afidel wrote:
Timmo! wrote:
Brandon the Traveler wrote:
Timmo! wrote:
L but entry level for consumers buying a new TT is really out of reach for many "common folks".
They just finance them for 12 years or longer. A TT that was @ $20K 18 months ago is now @$35K or more, and banks are lending towards them. Let the inflation continue including the ever rising cost of fuel and watch this house of cards come crashing down. When these inflated prices, actually values drop, it will be ugly.
IMO, when the amount financed exceeds FMV at the very beginning, then the entire deal will always be "underwater".
When a person makes a deal based on "how much is my monthly payment", and not on "how much does it cost", then it is proof positive that we have a generation of people that are absolutely "financially illiterate". (shakes head)
How many know that charging their credit card $5 for a Starbucks cup of Joe and then paying for it over 10 years at 25% interest...the real cost is $13.65. But it's only costing you 11 cents a month.
Financial illiteracy at it's finest.
My RV loan I took out last year is at 3.5%, inflation is currently 5.4% so as long as any investment I made instead of paying cash is at least keeping up with inflation I'm well ahead, and they are. But I did a normal 60 month loan knowing that I'll be trading up to a 5er about a year or two after that so I didn't want to have anything left on this one (going part time on the road after I get the younger one through college).
Yes, this years' inflation is abnormally high at 5-6%, but, imo, there are some fallacies in your line of thinking.
For the period 2011-2021, the annual inflation rate averaged 2.2% (try using this number in your analysis). In normal times, the rate of inflation will usually be close to, or below the prime interest rate (3.25% today).
Certain assets traditionally increase in value over time (real estate, stocks, precious metals, etc) and certain assets don't (vehicles, RV's computers, etc).
To value an asset purchased 10 years ago in terms of today's dollars, one starts with purchase price (say $10,000) and adjust it for inflation (10 years at 2.2%--lets keep it simple and call it 22% or $2,200). Ergo, an asset purchased 10 years ago for $10,000 is valued at $12,200 in today's dollars (inflation).
But this math does not work for assets that depreciate (RVs)--as the values are determined by the marketplace, called Fair Market Value (what a willing buyer will pay and what a willing seller will sell, neither under any duress).
Imo, we are witnessing in the RV industry an excellent example of "market aberration"; aka abnormal conditions.
I stand by my claim: If the amount financed exceeds the asset's FMV, the entire deal will always be underwater (loan < FMV). Said differently, if an RV is worth $20k but I pay $30k for it, and is financed 100%, when will this deal ever be above water (amount due on loan be less than FMV)? But I hear the howls, "what if I pay the loan off and sell it for $1"
Well,we have this thing called carrying costs, (aka interest). Difference between all cash purchase and 100% financed. Add all those interest payments to the purchase price and you have your actual cost.
