Question Financing dilemma

[Russellvh]

I will be retiring next year and going full time RV’er. I’ve decided on a 5th wheel and truck but have neither yet nor have I picked out a specific of either. Figure I’ll final on a trailer then get the necessary truck. Have decided, probably, both will be used.

My delemma is that I don't think I will have enough savings to purchase both without financing part of one of them. Any advice on which one to finance? Does one offer lower finacing or longer terms? I realise there are variables on where I get the financing and my actual credit score but any thoughts would be appreciated.

 

[redbaron]

The interest on the rv is tax deductible in most cases, thus offsetting some of the costs.

Take this into consideration when comparing rates.

 

[Fish]

Just in my experience, interest would be lower on the vehicle and term could be arranged to be longer on the rv.
So far as getting a tax deduction on rv interest I've had no luck doing that even when living in it for work. The standard deduction is so huge now I end up filing 1040ez. I paid a cpa good money for years and then I noticed that 2 years in a row he had filed form 1040ez for me so I just started using turbo tax and doing it myself.

 

[redbaron]

Just in my experience, interest would be lower on the vehicle and term could be arranged to be longer on the rv.
So far as getting a tax deduction on rv interest I've had no luck doing that even when living in it for work. The standard deduction is so huge now I end up filing 1040ez. I paid a cpa good money for years and then I noticed that 2 years in a row he had filed form 1040ez for me so I just started using turbo tax and doing it myself.

Good points. I have zero experience with retirement income,1040ez and standard deductions, but what you say makes sense.

 

[Jireh Financial]

I am always on the side of a good performing lower interest rate loan. If your money is in anything market related, there is a great chance you can out perform a good interest rate. I do not advocate for making minimum payments but paying interest is generally not the largest money problem people will have. Paying cash (potential appreciating asset) for a car or camper (a sure depreciating asset) does not make sense to me. A good interest rate along with additional payments is proven to be a solid choice for many buyers. Getting rid of cash or investments and throwing away the compounding of the money is hard to recover from.
Please remember, this is an OPINION topic. It's your money - you make the choice that helps you sleep better.
Let us know how we can help.
Ken

 

[Russellvh]

I am always on the side of a good performing lower interest rate loan. If your money is in anything market related, there is a great chance you can out perform a good interest rate. I do not advocate for making minimum payments but paying interest is generally not the largest money problem people will have. Paying cash (potential appreciating asset) for a car or camper (a sure depreciating asset) does not make sense to me. A good interest rate along with additional payments is proven to be a solid choice for many buyers. Getting rid of cash or investments and throwing away the compounding of the money is hard to recover from.
Please remember, this is an OPINION topic. It's your money - you make the choice that helps you sleep better.
Let us know how we can help.
Ken

Thanks. Helpful info.

 

[Bob K4TAX]

I always figured if my investments are paying a 5% annual return and my annual loan costs is 4%, I'm ahead of the game by 1% and I still have my money in the bank. I'm not taking the money out of the investments.

I paid a CPA for years and was advised and decided to use TurboTax. I saved the CPA fee plus got a larger return. Now at 79 years old, I haven't paid income tax in years. I financed our truck and then financed our travel trailer. Both at a lower rate than the investments return. In some places, you can finance both as one loan. It pays to shop around. I went to my bank where we've done business for 20+ years for the deal and was amazed at the high-interest rate quoted. I shopped around and beat their rate by more than 3%.

 

[Jireh Financial]

I always figured if my investments are paying a 5% annual return and my annual loan costs is 4%, I'm ahead of the game by 1% and I still have my money in the bank. I'm not taking the money out of the investments.

I paid a CPA for years and was advised and decided to use TurboTax. I saved the CPA fee plus got a larger return. Now at 79 years old, I haven't paid income tax in years. I financed our truck and then financed our travel trailer. Both at a lower rate than the investments return. In some places, you can finance both as one loan. It pays to shop around. I went to my bank where we've done business for 20+ years for the deal and was amazed at the high-interest rate quoted. I shopped around and beat their rate by more than 3%.

Not every lender has a taste for RV loans. Some of the largest household name banks have horrible programs for this type of thing. We have a group of lenders that have great programs. No two are exactly the same none take every type of deal.
I have never seen one loan with a auto and an RV collateralized on the same contract. They generally have different rates and terms available so the mix sure would be odd. Also, if a person replaces one or the other, the lender would need to release just one part. It sure would be interesting to see.
Let us know how we can help.
Ken

 

[Fish]

I always figured if my investments are paying a 5% annual return and my annual loan costs is 4%, I'm ahead of the game by 1% and I still have my money in the bank. I'm not taking the money out of the investments.

I paid a CPA for years and was advised and decided to use TurboTax. I saved the CPA fee plus got a larger return. Now at 79 years old, I haven't paid income tax in years. I financed our truck and then financed our travel trailer. Both at a lower rate than the investments return. In some places, you can finance both as one loan. It pays to shop around. I went to my bank where we've done business for 20+ years for the deal and was amazed at the high-interest rate quoted. I shopped around and beat their rate by more than 3%.

My mortgage is paid off, I have a small heloc with a bank I owe on. I bought a 2018 Terrain a few months ago since I needed something to drive after I sold the dually and the Montana. I paid them off. I owed nothing on the Monaco or the Silverado.
Told the dealer I'd put 5 grand down. He said We'll get it all cleaned up and get the papers ready.
Went and picked it up that day, financed through dealer at a local bank I'd financed a duramax at before. A little over 3%.

So I pick up the mail yesterday and there's a letter from the bank I have my heloc through, it says sorry we couldn't approve your auto loan application. Reason was not enough installment loan history. I was kind of surprised, but then I realized the dealer handled all of it.
This same outfit is always worrying me wanting me to borrow money, and wanting me to take out a permanent mortgage.
I guess I have an answer for them next time they bug me "Well I wasn't good enough to borrow a little dab of money off of you for a car so how about leaving me alone".

 

[Bob K4TAX]

Well, there are "advantages" to being in debt. Otherwise, no mortgage, no installment loans, no credit card debt, no revolving credit accounts, no credit history, and the loan companies won't give you a loan regardless of your credit rating.

Yes, some loan companies/banks do not loan on certain commodities such as boats, RV's, motor homes, airplanes, farm equipment, and other specialty items. While others specifically specialize in those commodities. My wife was a loan officer for a yacht finance company some years ago, and that was all they financed, nothing else. And there were specific requirements there as well. You'd be surprised at the supposedly wealthy people that were turned down due to "no credit history" but excellent credit ratings.