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.

Many of the questions we’re often asked here at Derby Motorhomes are about the financing options for buying a motorhome.

With the strict proviso that we are in no way qualified financial advisers, we’re happy to share with you some of our observations on the subject of motorhome finance. Our aim is simply to highlight – in the broadest possible terms – some of the options that you may be able to choose from when buying a new motorhome.

Using your own cash

A lot of buyers use their own cash – especially in circumstances where they have taken a lump sum out of a pension fund, have inherited money from a relative’s estate, or come into a similar windfall.

In many respects, paying by cash is intuitively attractive. It means you won’t be paying interest charges to a lender, and neither will you need to convince someone else that you can afford the money you are spending. It is your decision and yours alone.

However, you may need to keep in mind that some advisers might argue that spending your own cash is not always an optimum solution. If you spend a substantial sum of money on your motorhome from your own cash reserves, then by definition, that money isn’t available for you to use for other purchases.

True, you could always sell your motorhome in future to get a percentage of your cash back but that can take a little time and while you’re going through the sales process, your funds aren’t available to you.

Hire Purchase

You are almost certain to be familiar enough with the concept of Hire Purchase (HP) that it needs no further explanation.

In brief outline, suffice it to say, that all is required from you is to find a sum of your own cash to contribute towards the cost of the vehicle by way of a “deposit”. The Hire Purchase provider will then fund the balance and purchase the vehicle for you to use as its registered keeper.

You will then pay a monthly repayment of the outstanding sum, over some years, until such time as you have paid off the balance. During that period of time, the vehicle legally remains the property of the HP provider and you must not sell it without their advance written permission.

The advantage of HP is that the vehicle is being purchased, in large part, with somebody else’s money, meaning you keep your capital reserves for something like an emergency. Of course, you will need to show – by way of relevant credit checks – that you are financially able to maintain the repayments.

Use our motorhome HP finance calculator for an idea of figures here.

Personal loans

You could go to a finance company or bank and ask them to advance you a sum of money which you can then spend on buying the new motorhome of your choice.

You will then need to repay the loan, of course, over an agreed period of time or term.

Once again, you will need to find some form of deposit. You will also again typically be assessed in terms of your creditworthiness and ability to financially meet the loan repayment commitment you are entering into.

Loans offer the advantage of giving you a degree of freedom over where you purchase your vehicle, and they may increase your negotiating position a little with a seller or dealership (as to them you will effectively be a cash buyer).

On the downside, certainly, bank loans are perhaps not always as readily available for luxury or non-essential expenditure as might once have been the case.

Personal Contract Purchase (PCP)

In recent years, the market in motor sales has been dominated by personal contract purchase (PCP) arrangements. Inevitably, perhaps, this financing option is widely gaining ground for the purchase of motorhomes.

One of the attractions of the PCP is that you visit the dealer or franchise holder, choose your motorhome, put down a deposit, agree the monthly repayment schedule, sign the papers, and drive away in your new motorhome.

It might seem similar to HP but differs in crucial respects.

Your monthly repayments are reduced and rolled over until the final “balloon” payment, which you can pay so that the vehicle becomes yours outright.

Alternatively, you can hand back the motorhome, with nothing further to pay. But if you have built up an equity in the vehicle – because it has maintained its value better than expected, for instance – you can arrange its sale and put down the released equity as a deposit on the purchase of a new motorhome.

Summary

At Derby Motorhomes we work with a number of motorhome finance specialists to find you what we consider is the most suitable finance solution for your next motorhome. Why not contact us today to see how we can help?

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?