Travel Trailer Depreciation?

[tshirtman]

What is the "rule of thumb" depreciation on used travel trailers?
I know that if the MSRP is real(lol) than 25%-30% off new.
what is the norm for 2-5 year depreciation schedules?

thanks to everyone:)

[tshirtman]

This topic is not about weather to finance or pay cash.
I want to know about depreciation so I can make an offer on a 2013 unit!!!!!

[SoundGuy]

SprinklerMan wrote:
A used trailer is only worth what someone will pay for it .

That's certainly true when selling privately at retail and probably at wholesale once the trailer is 5+ years old but newer rigs being traded in are depreciated at a predetermined rate of about 20% the first year and 10% each year thereafter until it's 5 to 6 yrs old when as you say any used trailer is only worth what someone else is willing to pay for it, including dealers.

[Stovepipe]

Gdetrailer wrote:
Personally, I wouldn't take money out of my investments for this type of purpose.. Instead I SAVE and SET ASIDE some money EVERY MONTH for these types of purchases BEFORE I BUY..

Yes, it IS and "old fashioned" and out of date "approach" to handling money and finances.. But it DOES WORK..

This is exactly what I'm doing. My wife and I decided in 2012 that we wanted to upgrade from the pop-up to a travel trailer, and the associated tow vehicle. Every month I've auto-deposited some money into an investment account, not a lot mind you, but that money has added up. Summer of 2016 we should have enough saved up to make sizable down payments on the truck and trailer such that payments on both will be very manageable.

Now, the wait is absolutely killing me. But I know this is the right approach for us. I'd hate to end up "trailer poor" as a result of pulling the trigger too early. Plus it has allowed us to research the heck out of the purchases and hone in on exactly what we want. Regarding depreciation, I couldn't care less as we plan on keeping the rig at least 10 years until the kids are out of high school.

[mich800]

Gdetrailer the two options were purchasing cash or financing. If you purchase with cash your loss will be higher. The fact is there IS an opportunity cost losing that investment income. With low interest rates the interest paid is muted by the gains in your investment account that would be $0 if you paid cash. This is assuming the OP assumptions are accurate. I used 5% @ 10 years for the loan and 8% on their investments. Selling in 18 months and realizing a $1,000 loss on that sale. (actually I took your $20k purchase price from your example)

Remember, this only works when we are comparing financing vs cash purchase. If you are just financing a luxury item without the cash reserves as a back up that is an entirely different argument and more in line with your original "never finance a toy" argument which I do not necessarily disagree with.

• Monthly Payment
• $212.13
  Purchase Price
• $20,000
  Loss @ Sale
• $1,000
  
  Loan Bal@18 Mo.
• $17,597.68
  Interest Paid
• $1,416.02
  
  Total Cost to finance+loss
• $2,416.02
  Less Investment Inccome
• $1,600
  Net Loss
• $816.02
  
  Total cost/loss if paid cash
• $1,000
  Less Investment Income
• $0
  Net Loss
• $1,000

[rbpru]

Gdetrailer,

Your idea is sound, however, these days why fork over $5000.00 that can be barrowed at 3%, when it can earn more with a good investment service?

Personally I do not like to borrow money for toys, especially toys the loose value. But I am sure I am in the minority on that idea.

[Gdetrailer]

mich800 wrote:

Gdetrailer wrote:

dadmomh wrote:
We just sold our Rocky 2604 after only having it for 1 1/2 years. We bought it for about 33% off MSRP. Never expecting the changes we're making in our lifestyle now, we looked at 5% interest we'd pay on a loan vs 8%+ on our investments. Debated whether we should take money out and pay cash, but decided that seemed like a no brainer with making 3%+ more plus being able to deduct the interest as a second home. Now the bad news. Long story short, it cost us about $1000 to sell it. One of those things that if we knew then what we know now, we'd probably have kept our '07 ROO 23SS or just gotten out of camping entirely at that point. I can't imagine how folks that trade every couple of years keep from taking a bath on it....maybe they don't avoid it. I checked NADA, did tons of online searches and our price was right where it should have been, except for that darned $1000. So guess the answer is that you need to keep it for 3 or 4 years or so to come out at least even, maybe ahead a smidge. In any event, it was a key part of our changes and we're just thankful it wasn't any worse. The man who bought it is from LA and had seen the layout, but he said he never buys new and had a heck of a time finding a really good almost new. We feel like he'll be a good "dad" for Rocky and take excellent care. Making this huge change is like watching money flying out the door, which it really is, but in the big picture we'll be ahead when the dust settles.

Sorry that you had to sell off your trailer, sounds like you really liked it.

However, your experience should drive home the point that I have made numerous times on this forum and others have argued that I am totally wrong that buying a RV with CASH IS YOUR BEST BET WHENEVER POSSIBLE.

Taking out a loan on a depreciating HOBBY "asset" like a RV and comparing interest of a loan VS pulling SOME money from "investments" is a fools game.

In your case, circumstances can and often change which CAN make a loan payment no longer feasible or at the least a family or health issue can make a RV sit in your yard or storage for years with no use..

I understand not everyone has the "cash" just laying around, BUT there are things you can do like start putting money aside like you are paying a loan payment to a bank.. But instead of a bank you are paying yourself into an account that is separate.. It is an "old fashion" term called "SAVINGS"..

That is pretty much how I get the next down payment for my next vehicle.. I put a lot of miles on for my commute and have no choice but to replace vehicles often.. I put down a good size down payment then pay extra against the principle.. This allows me to pay off a 5yr loan in about three years.

Once loan is paid off I then put the the same amount of money I WOULD HAVE been paying to the bank until I need to replace the vehicle.. This builds up the next down payment.. When done right it will snowball and the next down payment will be larger to cover the rising cost of the next vehicle.

As far as the OPs question goes.. There is no real "set" amount of depreciation on RVs.. In the used market, AGE is typically the main "factor" in what it is worth.. The older it is the less it will be worth to the next buyer..

A used RV is really only "worth" what the next buyer is willing to pay regardless of what some "book" tells you.. And in the used market there are many more used ones for sale than buyers..

I drive by several used car lots that have had at least two TTs and one 5ver pretty much all the time.. several have been sitting on those lots for several years..

They would have taken the depreciation hit whether they financed it or paid cash. And in fact if they had the cash to purchase outright then the difference in interest paid vs. investment gains was most likely small. If they paid the entire purchase with cash their hit would actually be higher as they would have lost all the investment income plus the depreciation.

Actually paying cash would REDUCE the loss down to just depreciation only instead of depreciation AND interest paid on the loan.. In reality the interest paid on a loan is considerable and that eats into your buying power.

example, $20K loan at 3% for 10 years with a payment of $193.12 per month is costing you $3,174.58 in addition to the depreciation loss.

That $193.12 per month only applies a mere $143.12 toward paying off the principle and $50 is the interest owed..

Now if you put a down payment of $5K (this would come from your "investments" or cash "savings") and only borrow $15K the same loan terms now would be monthly payment of $144.84, interest paid would now be $2,380.93.. Out of that monthly payment you only pay a max of $37.50 per month in interest!

So just putting $5K down will save you $48.28 in payments per month which you could turn around and either add back into your savings or investments OR use as an additional payment towards your principle borrowed and drastically cut the length of the loan and even pay much less interest to the bank!

You can figure that out for a bigger down payment if you wish and you will find you will have more money to work with each increase in the down payment.

Yes, if you take some money out of your "investments" you will lose SOME of the "potential" gains but it is for a SHORT TIME.

Personally, I wouldn't take money out of my investments for this type of purpose.. Instead I SAVE and SET ASIDE some money EVERY MONTH for these types of purchases BEFORE I BUY..

Yes, it IS and "old fashioned" and out of date "approach" to handling money and finances.. But it DOES WORK..

I was taught in basic High School Economics 101 that every time you pay interest to a bank you lose buying power. Many people seam to have slept right through those classes and don't seem to mind forking over hard earned money just so they can get immediate, instant satisfaction..

I don't mind waiting and saving for those things I would like to have and I am not in a big hurry and because of this I can easily afford to buy the toys I want when I want..

[hawkeye-08]

I was wondering if the OP was thinking about writing the trailer off as business expense and was wondering what other folks were doing in regards to the depreciation schedule.

[Doug33]

Gr8life wrote:
I would be reluctant to call anyone else foolish when it comes to buying RV's. A few folks on here may claim to buy low and sell high but the vast majority of us look at it as the cost of entertainment. If one can purchase at a hugely discounted price and sell in a seller's market, the financial loss may not be terrible. The joy of rving can be priceless.

True - there is no way to financially justify the cost of the TT, fuel, supplies, depreciation, etc. Even if you calculate the cost differential between a night at a CG and a hotel at $100/night, you would have to camp 10 years at 25 nights/year just to make up for the original cost of buying the TT. Throw in the cost of a TV, tolls, gas, maintenance, etc and it would probably take 20 years.

The biggest way I justify my TT is that I get to go where I want and sleep in my own bed and use my own bathroom. We also love to sit by the campfire and cook meals (both inside and outside on the Aussie grill that came with the TT).

And maybe I'm strange, but I like the sense of accomplishment being able to tow our little house to where we want to go, and use it as a base camp.

The downside is that in my area you can only do this from about April-November, so we are resigned to staying at hotels when traveling from December-March.

This summer we are contemplating leaving the TT on a CG site for all of August to see what it is like. We have never done that before, because we love to visit new places all the time. I can't see being a seasonal camper, but one month could work well for the rest of my family while I'm working.

[TomG2]

There is an easy way to reduce the impact of depreciation, simply use the trailer more. I use mine over 200 times a year which means that $3,000 in depreciation amounts to $15/night. For those who only use theirs 50 nights a year, that cost soars to $60/night. I have always received book value for my trade ins, and the dealers don't even ask how often I use mine. For those who seldom use their trailers, buying used really makes sense. I like new since I value what that gives me in terms of warranty, and reliability.

[mich800]

Gdetrailer wrote:

dadmomh wrote:
We just sold our Rocky 2604 after only having it for 1 1/2 years. We bought it for about 33% off MSRP. Never expecting the changes we're making in our lifestyle now, we looked at 5% interest we'd pay on a loan vs 8%+ on our investments. Debated whether we should take money out and pay cash, but decided that seemed like a no brainer with making 3%+ more plus being able to deduct the interest as a second home. Now the bad news. Long story short, it cost us about $1000 to sell it. One of those things that if we knew then what we know now, we'd probably have kept our '07 ROO 23SS or just gotten out of camping entirely at that point. I can't imagine how folks that trade every couple of years keep from taking a bath on it....maybe they don't avoid it. I checked NADA, did tons of online searches and our price was right where it should have been, except for that darned $1000. So guess the answer is that you need to keep it for 3 or 4 years or so to come out at least even, maybe ahead a smidge. In any event, it was a key part of our changes and we're just thankful it wasn't any worse. The man who bought it is from LA and had seen the layout, but he said he never buys new and had a heck of a time finding a really good almost new. We feel like he'll be a good "dad" for Rocky and take excellent care. Making this huge change is like watching money flying out the door, which it really is, but in the big picture we'll be ahead when the dust settles.

Sorry that you had to sell off your trailer, sounds like you really liked it.

However, your experience should drive home the point that I have made numerous times on this forum and others have argued that I am totally wrong that buying a RV with CASH IS YOUR BEST BET WHENEVER POSSIBLE.

Taking out a loan on a depreciating HOBBY "asset" like a RV and comparing interest of a loan VS pulling SOME money from "investments" is a fools game.

In your case, circumstances can and often change which CAN make a loan payment no longer feasible or at the least a family or health issue can make a RV sit in your yard or storage for years with no use..

I understand not everyone has the "cash" just laying around, BUT there are things you can do like start putting money aside like you are paying a loan payment to a bank.. But instead of a bank you are paying yourself into an account that is separate.. It is an "old fashion" term called "SAVINGS"..

That is pretty much how I get the next down payment for my next vehicle.. I put a lot of miles on for my commute and have no choice but to replace vehicles often.. I put down a good size down payment then pay extra against the principle.. This allows me to pay off a 5yr loan in about three years.

Once loan is paid off I then put the the same amount of money I WOULD HAVE been paying to the bank until I need to replace the vehicle.. This builds up the next down payment.. When done right it will snowball and the next down payment will be larger to cover the rising cost of the next vehicle.

As far as the OPs question goes.. There is no real "set" amount of depreciation on RVs.. In the used market, AGE is typically the main "factor" in what it is worth.. The older it is the less it will be worth to the next buyer..

A used RV is really only "worth" what the next buyer is willing to pay regardless of what some "book" tells you.. And in the used market there are many more used ones for sale than buyers..

I drive by several used car lots that have had at least two TTs and one 5ver pretty much all the time.. several have been sitting on those lots for several years..

They would have taken the depreciation hit whether they financed it or paid cash. And in fact if they had the cash to purchase outright then the difference in interest paid vs. investment gains was most likely small. If they paid the entire purchase with cash their hit would actually be higher as they would have lost all the investment income plus the depreciation.

[Gr8life]

I would be reluctant to call anyone else foolish when it comes to buying RV's. A few folks on here may claim to buy low and sell high but the vast majority of us look at it as the cost of entertainment. If one can purchase at a hugely discounted price and sell in a seller's market, the financial loss may not be terrible. The joy of rving can be priceless.

[Gdetrailer]

dadmomh wrote:
We just sold our Rocky 2604 after only having it for 1 1/2 years. We bought it for about 33% off MSRP. Never expecting the changes we're making in our lifestyle now, we looked at 5% interest we'd pay on a loan vs 8%+ on our investments. Debated whether we should take money out and pay cash, but decided that seemed like a no brainer with making 3%+ more plus being able to deduct the interest as a second home. Now the bad news. Long story short, it cost us about $1000 to sell it. One of those things that if we knew then what we know now, we'd probably have kept our '07 ROO 23SS or just gotten out of camping entirely at that point. I can't imagine how folks that trade every couple of years keep from taking a bath on it....maybe they don't avoid it. I checked NADA, did tons of online searches and our price was right where it should have been, except for that darned $1000. So guess the answer is that you need to keep it for 3 or 4 years or so to come out at least even, maybe ahead a smidge. In any event, it was a key part of our changes and we're just thankful it wasn't any worse. The man who bought it is from LA and had seen the layout, but he said he never buys new and had a heck of a time finding a really good almost new. We feel like he'll be a good "dad" for Rocky and take excellent care. Making this huge change is like watching money flying out the door, which it really is, but in the big picture we'll be ahead when the dust settles.

Sorry that you had to sell off your trailer, sounds like you really liked it.

However, your experience should drive home the point that I have made numerous times on this forum and others have argued that I am totally wrong that buying a RV with CASH IS YOUR BEST BET WHENEVER POSSIBLE.

Taking out a loan on a depreciating HOBBY "asset" like a RV and comparing interest of a loan VS pulling SOME money from "investments" is a fools game.

In your case, circumstances can and often change which CAN make a loan payment no longer feasible or at the least a family or health issue can make a RV sit in your yard or storage for years with no use..

I understand not everyone has the "cash" just laying around, BUT there are things you can do like start putting money aside like you are paying a loan payment to a bank.. But instead of a bank you are paying yourself into an account that is separate.. It is an "old fashion" term called "SAVINGS"..

That is pretty much how I get the next down payment for my next vehicle.. I put a lot of miles on for my commute and have no choice but to replace vehicles often.. I put down a good size down payment then pay extra against the principle.. This allows me to pay off a 5yr loan in about three years.

Once loan is paid off I then put the the same amount of money I WOULD HAVE been paying to the bank until I need to replace the vehicle.. This builds up the next down payment.. When done right it will snowball and the next down payment will be larger to cover the rising cost of the next vehicle.

As far as the OPs question goes.. There is no real "set" amount of depreciation on RVs.. In the used market, AGE is typically the main "factor" in what it is worth.. The older it is the less it will be worth to the next buyer..

A used RV is really only "worth" what the next buyer is willing to pay regardless of what some "book" tells you.. And in the used market there are many more used ones for sale than buyers..

I drive by several used car lots that have had at least two TTs and one 5ver pretty much all the time.. several have been sitting on those lots for several years..

[SprinklerMan]

A used trailer is only worth what someone will pay for it .

[JiminDenver]

ugh wrote:
I was shopping for a used TT. The TT that I was looking for is around 26ft bunk house camper with or without a slide. I noticed that the cost or asking price of a 5 year old trailer was sometime too close to a brand new TT that was on sale with huge mark down like a RV show price. I almost made a mistake of buying a used one without a looking at the new one to see what kind of deal I could get. I bought my camper for 18K last Saturday, a lot of used one with similar floor plan between 8 to 10 years old have a asking price of over $10K. Many of them were in $12-15K range. So I figured that in ten years, I may loss around 6K or more. The math is much different for higher end TT. Like Mercedes, it deprecate a lot more than a Honda. My 2 cents

We got a good price on our 25 ft bunk house in 2011 for $13,500 and you could have knocked me over with a feather when it was totaled by hail and the insurance valued it at $12,500. We couldn't find anything even close for the $3000 buy back so we took the trailer and a check.

[Doug33]

I tried getting an estimate of what my 2-year old TT is worth on NADA.com. However, it lists options such as electric slide out room and fiberglass exterior as options, even though they are standard with the model I own. Those two options, if I check them off, add over $5K to the average retail price. This makes no sense to me, and the average retail price becomes more than I paid for the TT originally.