Category: Motorhome Finance

Are you looking for motorhome finance? Well it is an important thing to check out the actual costs. Whilst interest rates have been at an all time low, it can still add up. Especially over long periods of time. Many motorhome loans are over ten year periods.

There is no such thing as guaranteed motorhome finance, although some people would have you believe that. So when taking out any finance find out who you are dealing with.

Motorhome Finance.

Also, anyone in the UK offering motorhome finance has to be on the FCA register and approved to do so. This is a way to ensure that people are treated fairly. Motorhomes are no small cash items far from it. Do your finance homework before you buy any motorhome.

This could well become the largest amount that you spend after buying your house. Therefore, it is important to check Interests charges and any arrangement fees are in order.

Here at Derby Motorhomes, we are dealers in motorhomes – among the best in the country, we like to think. We are not financial advisers, though, so the following thoughts and comments are offered by way of suggestions rather than any form of financial advice.

Furthermore, suitable methods of funding and sources of finance for your new motorhome are going to depend mainly on your personal financial means and circumstances. Of course, we have no idea of those at present. So, all that follows needs to be interpreted in an entirely general fashion – and may or may not apply to your own unique circumstances.

Finding finance

For most intents and purposes, there are typically five potential sources of motorhome finance:

  • your bank;
  • the dealership from which you intend to make your purchase;
  • an independent finance company you’ve found yourself;
  • loans from friends or family; or
  • your own financial resources (from your existing savings or a retirement lump-sum, for example).

For this article about sources of finance, we might put to one side any further consideration of loans from family or friend or the use of your existing savings since our particular interest is in finance deals available commercially.

That leaves us with the three possibilities of your bank, an independent finance company, or finance arranged by your dealership.

Your circumstances

Whoever you approach for an advance of motorhome finance, you are almost certain to be expected to bring certain things to the table, such as:

  • evidence that you can afford the repayment schedule (typically, documentary evidence of a regular income);
  • evidence that the price asked for the vehicle proposed is realistic and makes sense when viewed against its current market value;
  • proof of your identity and address that you are who you say you are – by way of readily verifiable data such as the electoral register;
  • a deposit or some other financial contribution towards the price, that helps to reduce or share the risk to the lender – so that, the bigger the deposit or the more of your own money you are contributing, the easier you are likely to secure the funding you are after as an attractive rate of interest (assuming all other things are equal); and
  • an acceptable credit history record – contrary to widely-held myth, credit history issues are not usually show-stoppers, but they may affect how much you’ll need to pay for your finance.

Bank funding

This has a major attraction for some in that it’s familiar. Banks have also cleverly positioned themselves in the marketplace over generations so that they sound like solid pillars of the community – and that still appeals to many customers.

On the downside, you might find that:

  • they can be rather slow to come to a decision;
  • they may demand a higher contribution from you than some other potential lenders;
  • you might want to keep your vehicle purchasing affairs private in terms of your bank’s view of the totality of your spending; and
  • the banks can be risk-averse and less receptive to luxury vehicle financing than some other sources.

Finance companies of your own choice

Remember, every time you make a loan application and it’s refused, that will potentially damage your credit score. So, avoid making large numbers of random applications in the hope you’ll get a favourable outcome and instead look for companies that have a proven track record in the provision of motorhome finance.

Look at all the usual factors including:

  • whether they are duly authorised and regulated by the Financial Conduct Authority (FCA);
  • the rate of interest you will be paying for the finance;
  • the term of the finance arrangements – in other words for how long you will be repaying any credit or loan;
  • the maximum age of the vehicle the lender will accept; and
  • any conditions, penalty clauses, and the like that the lender may apply.

Take your time reviewing any offer of finance, of course, and if you’re not fully comfortable with the financial concepts and jargon, make sure to take independent and objective advice from someone who is.

Dealership finance

Dealerships have a big advantage – they know the finance providers who are likely to be receptive to applications relating to motorhome finance. For example, this route might help to keep the deposit you need to a lower level.

Things to keep in mind might include:

  • whether you would prefer to keep entirely separate the related issues of finding finance and driving a deal on a motorhome;
  • the high demand for motorhomes and the fact they hold their prices may make your whole approach to negotiating a deal quite different from the way you might buy a car; and
  • remembering to appraise and review any offer of finance from a dealership in just the way you would any other offer – by looking at rates of interest, the term of any finance, conditions, and penalties, for example.

We hope this brief guide to getting the most attractive motorhome finance deal is useful. At Derby Motorhomes we are not independent financial advisors and so are unable to provide you with independent financial advice. We do, however, work independently with funders and brokers to help you access motorhome finance. You can find out more on our motorhome finance page.

It’s likely to be a simple financial fact of life. Statistically speaking, a motorhome is likely to be the second most expensive purchase – after your home – you’ll ever make.

Put even more simply, if you are looking to buy a motorhome, you will want to give its funding – your finance options – some especially careful thought. And that is a subject on which, here at Derby Motorhomes, we can help.

So, let’s take a look at some of the major and most common sources of motorhome finance chosen by many purchasers.

Cash

That’s the money you have to hand in your bank account, of course. You might be fortunate enough to have an instant access savings account, for instance, which can let you pay for your motorhome in a single transaction, paying by electronic transfer or money order.

In these days of relatively straitened financial circumstances, of course, savings might be few and far between – but perhaps you have been the beneficiary of a windfall through someone’s will or maybe you have just drawn down a pension lump sum.

Pros: Easy, simple, and straight forward. There are no interest costs or related charges. Neither are there going to be any credit score issues if that is an area in which you might be challenged. The vehicle becomes yours immediately after you have handed over the cash.

Cons: Depending on your overall financial circumstances, using “spare” cash to fund the purchase of a motorhome may not necessarily always be the most appropriate use of your liquid capital. Your cash is immediately gone and isn’t available for other emergency uses.

Equity release

In a sense, this is a variation on cash. It differs only in how long it takes you to release the equity and to some extent, how you do so.

Essentially, equity release involves getting hold of liquid capital you might currently have tied up in other things, then using that to purchase your motorhome.

For example, if you take out a loan based upon the equity you have in your property (equity there is defined as the difference between your property’s realistic market value and any remaining mortgage you might have on it).

Pros: once again, the funds released through such an arrangement make you effectively a cash buyer for your motorhome. Unsurprisingly, therefore, equity release can be a very cost-effective way of accessing capital

Cons: it can take a little time, involve some form-filling, and legal documents to be drafted as you try to free up your equity. Borrowing against equity is still borrowing, so you need to look closely at interest rates as per normal. It will invariably involve reference to your credit status and score. If you’re borrowing against the equity in your home, remember that your home might be at risk if you fail to keep up the repayments.

Hire Purchase (HP)

For most of us, this is a thoroughly familiar form of finance.

It works very simply. If your application is approved, the lending company will purchase the vehicle and give you permission to keep and use it as the legally recognised “registered keeper”.

After paying a deposit – typically, around 10% of the purchase price – you’ll then repay the balance over a specified period of time, but the vehicle becomes legally yours only after you have made the final repayment. During the term of the agreement, the vehicle is NOT legally yours and you must not sell it without the HP provider’s advance permission (to do so would be a criminal offence).

Pros: a thoroughly familiar form of funding. It can be more cost-effective than paying in cash, depending upon your particular overall financial circumstances. Decisions may be reached fairly quickly once your application is made.

Cons: your motorhome may be legally seized if you default on the repayments – that is, you fail to maintain the repayments in accordance with the agreed schedule. You will typically need to meet certain minimum credit risk scoring criteria.

Bank loans

Conventional bank loans have been around for a long time, of course, so the ins and outs of borrowing from your bank are probably well understood.

Pros: it’s likely to be a familiar arrangement. It is likely to be most convenient for those with an established relationship with their bank.

Cons: some banks may be reluctant to lend larger sums for what they will consider to be luxury items. Decisions can be slow and credit scoring is likely to be involved.

Summary

Although we have mentioned credit scoring above, please don’t assume that you need a perfect credit score in order to obtain finance! We are authorised by the Financial Conduct Authority (FCA) to advise on motorhome financing options and stand ready to help you with motorhome finance even if you have a less than perfect credit history.

Why not call us for a further discussion?