Help me make sense of financing

[Tdavid]

Hi,

I'm embarrassed to admit that I'm confused about best way to structure my financing deal, asking for the wisdom of who has done it before here (I am sure many have).

I paid cash for my current rig in 2016, around $24k, owe nothing on it.

Private sale retail, when spring comes, I think I can get around $17k for it.

I have a $60k fifth wheel on order, due in Feb.

My dealer is offering $13.5k trade in value.

If I am doing my research correctly, it makes a lot more sense to do the following:

Finance the total amount of the new fifth wheel, sell my old rig privately, and then apply the proceeds towards the new rig's loan as a principal reduction.

Here is what I am seeing:

I plan on financing for 180 months, to keep cash flow as attractive as possible. However, I plan on only keeping the rig for maybe 48 months.

Using the $17k as a principal reduction on the financed amount allows me to jump ahead on the amortization schedule, and I will have more equity at 48 months vs allowing the trade-in to reduce my financed amount, or using the $17k as a downpayment (should I sell my current rig before the new one comes in).

Using the $17k as a principal reduction also means I have paid less interest at 48 months vs the other two scenarios.

Bottom line, if I am doing my research correctly: don't use the cash from my current rig's equity as a downpayment (or trade-in). Sell it privately and use the proceeds as a principal reduction on the new rig's loan.

I plan on using GoodSam, and they do not have a prepayment penalty.

I realize that I can reduce my tax burden on the new rig by trading in my old one, but the savings is only about $800.

Risk here is that I don't sell my current rig for a while, but even if I fire sale it at $13.5k, the trade in amount, I am still better off as a principal reduction on new one?

Am I missing anything?

Thanks,

Dave

[FunnyCamper]

you eat the depreciation and ya can't win in truth 🙂 of it all....just pay up for the next ya want and forget it. We all wonder about the buck we 'could have saved' if doing xyz but in the end, you wanted what you wanted and ya will take that hit.

Do it or not, be fine with it or not 🙂 🙂

We took the hit 2 times on rv's and we just had to say goodbye to some bucks and smile while doing just that cause we wanted what we wanted when we wanted it 🙂
It is only money and you can't obsess to the level of insanity at some point.
just how we saw it for us.

[Ductape]

Depending on your age, tax situation, and whether you’re still working or not the answer may vary.

In other word for some people the best result may come from investing the sales proceeds on a Roth IRA and having future non taxible income.

Not a simple black and white situation. There is enough opportunity there to make it worth your while to pay a financial expert for an opinion. When I had similar concerns a few years back I did all my calculations and then took them to a CPA tax advisor and paid for an hour of his time to consult. It was money well spent and reassuring to find out my assessments were correct.

[donn0128]

No one can perdict what might happen to the market in the next 48 months. Your numbers might be correct or you could wind up loosing your shirt. Either way, all your doing is hedging your bets on depreciation. 4 year old RVs are realistically worth roughy 50% of selling price. So, on a 60K RV in 4 yesrs worth 30K, you put down 17K, your still upside down around 10K. Not good math to me.

[CarnationSailor]

I think your calculations and assumptions are correct. The only question you have to answer is is it worth $2700 ($3500 minus the $800 tax hit) to you to go thru the headache of selling it yourself. If it were me, I'd probably take the 13.5k and be done with it.

[ken56]

Yep, you will eat the depreciation on the new rig just as you are on the old rig. A lose-lose situation. If that is OK to you then I would go with the financing that offers the smallest payment. No one ever gets one over on the bank.

[newman_fulltime]

either way with depreciation it is just a matter of do you want the headache of selling. my opinion why buy a new rv to keep such a short period you will be upside down on tbe loan