need to understand how finance calculation work
We want to buy a fifth wheel, and we need to trade a travel trailer that has no equity. Is there a step i can follow so i dont get taken advantage of or tricked into a bad deal?
Forum Discussion
It would help the OP get better information and advice if he would provide the suggested cost of the new unit, what the dealer is willing to sell it for, the homework the OP has done to verify that the selling dealer is selling the unit for a price that is as good as most dealers would sell the same unit for, and the age and original price of the TT the OP paid. Most of the time the dealer will bury the negative equity into the new unit and just finance the whole deal. For some reason this dealer is not giving the OP even what he owes on the TT as a trade so in my mind this is the first red flag. Maybe this is an honest dealer and is trying to show the OP that the numbers are not in his favor. That would be refreshing to be sure.
If the OP caluclates what he paid for the TT, what he will sell it for (depreciation expressed in trade in value or private sale) and divide that by the nights camped in it, the OP might be shocked at the cost per night. Add to that the payments the OP made, the down payment given at purchase, and all the other costs associated with the TT and the numbers are not in the OP's favor for trading into a more expensive unit unless he plans to live in it full time. The OP could pay off the TT and have no payments long before the fifth is even half paid for at around $700 per month, have no negative equity, get some value out of the TT, and have a paid for RV; or....... go into big debt, big payments, and start out with negative equity. How many nights does the OP have to camp in the new fifth just to break even on a per night basis above and beyond what it costs to use the existing TT? If the OP does not like the TT and wants to off it, just think how big a hit it will be if the OP wants to off the fifth very early in the new loan. Since RV's are depreciating commodities, we never recover what we have in it. Less depreciation can occur if purchasing pre-owned and that might be a good way for the OP to try to go if seriously looking at a fifth wheel. Cutting the 'entry fee' costs by $25-30,000 on a good five year old model can help take some of the sting out of the TT's negative equity that the OP will have to eat.
If the OP caluclates what he paid for the TT, what he will sell it for (depreciation expressed in trade in value or private sale) and divide that by the nights camped in it, the OP might be shocked at the cost per night. Add to that the payments the OP made, the down payment given at purchase, and all the other costs associated with the TT and the numbers are not in the OP's favor for trading into a more expensive unit unless he plans to live in it full time. The OP could pay off the TT and have no payments long before the fifth is even half paid for at around $700 per month, have no negative equity, get some value out of the TT, and have a paid for RV; or....... go into big debt, big payments, and start out with negative equity. How many nights does the OP have to camp in the new fifth just to break even on a per night basis above and beyond what it costs to use the existing TT? If the OP does not like the TT and wants to off it, just think how big a hit it will be if the OP wants to off the fifth very early in the new loan. Since RV's are depreciating commodities, we never recover what we have in it. Less depreciation can occur if purchasing pre-owned and that might be a good way for the OP to try to go if seriously looking at a fifth wheel. Cutting the 'entry fee' costs by $25-30,000 on a good five year old model can help take some of the sting out of the TT's negative equity that the OP will have to eat.
