# Finance Vs. Cash For A New Rv



## aggie91 (Feb 12, 2011)

Guys,

Just curious on what advice I might get on paying cash for a new RV vs. financing at a 6% - 7% rate. I am in a good position to possibly do either and I understand 'some' of the benefits of both - just looking for some comments.


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## willingtonpaul (Apr 16, 2010)

if you have the cash, pay cash. even after the tax deduction, 6-7% interest is costing more than you can make without taking a fair bit of risk.
you are taking the hit on depreciation either way. why take the hit on interest also, if you can avoid it ?


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## Yukon Eric (Oct 14, 2010)

We paid cash for our 312bh late last year and I have been wondering ever since if it was the right move. We looked at 6 to 7% you would pay in loan interest, and maybe 1% you can make on your money if you invested it instead. Don't know what to tell you.

Yukon


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## egregg57 (Feb 13, 2006)

I personnally think you should do as much as you can cash wise. What happens down the road three years from now no one knows. Being able to sell or trade with little or no money left on it is a good position to be in. We paid partly in cash and partly financed.

Eric


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## KTMRacer (Jun 28, 2010)

aggie91 said:


> Guys,
> 
> Just curious on what advice I might get on paying cash for a new RV vs. financing at a 6% - 7% rate. I am in a good position to possibly do either and I understand 'some' of the benefits of both - just looking for some comments.


at that finance rate I'd pay cash.

You might look at a home equity line of credit. Mine is 4%.

Went through the same question when we bought ours. In out case it was 4% finance rate that is tax deductible= 3% effective rate for us, vs pulling out money that is paying a little over 5% tax free as dividend income. So we went with equity line of credit and a 4 year term.

If our choice was money in the bank paying 1% vs. 4% ELOC I'd have gone with cash.


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## clarkely (Sep 15, 2008)

I am a proponent of paying for what you own if you can afford to........... loans work for things, but never more than a 5 year term for something like this. We bought our first, financed the second one and then bought our new one............ all depends on where you are at the time, but cash is king


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## sunnybrook29 (Oct 7, 2009)

I believe in paying cash for something that is gonna depreciate as fast as a RV.


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## Kevin K (Jan 31, 2011)

sunnybrook29 said:


> I believe in paying cash for something that is gonna depreciate as fast as a RV.


You can never get in trouble paying cash for toys!

Going bankrupt and having to unload the trailer your already upside down in because you can't make the payments and they are coming to repo it in the dead of winter = motivated seller = bigger hit than the already fast depreciation.


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## John3640 (Sep 27, 2010)

In the past (more than 10 years ago) I have gotten better deals on the selling price of cars when I financed them through the dealership. The rates were always higher the I could get at my bank but the dealership would give me a lower price because they would make the money back thought the financing. I would then pay the loan off with my first payment so it was the same a paying cash for me. I don't know if this would still work in today's economy but it may be worth a try.

John


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## TexanThompsons (Apr 21, 2009)

Just a couple of things to consider...

1) This is a luxury item (second home) - do you really want to buy a luxury item with borrowed money?
2) If cash flow is important, pay the thing off so as not to take a $250 hit each month
3) If cash on hand is important, keep this in mind...if you put 10% down ($2500) on a $25,000 trailer, you will probably still end up financing close to $25,000 when all the fees, taxes, registration, etc are added back in. To this end, most people don't keep their trailers more than a few years before they realize they need something else. Then, you can pay the difference between what you owe and what you can sell it for. So in essence, you've leased the trailer for yourself and paid maybe $12,500 or so out of pocket and now get a new one

I would not recommend #3. Cash is king. Nice being able to know I don't have to send that check each month


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## huntr70 (Jul 8, 2005)

One thing to consider if using a home equity loan to get a low rate.......

Do you really want to risk your home if you default on the payment?

Equity loans use your brick and mortar home as collateral, so if you default, guess what they are coming after.....









.......not the travel trailer.


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## Nathan (Jan 2, 2007)

The only issue I see with cash is if you feel you will get a better return on your money while investing it. Let's say you were confident of a 8% return on your investments. Then you could keep the money, earn 8% and then write off the 7% interest so it would only be ~5% cost to you. Now if you prefer this situation, go for it.

The other issue I see is if you are depleting your emergency fund. I'd rather have a bank repo a trailer than lose my house because I couldn't make those payments because I depleted my cash reserves....

Just playing Devil's advocate for a minute here.


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## Doxie-Doglover-Too (Jan 25, 2007)

Nathan said:


> The only issue I see with cash is if you feel you will get a better return on your money while investing it. Let's say you were confident of a 8% return on your investments. Then you could keep the money, earn 8% and then write off the 7% interest so it would only be ~5% cost to you. Now if you prefer this situation, go for it.
> 
> The other issue I see is if you are depleting your emergency fund. I'd rather have a bank repo a trailer than lose my house because I couldn't make those payments because I depleted my cash reserves....
> 
> Just playing Devil's advocate for a minute here.


Hear hear!







. (just me 2 hear hears worth)


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## john7349 (Jan 13, 2008)

Pay cash. Go Camping.... Enjoy


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## KTMRacer (Jun 28, 2010)

huntr70 said:


> One thing to consider if using a home equity loan to get a low rate.......
> 
> Do you really want to risk your home if you default on the payment?
> 
> ...


agreed, don't use an ELOC willy nilly but it can be a good use of credit depending on financial situation. I've got plenty of ready cash to cover the ELOC draw many times over if needed, just that it is paying more than the ELOC costs (3% after tax), and the income is 5.5% tax free. In my case it's a 2.5 % spread in my favor. 
So IMHO for my situation it is a prudent use of credit. Now if you can't cover the ELOC if needed it's bad. And other than the ELOC which is about 10% of the home value, I owe nothing on the house. so not much risk.


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## Jewellfamily (Sep 25, 2010)

I'd pay cash if you can. If you finance $25,000 at say 6% you will pay 1500 bucks in interest just the 1st year. The number goes down a little each year until payoff. You can write off the mortgage interest as a 2nd loan but you dont write off the whole amount, basically you just get the income tax you would have paid on the 1500 bucks taken off (i.e. if you are in the say 20% tax bracket, you saved 300 bucks). Great. You still payed 1200 bucks in interest and the interest payments will continue, at a reduced rate, until loan payoff. Take the money you would pay in interest each year and go on some camping trips!


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## aggie91 (Feb 12, 2011)

Thanks for all the comments guys...


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