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rollindowntheroad

Buy now and finance or wait and pay cash

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Hello All!
  
I want to full time when I retire in 6 years.  Wanting to hear your opinions on whether I should buy something now and finance it or wait until I retire and pay cash.  If I finance it I probably would not finance it for more than 6 years as I want to be debt free when I retire.

Here is what I would be looking at to buy:  Used, Class A, gas in the 35' range.  Looking at the $50,000 price range.  I know many of you are probably going to say that I won't get much for $50,000 but that is the price range I would feel comfortable in.

I currently live in upstate NY.  To use it now would only be 6 months out of the year as there are no camp grounds that are open during the winter here.  There is also the issue of storage.  I live in an apartment and they don't allow motor homes, TT's etc. to be parked in the parking lot.  So I would have to find a location to store it when not using it.

Here in upstate NY there are not a lot of used MH's that I have found fit my criteria.  I use to live in FL and found that there are far more MH's there.  I would more than likely buy something in FL and bring it back to NY.  I have a Jeep Grand Cherokee that I can use as a toad.

So let me know what you think.  Also, if there is a better forum that this should be under please let me know.

Thanks.

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Welcome to the Escapees forum!  RVs are all a matter of compromise ... the ideal RV would have the size and maneuverability of a van conversion on the outside and the room of a 45 ft triple slide motorhome on the inside.

What matters are which compromises are important to you. An extra inch here or there can make the difference between an RV you love and one you merely tolerate.  And you'll only find that out by living and travelling in one for a while.  Very few people can choose their ultimate RV the first time around. 

I suggest a third option ... buy something now and use it during the next 6 years.  Find out what you do and do not like about it, then sell it and buy what you really want when you're ready to retire.

Edited by Lou Schneider

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10 minutes ago, Lou Schneider said:

I suggest a third option ... buy something now and use it during the next 6 years.  Find out what you do and do not like about it, then sell it and buy what you really want when you're ready to retire.

If I buy some thing now I will definitely have to finance it.

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How much RVing experience do you have?   If not much, I suggest that you rent one for 2 weeks and try it out.  Yes, it will be expensive, but small in comparison with putting our $50K and finding that you don't enjoy the lifestyle.

I wouldn't buy something that is used, you will just have a very old MH by the time you retire unless you know that you will sell it and upgrade at the time.   A few years before we retired, be bought a used Class C to play around in.   We went out about every other weekend and did week long trips at Christmas and in the summer in it.  It was great to learn on and we then knew what we did and didn't want in our Class A which we purchased about 6 months before we retired.    

BTW - if you have to pull large amounts from tax deferred accounts to pay for your RV when you retire, please rethink about doing it.   There are times when taking smaller chunks of retirement funds will be a better option overall than paying huge tax bite.

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MY vote, wait and pay cash. As well, look and learn in the intervening six years. Visit RV parks and see what owners say about the rig you now think you want. The way you talk sounds like you are single? If so you will only have to please you, and can down or up-size your idea of the perfect rig.  Visit RV parks and try to talk to the folks there as many of us are happy to share our views. Then rent the one you think you want to buy before you do, for at least a month of traveling.

Edited by RV_

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36 minutes ago, rollindowntheroad said:

I am single.  Don't plan on changing that....lol.  No pets either.

6 years is a LONG time, and things change.  Either way you go, you're going to second guess yourself.  

You said you can use the RV 6 months out of the year now, so if you'd enjoy that usage, why not get it now?  If storage location and fees are going to be a PITA, wait the 6 years.  By then, you have no idea what your life will be like.

Like I said, either way you're going to second guess yourself.

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Well cash is king but if you have a steady income and a hefty down see if you can strike a deal you can easily swing.

I went into dealer with X dollars wanting to pay no more than 5% of my monthly income for X years and was able to make it happen. It actually came together too perfect and freaked me out a bit! I didn't even have to negotiate too much but was able to squeeze the dealer a little bit.

Not sure if the 5% is too much based on what a financial advisor would say but I was easily blowing that on books, music, movies and guitar stuff which is no longer such a habit...

I got an Airstream as I was looking at a recent used model and brand new was only $4000 more! They seem to fetch ~85% new value in the first 2-3 years so not too bad. I can already walk away with cash in my pocket although I'd take a hit on initial investment... what I mean is its worth more than I owe....

If you do finance make sure you get a good insurance quote! My dealer swore it was only ~$10 a month on top of vehicle but more like $75 to $125! Check storage fees too if you have to house it! Can be another $50 to $200/mo! 

 

Az Tex

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Crunch the numbers and see what comes out. Also, you need to be doing some serious research NOW. Are you going to be moving every few days, or are you going to move only a few times a year? What sort of "stuff" do you absolutely need to have with you? (This covers, tools, hobbies, etc.). Get used to the idea of something towing something else. A MH can tow a fuel-efficient car, a 4WD truck carrying a 4-wheeler or motorcycle, etc. A pickup can tow a travel trailer with something in the bed or a fifth wheel and low boxes full of tools, hobby stuff, etc. It can't handle a motorcycle, though. A MH has the advantage of not having to go outside when you stop for lunch on travel days, and it is always at a comfortable temperature. Tires are MUCH more expensive, though.

Once you figure out what sort of coach fits your needs, you can start looking at used rigs of that type. That will give you a chance to try what you think will work at a relatively low cost. You will really take a bath when you buy new and trade it in in a a few months. Buying used will save you money when you trade in soon after you buy. The better you know your own needs the better you will choose.

Many places will not finance any RV that is more than 10 or so years old. Finding a MH that is less than 10 years old AND costs less than $50,000 AND is in good shape can be difficult. That doesn't mean impossible, though.

What sort of vehicle do you currently have? Can it tow something? It may not be what you want for full-timing, but it might be a good learning tool. We bought a small travel trailer that could be towed by the Mountaineer we had at that time. We knew when we bought it that it couldn't serve as a full-time coach, but it would let us get out and see if we really liked the RV life as much as we thought we would. We did, so after two years we sold the little trailer and started looking for what we figured out would be the right coach for us. Within a few months of selling the trailer we had our motor home.

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Suppose you buy now, for $50M  it will be a used MH, now add 6 years to that. Perhaps you retire with an 10 -12 yrs old MH. Meanwhile it has sat for 3 of those 6 years unused (per your 6 months statement) and you are paying insurance, license, taxes, storage fees, etc just t own it; that does not include ANY upkeep or normal maintenance on the MH.

Now the  other end of your money; how much interest will accrue on that $50M during the next 6 years vs buying a depreciating asset?

 

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To:  kb0zke

I have been doing research for a while now.  Have visited many RV dealers, been on forums like this one as well.  I have considered many options and there are just to many options available.....lol.  I considered a 5th wheel and truck, but just don't want to drive a big truck around once I get to a location.  I probably would consider getting a Yukon or Tahoe and towing a TT.  

I had thought about getting a small TT in the meantime.  My Jeep can only tow 3,500 lbs.  I looked in my area and there's not a lot in my area available that I can tow.  The Jeep can be towed 4 down, that is one of the main reasons I bought it.

I will definitely buy used what ever I buy.

Edited by rollindowntheroad

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First of all it really makes no sense to pay cash for a fast depreciating asset like an RV. Keep the cash and invest it. If you get a decent return on your investments it will surely out pace the interest on an RV Loan thus actually saving you money. If you use your cash to buy the RV you are also giving up the opportunity to profit from using it in other ways (Opportunity cost). Third; if you take out a loan in today's dollars you will be repaying that loan with future dollars worth somewhat less than when the loan was generated. If the economy should go south which it is giving every signal that it will, those dollars will shrink even more. Also future interest rates will rise and you will be set in a low rate taken now.

Paying cash is a depression era mindset that in most cases makes no sense.

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2 hours ago, beentherefixedthat said:

Paying cash is a depression era mindset that in most cases makes no sense.

Welcome to the Escapee forums! We are happy to have you with us. I find your thinking to be interesting but don't really agree. There are a lot of factors to consider, such as your debt load and age. 

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Since you've got 6 years, I agree with kb0zke that it would be a good idea to ease yourself into RVing. My suggestion is to keep your Jeep. But, purchase and older used tow vehicle and small used travel trailer. The cost won't be very high. And, in 6 years, if you keep both well maintained, you will get most of your initial cost back by selling to purchase a motor home. The highest depreciation for travel trailers is in the first few years. After that, there is less depreciation and well maintained models may actually increase in value. In those 6 years, you will learn a huge amount about RVing. You'll know what you want and don't want. For instance, you may find you love boon docking and need a motor home with large gray and black water tanks. Or, you might find that driving a large all wheel drive tow vehicle isn't that big a deal and is more convenient than a motor home towing a toad. Better to find out those kind of things before committing to an expensive motor home.

Just something to consider. 

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7 hours ago, beentherefixedthat said:

First of all it really makes no sense to pay cash for a fast depreciating asset like an RV. Keep the cash and invest it. If you get a decent return on your investments it will surely out pace the interest on an RV Loan thus actually saving you money

Really?   What investments are you talking about? My initial loan on the RV was 6 percent over 20 years...if I had continued with the schedule I would have paid an additional $57,500 in interest....

 

1 hour ago, IBTripping said:

My suggestion is to keep your Jeep. But, purchase and older used tow vehicle and small used travel trailer. The cost won't be very high. And, in 6 years, if you keep both well maintained, you will get most of your initial cost back by selling to purchase a motor home.

This might be a good suggestion... provided it's a good fit...not everyone wants a trailer..... I had a trailer and sold it....it's a lot more work.

 

1 hour ago, IBTripping said:

The highest depreciation for travel trailers is in the first few years. After that, there is less depreciation and well maintained models may actually increase in value.

No they don't...they continue to lose value.... you're right about the first few years....I lost more than one half of the value in 42 months.   They are like stinking fish... you have to get rid of them before they lay around too long... they do not increase in value..  where did you get this idea?

Houses and real estate property does increase in value over time.... that's much more reliable.

7 hours ago, beentherefixedthat said:

If you use your cash to buy the RV you are also giving up the opportunity to profit from using it in other ways (Opportunity cost).

Maybe....are you planning on purchasing rental property?     It's all about location...

 

1 hour ago, IBTripping said:

Better to find out those kind of things before committing to an expensive motor home.

YES.... my suggestion is to RENT a Class A and see how you like it....or at least go out on a number of test drives....

Before we purchased our Class B.... I test drove other Class C's.... I knew that a Class A was not for me. 

 

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Road trek, so your investments weren’t doing better than 6%?  Not only did we come out ahead on the cost of our loan, but we didn’t have to pay taxes on the funds as they made more money

We owned 5 houses over our 40 years of working.  Lost money on two of them, sold the other 3 for more than we paid, but only MADE money on the last one when you factor in maintenance costs over the years.  

Not  everyone see the world the same as you do, has the same risk tolerance, lives the same lifestyle.  

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Hi all,

Long time reader here and figured I'd chime in on this one since our experience may be helpful with your choice. This is how it evolved for us. We rented the smallest CLASS C possible for a trip to Yellowstone in 2013, ten years from retirement. At the time it was only the two of us and two small dogs so the 19ft was a good baseline to use. We immediately decided whatever we get, it will have to be a diesel and have a dedicated bedroom. The following years of doing research and visiting dealerships, and since we added two more small dogs, led us to decide a 5th wheel is the best choice for us. We developed a checklist of needs and wants. The original plan was to save and pay cash when retirement comes in 6 years at that time. But when the the right deal came up for a used ram 3500 with the Cummins 5.9 and soon after that another deal on a used 5th wheel with everything we needed/wanted, we decided to go ahead and finance. We didn't have the cash on hand but knew we could throw extra $ at the principle. Truck just paid off and 5er in two years. One "benefit" to financing is that interest paid on a RV loan is tax deductable as long as the RV meets second home requirements (kitchen, bathroom etc.). Plus, we have been able to enjoy the  new set-up for the past year and a half, which has been great since upgrading from a 1500 lb pop up. Not that this is the only and right way for you, it's working for us and is an option to think about. So do your research, figure out what are must haves and like to have and IF the stars align and the right deal presents itself, do it and start enjoying the preparation for your next life. Hope this helps.

Edited by TravellingCircus

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4 minutes ago, TravellingCircus said:

Long time reader here and figured I'd chime in on this one since our experience may be helpful in your choice.

We are happy that you have finally joined in! It is always interesting to compare the experiences of others and to learn from them. We have owned several different RVs and have financed some and bought others for cash. The financial aspect isn't always the most important benefit to be considered. 

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14 minutes ago, Kirk W said:

We are happy that you have finally joined in! It is always interesting to compare the experiences of others and to learn from them. We have owned several different RVs and have financed some and bought others for cash. The financial aspect isn't always the most important benefit to be considered. 

Thank you Kirk, I have enjoyed reading and learning from your posts and want to contribute back. When we started the process, it was confusing and brain wracking as I didn't really think to peruse forums at the time. Now our next learning curve will be where to domicile...but thats for another thread.

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Thank you for all your replies, they are much appreciated.

I am going to wait until I retire to get some thing.  Doing research on storage in my area I found out it is not cheap.  I would be looking at about $400 just to store it each month.  I am not willing to pay that much to store it.  I am just going to keep putting away money each month into my RV fund for now.

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2 hours ago, rollindowntheroad said:

I am just going to keep putting away money each month into my RV fund for now.

If you have no RV experience, it might be wise to rent an RV for a trip just to get the feel of things.

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3 hours ago, rollindowntheroad said:

 I would be looking at about $400 just to store it each month.  I am not willing to pay that much to store it.

Wow that would be a game changer for me also. Is that for covered storage with power? Thats almost what my monthly payment is now!

As recommend above, if you have any trips planned, renting is an excellent way to gain experience with rv'ing.

Best of luck, and don't forget to have fun with it! 

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On 3/3/2019 at 9:08 AM, Kirk W said:

Welcome to the Escapee forums! We are happy to have you with us. I find your thinking to be interesting but don't really agree. There are a lot of factors to consider, such as your debt load and age. 

Well there are other factors for sure, but those do not mitigate the fact that paying cash for this kind of asset is not financially a sound thing to do...nor is financing one for 20 years at 5-6% thus doubling the price. While age may be a factor and debt load surely is, too many people just blindly accept the "Pay Cash" dictum. The key is to not finance the cost of an RV for any more years than a car of the same price and year. And let your investments lower or wash out the effective interest rate you are paying. The key is to never be upside down in the loan/value equation.

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54 minutes ago, beentherefixedthat said:

The key is to not finance the cost of an RV for any more years than a car of the same price and year. And let your investments lower or wash out the effective interest rate you are paying. The key is to never be upside down in the loan/value equation.

Just remember that a lot of us purchase RVs that are over $100K in price - some WAY over that amount.   We really aren't talking 'cars' at this point.   The other point that you didn't mention was that paying for some of the price over a period of time may be beneficial if all or most of your savings is in tax-deferred investments and you will be paying income tax on those withdrawals ON TOP OF OTHER INCOME you receive during the year.  

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