How do you feel about depreciation?

[Roadtrek 1]

It's a sobering statistic, and if you financed your rig over 10 or even 15 years you'll wind up paying almost twice in interest payments while the value of the rig depreciates at such a rapid rate your upside down by the 10th year....Not to mention repairs, maintenance and insurance. 

I was extremely fortunate to have paid off my rig sooner to avoid all this but the RV still depreciates $5 to $6,000 per year no matter...

I'm enjoying the RV for the experience, but, it was certainly not a great financial decision. 

Oh well,  life is not a dress rehearsal and there's no do-over's....I guess you just have to look at these things differently and not worry about it.....

[Cat Lady]

I generally don’t buy new.  My latest small class C was 3 years when I bought her and paid cash.I don’t worry about depreciation because I keep a vehicle at least 10 years.  My car is a 2002 and still going strong...why buy another?  If I have to worry about depreciation, I can’t afford it.  

[chirakawa]

4 hours ago, Roadtrek 1 said:

 RV still depreciates $5 to $6,000 per year no matter...

 

I would say that this is an optimistic statement.  Of course, it depends on the original value of the RV.

[mptjelgin]

RV's are not investments, they are depreciating assets. If you get a great deal of enjoyment from using your RV it is no worse a financial decision than spending money on cars, boats, restaurants, sports events, or whatever floats your boat. 

Financing an RV makes it even worse as you are paying interest on something that is rapidly decreasing in value, and as you note you may end up owing more that the item is worth. 

[Kirk W]

Welcome to the Escapee forums!

It really doesn't matter what type of RV you buy, the depreciation rate tends to be very close to the same for the early years. My former loan office wife taught me more than most of us want to know about depreciation. In general, the first year of owning any new or near new RV is the biggest hit on depreciation. The reason is that no two of us pay the same price and the range of what is actually paid by consumers is very wide. At the end of the first year, we own an RV the value becomes "book value" form Kelley or NADA and then can be measured more accurately. In general, if you take the current book value of the RV it will decrease by 10% of that current value each year, so a $100K RV will lose $10K in depreciation the first year, $9K the second, $8100 the third, $7390 the third and so on. You are so right that most buyers fail to add the interest they will pay on any load to the actual cost of their RV and yet it is part of the cost. Most of them also fail to look at any authorization schedules for their RV loans and so do not realize that the first part of each payment is applied to interest so in the early years very little is actually applied to the principle of the loan. When you buy a new RV, the vast majority of customers actually end up paying more than the true value of that RV because only the most skilled at bargaining ever get a real bottom line price.  That is the reason that the first year value takes such a large hit. 

No matter what we may buy, if we finance it we pay two costs, the purchase price, and the interest which is the cost of using borrowed money. 

[noteven]

Just saw rm.w/aview ridin’ hard outta town with a posse of residential real estate experts in hot pursuit.... 🤣

[sandsys]

If a rig depreciate $6000 a year that is $500 a month. We paid a lot more than that to rent an apartment. Depending on how much you pay to park the rig, this may be cheaper.

Linda Sand

[Roadtrek 1]

6 hours ago, rm.w/aview said:

Reminds me of a conversation a while back with someone who bought a house for $80K and sold it for $160K. After he told me he made $80K I reminded him about his 30 year loan along with the $700/month mortgage he mentioned. In the end he paid $252K for the house through the payments (couldn't remember the down payment). Depreciation? Cost of ownership? Prolly has a lot to do with perspective as mentioned earlier. 

This is a great argument except that an $80,000 profit over 30 years is not so hot.

We've been in our house for more than 36 years and it's gone up in value 600 percent.... the problem with RVs is that while the value drops the maintenance costs skyrocket...bad combination.   

Look, I'm not saying that it's a bad thing.... but, you should know that financing one, even a brand new one ( which I don't recommend) is a prescription for a huge loss. The ONLY reason you might want to consider the brand new model is the warranty. I've heard of some people who manage to buy a new one and do very little maintenance, zero repairs and turn them around on a brand new coach starting all over again.... 

Does anyone know what the "sweet spot" is for selling, upgrading and getting out before the next round of maintenance.... meaning new tires, batteries, propane sensor,  plumbing issues, refrigerator, etc..   if you ask me it's all a very complicated decision.   Either way, anytime you sell it's a terrible move financially..... people always are looking to scoop up a bargain and will offer you less...... Not the same case with a house...it appreciates in value.....

You have to live somewhere... everything costs money...  My house mortgage is way lower than the financing I had on my RV.... thankfully, it's still deductible...but as you pointed out it costs a lot more to make the extra payments .... your friends example above of buying a house for $80,000 and living in this for 30 years ...at least it doubled in value....   A similarly priced RV for $80,000 would  practically have a zero value  at the end of 30 years...   

 

[Roadtrek 1]

1 hour ago, rm.w/aview said:

^ All true, and though we'd be practical in our RV choice it still has an emotional aspect in that there is a desire to live in an RV, so that's what we're going to do. Perhaps to justify, rationalize, or help with our move away from a sticks & bricks lifestyle and into a mobile lifestyle we'll run the numbers and discover that on average it is less expensive to be mobile. Each style has an aging abode that will need maintenance over the years and the value of each is only what someone is willing pay for it. So while each lifestyle will have pros & cons to it, just as the various types of RVs have their pros & cons, it seems that people generally will choose a house and choose an RV not as a financial investment as much as they choose it as a place or a way to live. On the "sweet spot" that you mentioned, this also could have emotional ties as folks develop memories & attachments in their abode so that the repairs or upkeep done with a sale in mind may backfire to the point of keeping it because it is now so much nicer. I suppose that they each could nickel/dime you to death and this is the crossroads, sell or keep, but know that they each, house or RV, will demand a financial pint of blood. The house appreciating in value is market and location based for certain, and it too can go sour, but at face value it seems that both the house and the RV will probably be, depending on perspective and a sharp pencil, not a financial investment in the long term and in the short term may be an acceptable loss, rentals and house flipping notwithstanding. Now with a sharp eye and enough incentive perhaps someone could flip RVs as they do houses for financial gain, just not on the same scale as the RV is smaller but similar in requirements. In a way it reminds me of when I was looking for a motorcycle, I knew that I wanted one so it was simply a choice based on research as to which one. It being a financial gain or loss never occurred to me, wasn't a factor. 

In his eyes, till we spoke, it was profit. Then he heard $252K for an $80K house 😥

 

All depends on location..... that's NOT a joke...  600 percent increase is huge by any measure. 

[sandsys]

4 hours ago, Roadtrek 1 said:

All depends on location..... that's NOT a joke...  600 percent increase is huge by any measure. 

But there's two sides to that too. The seller of the first house we bought had lived there a long time but, with a second marriage and a second child, it was now too small for them. Her payments had been $69 a month. Their new place was going to be $300+ per month. She was in shock.

Linda

[Roadtrek 1]

19 minutes ago, sandsys said:

But there's two sides to that too. The seller of the first house we bought had lived there a long time but, with a second marriage and a second child, it was now too small for them. Her payments had been $69 a month. Their new place was going to be $300+ per month. She was in shock.

Linda

Okay..... I can't imagine a house for $69 per month...or even $300 per month. Do you mind me asking what region of the USA this is?   What was the purchase price of this home?    Maybe... they put a higher down payment for a loan this low? 

[chirakawa]

6 hours ago, Roadtrek 1 said:

Okay..... I can't imagine a house for $69 per month...or even $300 per month. Do you mind me asking what region of the USA this is?   What was the purchase price of this home?    Maybe... they put a higher down payment for a loan this low? 

She didn't say when.  In 1974, I had a brand new 3 bedroom 2 bath brick house built for a total of $24,600.  My payment, including taxes and insurance was less than $250 per month.  My co-workers thought I was a fool to commit to such a high payment.  The first few years were tough, but it worked out okay.

[Kirk W]

54 minutes ago, chirakawa said:

She didn't say when.  In 1974, I had a brand new 3 bedroom 2 bath brick house built for a total of $24,600.

Sounds like us, about 10 years earlier. We had a 3 bedroom brick home that was custom built and it cost us $16,600 with a downpayment of $600 and a monthly payment of $102.37. A similar house a few doors away was recently advertised for sale at $178,000.

14 hours ago, Roadtrek 1 said:

I've heard of some people who manage to buy a new one and do very little maintenance, zero repairs and turn them around on a brand new coach starting all over again.... 

I have bought new and I have bought used and to date, I have not had even 1 bad experience. We have financed some and paid cash for some of each. After 45 years of RV experience, am I being told that I did it wrong? It takes a lot of research to buy new or used safely since with used you run the risk of buying someone's money pit. Life simply has no guarantees. If your theory is correct then nobody should ever own an RV or even an automobile until they are able to pay cash for it. There is a risk in all of life but looking back at 75+ years, I am very happy that I chose to take a few risks along the way. 

[mptjelgin]

We have bought one used RV and it was a great way to learn how to fix things. To be fair it was an entry-level unit and was cheaply constructed.  We have since bought two new fifth-wheel trailers, both well-constructed. Kept the first for about 10 years, including the last 18 months using it full time. It was in solid shape when we sold it. Have been in the second unit full-time now for 7.5 years and expect to still be in this rig for several more years. We've had essentially zero major maintenance items on either new rig except for tire replacement, which is certainly not unexpected. 

As for financing, if you finance a rig for 10 or 15 years you are certainly going to pay a lot of interest. Paying cash makes a lot more sense if you can swing it. 

At this point I'm not certain what the OP is trying to get across. I imagine that most of us understand that buying an RV is not an investment, let alone a good investment. Buying used is certainly cheaper but not a "must do".  We're totally satisfied with the two new rigs that we've owned. Financing an RV makes an expensive purchase even more expensive. 

And selling a rig isn't a "terrible move financially" if you' feel like you've gotten your money's worth out of the rig and are ready to move on. Everyone has a difference financial and living situation, and trying to come up with absolutes regarding RV ownership is a waste of time. 

[sandsys]

14 hours ago, Roadtrek 1 said:

Okay..... I can't imagine a house for $69 per month...or even $300 per month. Do you mind me asking what region of the USA this is?   What was the purchase price of this home?    Maybe... they put a higher down payment for a loan this low? 

The trick is that this was in 1974 and we paid $21,500 for that house in Minneapolis. The seller had probably been in that house ten years so it would have been even cheaper when she bought it. Life tends not to get cheaper as you go unless you sell a house to buy an RV.

Linda