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.

Apart from some of the more usual and expected questions about insurance for your motorhome, there are others that might seem relatively uncommon – but are no less important for all that.

Here are just two examples of the questions we are sometimes asked:

  • can I live in my motorhome full time and keep it insured?
  • what happens to my house insurance if I am away on extended motorhome trips?

In some ways, the questions might seem related – yet the issues they raise are certainly different.

Living permanently in your motorhome

It’s important to state at the outset, perhaps, that the overwhelming majority of motorhome insurance providers consider motorhomes to be vehicles you use occasionally for recreational purposes. It’s no coincidence, of course, that motorhomes are often referred to as “RVs” – quite simply, recreational vehicles.

Typical motorhome insurance policies will contain a clause that limits, in some form or another, just how much you can use your motorhome in a given year. That may be some months and that might be entirely satisfactory for the vast majority of motorhome owners. However, if you decide you want to spend your life on the road, it is likely to be inadequate for you.

There is no mystery behind the reasoning here.

Insurance providers use certain algorithms designed to calculate the risk of offering you cover. The facts they use to construct your risk profile include certain assumptions about your permanent address and how much time you will be living there for each year, as opposed to using your motorhome.

If you plan to be on the road all the time, in effect you don’t have a permanent address and that is going to cause many insurance providers a degree of conceptual difficulty in terms of offering you cover.

It may be possible to obtain specialist cover if you do decide to spend your life on the road but the key message here is to avoid simply selling up and driving off in your motorhome on the assumption that your existing motorhome insurance will be valid. It may not be!

How much time can you spend in your motorhome before it impacts your home insurance?

At first sight, this is also a question related to spending longer periods of time in your motorhome – but it raises quite different issues that have no direct impact on your motorhome insurance.

The challenges here arise from the fact that your existing standard home insurance almost certainly contains a clause limiting how long – counted in consecutive days and nights – you can leave your property unoccupied before your insurance is at risk.

That period of time is usually somewhere between 30 and 45 consecutive days.

If you wish to go off and spend extended time on the road discovering the world in your motorhome, you will typically need to remember that you may need to contact your home insurance provider about your plans and consider whether you must arrange specialist unoccupied property insurance. This will extend a policy to cover your property for longer periods when you are not in residence.

Disclosure

A key message that emerges from our consideration of both these questions relates to the importance of disclosure to your insurance company. Put another way, you must make sure that your motorhome insurer and any broker involved are both kept fully informed when there is any change at all in your circumstances (those that existed when the cover commenced) – and that includes a decision to live for a time in your motorhome or to leave your home temporarily unoccupied for longer than a month or so.

Most insurance providers will try to be as flexible and as helpful as they can in order to help you to enjoy your motorhome to the fullest possible extent.

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?