An RV can be a great investment, offering years of affordable family vacations or a great retirement lifestyle. But what are the average loan terms on an asset like a recreational vehicle?
Let’s take a closer look at average RV loan terms and other important aspects of recreational vehicle financing.
How Do RV Loans Work?
As with a car, you can choose to go with your dealership’s financing or walk into the lot with a pre-approved RV loan from an outside lender in hand. You can get an RV loan from your local credit union, some banks, or a specialty lender.
Whoever you approach for your loan, you'll likely be offered a fixed rate, which means your interest rate stays the same throughout your entire RV loan term. You make equal monthly payments until the loan is paid off in full.
You may borrow up to 100% of the value of the vehicle depending on your situation. But keep in mind that a down payment will reduce your borrowing costs.
Average RV Loan Term
RVs describe a great range of vehicles from tiny campers to multi-room mega-trailers, and that's why RV loan terms tend to be highly flexible, ranging from five to 15 years.
- For small RVs, terms can match those of a regular car at just three to four years.
- Many RV loan terms for both new and used vehicles fall between 10 and 15 years.
- Some luxury units attract terms up to 20 years.
These longer terms help you afford a purchase price of, say, $100,000, by giving you manageable monthly payments.
Terms for used trailers tend to be shorter because of depreciation, as well as the fact you might use it for a shorter time than your RV.
Impacts of RV Loan Term on Your Finances
The simple math is that shorter RV loan terms offer lower rates. This means you can save a significant amount of money by choosing a shorter term. While your monthly payment will be higher, you will own your RV outright sooner and pay less interest overall.
Here's what you need to know before you choose an RV loan term:
- Shorter terms get lower rates but higher monthly payments, and you will pay less total interest over the life of the loan.
- Longer terms get higher rates but more affordable payments, and you will pay more total interest over the life of the loan.
- Shorter terms mean you'll be debt-free faster.
- Longer loan terms can put you at risk of going underwater on your loan, where you owe more than your RV is worth due to depreciation.
The bottom line is you should choose the shortest loan term that offers a monthly payment you can afford.
Average RV Interest Rates
Because RV loan terms tend to be longer than car loans, you want to shop around and find the most competitive rate. You can expect to pay an annual percentage rate (APR) that is slightly higher than an auto loan but lower than a personal loan or credit card.
Remember that the APR you see advertised is the lowest rate on offer for people with the best credit scores. The available rates may fall into a range of, say, 6% to 18%.
Other Factors that Influence Your RV Loan
Aside from loan terms, let’s look at some other significant factors that influence your RV loan experience, from the lender you choose to the type of RV you have your eye on.
An RV loan can seem risky for lenders because of depreciation on a vehicle that's worth almost as much as some homes. It may be tougher to qualify and may involve more paperwork than an auto loan, including an inspection.
Smaller community lenders like credit unions may process loans locally and take the time to understand your situation.
As with all loans, the RV loan terms and rates you get offered depend on your credit report and score, as well as your income and other debt obligations.
Size of Loan
The more axles you’re rolling, the more you're going to pay, to say nothing of customizations and luxury upgrades. The amount you borrow will impact the loan term you need in order to afford your monthly payments. But remember that long terms increase your total interest.
As with a home, the more you can put down, the less you need to borrow. A down payment may mean you can afford to choose a shorter RV loan term, which will mean higher monthly payments but you'll save on interest.
Age of RV
RVs depreciate fast, especially in the first five years when they may lose 25% to 30% of their value. They also have more to depreciate, including appliances, interior finishes, and textiles. That means you might get better value on a gently used RV that's just a few years old.
Type of RV
RV price is linked to size. Class A (bus chassis) and Class C (truck chassis) units are generally the priciest, while Class B trailer-type “fifth-wheels” offer relatively good value. Small trailers and camper vans cost less. Choose the RV type that lets you choose a shorter loan term.
RV Loans With Wasatch Peaks Credit Union
Utah is great RVing country and Wasatch Peaks Credit Union offers competitive terms on loans for your camper, fifth-wheel, or trailer. Wasatch Peaks offers our members:
- Low fixed rates
- No application fees
- Flexible terms up to 15 years