How to finance your new motorhome
Motorhome basics: Guide to motorhomes
In association with Creative Funding Solutions
Page contents
- Why buy a motorhome?
- The advantages
- A typical loan on a five-year-old motorhome
- The first steps
- Loans
- Hire purchase
- Other options
- The next steps
- About our magazines
Words by motorhome.finance.com
Why buy a motorhome?
There are many ways to fund your new motorhome and, to get the most up-to-date information on the latest finance offers, we have teamed up with expert funding broker, Creative Funding Solutions, which operates the motorhome.finance website
The initial cost of a motorhome may appear high but consider what you get in return – a holiday home or office, or both, on wheels that is at your disposal all the time. That means anything from weekends away to tours lasting months.
Buy a compact model and you can also use it as an everyday vehicle and, if you buy wisely, you will enjoy snail’s-pace depreciation, meaning your motorhome will lose only a fraction of its value over the years.
But that initial outlay can still be a barrier for some and this is where finance comes in. As more new buyers have come into the market looking for familiar ways to finance their motorhome purchase, so the number of deals and providers has increased.
(Photo courtesy of Creative Funding Solutions)
Steven Blake, Creative’s Sales Manager, explains,
With the pandemic leading to overseas travel restrictions in particular, we’ve seen people from all walks of life decide that owning a leisure vehicle is a great option for them, coupled with an affordable monthly finance payment instead of that lump investment of, initially, a much larger sum.
People of all ages and all circumstances come to us looking for finance, from singles and couples buying their first motorhome, campervan or caravan, through to families and older people already well versed in the world of leisure vehicles. Some customers, of course, do not have the resources to pay for a motorhome outright so engage our services, which allow them to buy a higher-quality motorhome whilst keeping repayments on a sensible monthly budget.
Other customers have significant cash reserves but choose to use their money for other purposes and are attracted by a fixed budgeted monthly payment that is comfortable for them and is easily arranged.
The advantages
Consider these positives if you’re still unsure about buying on finance or using some of your savings to purchase a motorhome:
- If you borrow, interest rates are at an all-time low, although there are signs these may rise soon
- Returns on your savings are also at an all-time low
- Residual values on motorhomes are currently stronger that a large portion of the passenger car market, limiting likely future depreciation
- Compare the cost of a motorhome to what a decade of package holidays would cost – you’ll still enjoy all the holidays (and more) and, at the end, you will still have a valuable asset
- An application for finance for your motorhome is a quick and easy process and can allow you to conclude a sale with a dealer quickly before the vehicle is sold to other customers
- If you buy a compact model you can also use it as an everyday vehicle, too, meaning you no longer need a family car as well
A typical loan on a five-year-old motorhome
2016 Bailey Approach Advance 665
Cost: £45,995
Deposit: 10% = £4,599.50
Amount borrowed: £41,395.50
Repayment: 120 monthly repayments of £494.13
Interest rate: 7.9% APR representative – rates from 6.9% APR are available
Total amount payable: £63,895.10
Cost of credit: £17,900.10 spread over 10 years
Remember, loans can cost you more if you fail to meet the repayment schedule, or less if you overpay or settle early
The first steps
(Photo courtesy of Alamy.com)
A popular way to fund some or all of a new motorhome is from savings. This is because returns on savings remain very low. Many buyers also delve into their pension pot to withdraw a tax-free lump sum for part or full payment.
While savings will always be a popular funding solution, what is rapidly increasing in popularity is using finance for some or all of the purchase. But, before you jump in, do some basic work at home first.
Steven Blake, Creative’s Sales Manager, advises,
Work out what your approximate monthly budget is – you can then look for vehicles that you know can fit within your financial circumstances, you can easily do this via a finance calculator like the one we offer through Creative’s dedicated website for our leisure vehicle customers and dealers at motorhome.finance
I’d also say make sure you use a finance broker who has a wide panel of funders, like we do. At Creative we have many customers pre-approved for finance, which means they can then visit leisure vehicle dealers safe in the knowledge that finance is unlikely to pose a stumbling block, leaving them free to fully concentrate on the main objective, which is finding themselves the right motorhome, campervan or caravan.
That wide panel of funders Steven refers to is the number of lenders a broker has a partnership with. The larger the number of lenders, the greater the choice and the greater the potential for a better deal. But don’t just look for this in a finance provider, also look for customer care.
Steven Blake says,
It is one thing having a panel of funders but it is equally important to keep all parties in the loop every step of the way in the finance process, keeping the customer fully informed regarding their application but also dealing with the supplying dealer on behalf of our customer – something our customers appreciate and this can really take the strain out of arranging the funding for the purchase.
You’ll see many finance options out there for leisure vehicles which can be confusing. Talk to us and we’ll walk you through the process in a professional manner.
Loans
Getting a loan is an age-old way of financing all kinds of purchases. If you source the loan yourself, you essentially become a cash buyer at the dealership.
Providing you have a good credit rating, there are some great deals to be had, thanks to low interest rates. If it’s been a while since you last borrowed, it is worth signing up with a credit checker to get your credit rating.
Creative Funding Solutions also has its advantages here as it has that wide range of funders, as well as dealers to call on.
Steven explains,
Our carefully selected panel of leisure vehicle funders help us to provide an appropriate solution for our customers based on their personal circumstances and the vehicle they are looking to purchase.
If you have not yet found your perfect vehicle, we can also help you with sourcing via our extensive network of leisure vehicle dealers and suppliers that we work with down the length and breadth of mainland UK.
All of the main high street banks also offer personal loans and banks often offer exclusive deals to existing customers. Other companies offering loans include supermarkets and brands like the AA and Admiral.
There are also plenty of online-only lenders offering competitive deals. Use a comparison website to see what deals are available.
Hire purchase
(Photo courtesy of Alamy.com)
Hire purchase, where you agree with a lender to finance your new motorhome or campervan in return for a monthly repayment and then with the option to buy the model with a higher final payment, is a very popular option.
Steven explains,
By far the most common finance option selected by our customers is hire purchase,
Customers make repayments on a monthly basis over a set period at a fixed rate of interest. Usually, the finance is taken out and then repaid by the customer over a three-year up to 10-year finance term, although some customers are hoping to settle more quickly than that.
Our funding options include 10-year finance terms for all the core leisure vehicles: motorhomes, campervans and caravans.
Factors that determine how long a finance term will be include a buyer’s monthly budget, the period they are looking to keep the motorhome or campervan for and its age when they buy it.
For this type of finance, a motorhome can usually be no older than 20 years at the end of the term so, for a 10-year agreement, the vehicle can be no older than 10 years at the start. If you’re considering an older model, there is an alternative.
Steven says,
For much older vehicles where HP is not suitable, we have leisure vehicle loan products as an alternative for lends up to £35,000.
Some funders do require a deposit to be put down for an HP finance application (usually circa 10% of the value of the campervan), but here at Creative we do provide access to some other financing options with lower deposits as well, always subject to affordability of course.
Likewise, Creative also provides solutions for the purchase of American RVs and left-hand drive vehicles, as well as for people looking to purchase vehicles for business reasons.
Other options
It’s now also possible to buy a motorhome or campervan using personal contract purchase (PCP).
A PCP allows buyers to spread the cost by paying a deposit, then monthly payments over a number of years. At the end of the term, the options are to return the motorhome, pay what’s left to own it outright, or trade it in and start a new deal.
There are likely to be terms relating to the return of the vehicle, including keeping to a limited number of miles per year and a lack of damage.
Another option is to take a secured loan against your home, which can allow for lower monthly repayments as the loan is spread over a longer period.
Steven explains,
Some customers who are homeowners with equity in their property welcome the ability to secure a loan for their leisure vehicle against their residential property.
The key advantage here is that the funding can be secured over a much longer period, subject to circumstances, up to 25 years.
Equity release is also an option which involves drawing funds from the equity in your home. Unlike a secured loan, there are no repayments and the amount, plus interest, is repaid when the scheme ends – when the property is sold or in the event of the policyholder’s death.
A downside is the value of the policyholder’s estate is reduced. The amount of interest on the final settlement can vary significantly, too.
f you’re aged 55 or over, you can also withdraw a lump sum from your private pension. The first 25% is tax-free, while the remainder is taxed at your normal marginal rate. Your pension income will be reduced on retirement, though.
Many motorhome dealers and manufacturers also offer finance and/or lease deals and, with interest rates so low, this can be an appealing option.
The next steps
Consider all the funding options before making a final decision. Finance is so important to get right so do your research carefully.
A PCP allows buyers to spread the cost by paying a deposit, then monthly payments over a number of years. At the end of the term, the options are to return the motorhome, pay what’s left to own it outright, or trade it in and start a new deal.
There are likely to be terms relating to the return of the vehicle, including keeping to a limited number of miles per year and a lack of damage.
Another option is to take a secured loan against your home, which can allow for lower monthly repayments as the loan is spread over a longer period.
Steven says,
Don’t be afraid to ask if you have questions concerning finance.
At Creative we really understand this market and enjoy helping customers through the process, explaining the options out there and working to achieve a good outcome for our customers at all times.
We are not a large faceless call centre, we are about building relationships with our customers – one person will own your finance transaction and you won’t get pushed from pillar to post...
We’re small enough to know you and big enough to help!
