he whole car sales business and he made a strong point of saying that you should never divulge during negotiations that you intend to pay cash.

I have made that mistake in the past - wonder how much it cost me! I still felt I negotiated a far deal but who knows! The one thing I am sure is that the dealer wasn't losing money!

[booster]

Originally Posted by <<B-Guy>>

Only problem with that is that you could have jeopardised your chances of getting the best deal!

As I understand it, these days dealers make more money on the financing than they do on the sale price of the car itself.

That being so, if you tip the sales person off that you will be paying cash then they know they will get nothing at the tail end of the sale, so will be that much tougher in getting what they can when negotiating price.

I just watched a video on that very aspect and the fellow presenting it seemed pretty familiar with he whole car sales business and he made a strong point of saying that you should never divulge during negotiations that you intend to pay cash.

I have made that mistake in the past - wonder how much it cost me! I still felt I negotiated a far deal but who knows! The one thing I am sure is that the dealer wasn't losing money!

I would agree that can be true, and it also varies a lot depending on the whole atmosphere going on. Unless you are willing to put in long hours of stupid negotiations with lots of trips into the manager by the salesperson (I lost patience for this years ago) it is often best to try to convince them of their need to give you their best "out the door" price upfront. Either accept or reject it and give one offer of your own which you have researched to know it is on the very low end of pricing. If they turn it down because they don't believe you are serious, walk after telling them to call you if they change their mind. We got one that way, so it was much less hassle, once we got the right sales person and dealer.

[<<B-Guy>>]

Yes I agree with that.

I have a bit of an arrangemet with a particular salesman at a local GM dealer where I have bought several cars.

Basically I tell him that I believe he knows what he can sell the car for and that after discussion, I will make one and only one offer that I think is fair and I will not get into this game where he goes to see if his boss will accept it.

First time I tried that we agreed on a price and he still said he had to go to his boss to finalise it. Of course he came back with slightly higher counter offer.

I really hated to walk as I really wanted the vehicle, but my pride would not let me back down so I did walk.

Within an hour I got a call at home saying that if I would come back that evening we had a deal at my price!

I bought a couple other cars from them since and each time reminded the salesman of my dislike for their games!

Of course I am not kidding myself that they are not still making money!

I think next time I am in the market, I may consider paying one of these companies that does the research and tells you what you should realistically pay for a particular make and model. I think they charge maybe $100 or so.

[avanti]

If you want to buy a new car these days, here is how to do it:
1) Go to the OEM website and configure EXACTLY the vehicle you want, right down to the color.
2) Use their search engine to get a list of all dealers within, say, 500 miles from your home.
3) Spend an evening searching each of their inventories for in stock vehicle that exactly match your desires. You will discover maybe 10-20 cars exactly matching your spec (there typically aren't that many combinations).
4) Send an email to each of them telling them exactly what you are doing and asking for their best price, delivered to your home. Give them their stock number of the vehicle you want.
5) Half of them will quote sticker price, which means they aren't interested in an easy, low-profit transaction. From the others, you will get an amazingly broad range of prices. There are a number of dealers in each region that do this kind of transaction as a side-line. They are good at it and will be eager to work with you. The good ones will deal with shipping and all the paper work--right down to sending a notary to your home.
6) Sit back for about a week, and a flat-bed will magically appear in your driveway with your shiny, new car at a price you won't believe.

Doesn't work quite so well with an RV, but the basic principle is sound.

[booster]

Originally Posted by avanti

If you want to buy a new car these days, here is how to do it:
1) Go to the OEM website and configure EXACTLY the vehicle you want, right down to the color.
2) Use their search engine to get a list of all dealers within, say, 500 miles from your home.
3) Spend an evening searching each of their inventories for in stock vehicle that exactly match your desires. You will discover maybe 10-20 cars exactly matching your spec (there typically aren't that many combinations).
4) Send an email to each of them telling them exactly what you are doing and asking for their best price, delivered to your home. Give them their stock number of the vehicle you want.
5) Half of them will quote sticker price, which means they aren't interested in an easy, low-profit transaction. From the others, you will get an amazingly broad range of prices. There are a number of dealers in each region that do this kind of transaction as a side-line. They are good at it and will be eager to work with you. The good ones will deal with shipping and all the paper work--right down to sending a notary to your home.
6) Sit back for about a week, and a flat-bed will magically appear in your driveway with your shiny, new car at a price you won't believe.

Doesn't work quite so well with an RV, but the basic principle is sound.

Yep, and if they whine about delivery costs, which may not even apply because they may do a swap with a dealer closer, ask them how much that cost is and then base on offer on going to get it if you can do it a lot cheaper than that. Even 500 miles each way is one day doable driving but comes at a cost you need to cover. In safer times a bus ride or airport shuttle can often be used if the go there, which makes it very easy. I got my old Buick in a suburb of St Louis, which took a flight to Atlanta from Minneaplolis on the way to get there and a long drive home. 5am flight, home at 10pm.

[<<B-Guy>>]

Good approach - I did something a bit similar when buying our B van.

Only two dealers close enough for me to consider - there was a third, but I ruled them out as they would not take our diesel truck and airstream in part trade, and I really did not want to go teh private sale route even though I might have made out a bit better financially.

I knew exactly the make and model van I wanted, and what options I wanted.

Spent a week or so going back and forward with each dealer by email and eventually said I would give both 24 hrs hrs to get back to me with their best and final offer - telling each of course that I was looking for competitive prices.

Initially one came back and said that while he was ok with that approach, his boss wouldn't agree. I said fine we'll leave it at that, and soon after he emailed me back to say his boss had changed his mind.

It worked out, and I ordered the van.

I was a bit nervous that when I took our trailer and truck to them I would get an argument that I had misrepresented them, (I had sent descriptions and photos) but that didn't happen, and all went smoothly.

I was pretty happy with the discount I got off MSRP and also with the trade in allowances (having trade-ins of course also saved me on sales tax on the van.)

I had researched the amount I thought I might be able to get selling the truck and trailer privately by talking with people on forums who had sold similar vehicles / similar ages, and also looking at asking prices for comparable vehicles on sites such as autotrader.

The dealer was happy and I was happy - and that as they say is indicative of good deal!

Originally Posted by avanti

If you want to buy a new car these days, here is how to do it:
1) Go to the OEM website and configure EXACTLY the vehicle you want, right down to the color.
2) Use their search engine to get a list of all dealers within, say, 500 miles from your home.
3) Spend an evening searching each of their inventories for in stock vehicle that exactly match your desires. You will discover maybe 10-20 cars exactly matching your spec (there typically aren't that many combinations).
4) Send an email to each of them telling them exactly what you are doing and asking for their best price, delivered to your home. Give them their stock number of the vehicle you want.
5) Half of them will quote sticker price, which means they aren't interested in an easy, low-profit transaction. From the others, you will get an amazingly broad range of prices. There are a number of dealers in each region that do this kind of transaction as a side-line. They are good at it and will be eager to work with you. The good ones will deal with shipping and all the paper work--right down to sending a notary to your home.
6) Sit back for about a week, and a flat-bed will magically appear in your driveway with your shiny, new car at a price you won't believe.

Doesn't work quite so well with an RV, but the basic principle is sound.

[<<B-Guy>>]

Originally Posted by booster

Yep, and if they whine about delivery costs, which may not even apply because they may do a swap with a dealer closer, ask them how much that cost is and then base on offer on going to get it if you can do it a lot cheaper than that. Even 500 miles each way is one day doable driving but comes at a cost you need to cover. In safer times a bus ride or airport shuttle can often be used if the go there, which makes it very easy. I got my old Buick in a suburb of St Louis, which took a flight to Atlanta from Minneaplolis on the way to get there and a long drive home. 5am flight, home at 10pm.

Good advice - only thing that I have heard though - especially in relation to RV's, is that dealers can make point of making life difficult for you in getting service. warranty work etc if you did not buy from them specifically.

To maintain their dealership for a particular brand I'm sure they are not supposed to do that, but realistically I think it is hard for the manufacturer to control.

For example you might be quoted a long time before they can take your RV in for service.

Recently I had to take my van in to our dealer where we bought the van for recall work.

They took it in the day after I called for an appointment. Based on what I was hearing from other owners on a forum about long waits, I was anticipating a wait of weeks or even months.

Could have been a coincidence - who knows!