How is interest applied on an RV loan?

Rick Jay wrote:
95jersey,

As others have said, the majority of RV loans will amortize just like a home mortgage. No difference. I can tell you what I did to avoid the "upside down" loan problem.

First, we bought a new unit and purchased it at a very competitive price. I had bids from 3 dealers, and 2 of them couldn't come within $10k of the third dealer. Now, this was an "online" dealer, so there were some "risks" with that purchase, but all ended well.

Anyway, I put down 20% of the purchase price in cash and paid for the first year sales tax & excise tax in cash as well. Otherwise I would've put almost 30% down. I checked NADA value each year of the loan and our rig was generally worth somewhere a bit above low NADA value, so IF we were upside down, it was minimal. Since the rig was kept in good shape, I believe we could've sold it at anytime and paid off the balance.

We also financed over a period of 20 years with a plan to pay it off in 10. The formula I used to pay it off is to double the principal payment on every payment. Doing so will cut the loan term in half, so the 20 year loan was payed off in 10 years. However, early in the loan, the largest percentage of the loan payment was interest, so doubling the principal early on in the load didn't hurt too much. Every loan payment, though, was a bit more than the last. By the end of the loan, our monthly payments were almost double the original payment because the majority of each payment was principal (which we doubled), with minimal interest added. However, 9 years later into the loan, my take home pay was higher and took the sting out of it. Plus, excise tax and insurance generally dropped every year as well.

It's a bit complicated and you need a spreadsheet to make each loan payment calculation, but it works quite well.

My other concern with a loan of this size was, just in case money got tight, I could always resort back to the regular 20-year pay-off schedule with it's relatively small monthly payment. So, that's my fall-back plan. Which wasn't needed.

If you think you're going to be selling it in 5 years, unless you buy a rig which has already taken a big depreciation hit, you'll most likely be upside down in a loan unless you do something proactive to get it paid off early. Fortunately, you can do your homework ahead of time and see what you need to pay to keep from becoming upside down.

There are those on here who will tell you to NEVER finance an RV...depreciating asset, and all that jazz. Nice for people who can do that, but that wouldn't have worked for us. Plus, life is too short. If you can swing it without financially jeopardizing your family, go for it!

Good Luck,

~Rick

This is great information. To be precise about my scenario, the RV is a 2017 Jayco 273 toy hauler. I think new (2018) they are $34k. The price after negotiation is $21k. I think it is a good price and a quality RV. I am trading in my current paid off RV for $6k (which I bought for $7500 3 years ago), So I will finance approximately $15k + tax. I am hoping in 5 years it will still be worth $12-$15k and I will have paid off 40% of the loan (10 year), and be above board? Is that reasonable thinking?