There is an old joke to the effect that “buying a vehicle is much more fun than paying for it”!
No doubt that’s true but even so, there are a range of options that might be open to you.
Numbers of people purchase their motorhome using their cash reserves. That often comes from things such as pension cash-ins, life savings, windfalls or sometimes wills and other bequests from relatives etc.
Using your own cash has two big advantages:
- you don’t have to apply to anyone or seek the approval of a third party in terms of your spending plans. That can make the process fast;
- your spending doesn’t incur costs in terms of the interest rates and other charges that might be associated with some loans – though that must be modified a little as outlined below.
There are two “cons” to consider too:
- once you’ve spent your capital, it’s “tied up” and not immediately available should you need it for emergency purposes;
- strictly speaking, you should consider what’s called the “opportunity cost” of using your own cash. If you could invest it elsewhere and get a good return, then not being able to do so because it’s now been used for your motorhome is a cost to you in the sense of it being a lost opportunity.
There are several potential options here including those we offer.
Perhaps the most familiar form of motorhome financing is that of Hire Purchase otherwise known as “HP”.
This probably needs no introduction but just in case, it involves:
- finding a contribution towards the cost of the vehicle from your own finances. A figure of around 10-15% is commonplace;
- the lender will advance you the balance in the sense that they will buy the vehicle. It becomes their legal property, but they then allow you to use it as the “registered keeper”;
- each month you will make a set repayment to the funds At the end of the agreed term, the vehicle becomes yours in the legal sense – assuming you have made all repayments;
- while the agreement is in force, you must not sell the vehicle or significantly modify it without the lender’s/provider’s explicit permission in advance.
This approach has been around for a long time and typically works well and to everyone’s satisfaction.
Your application will need to meet criteria in terms of you being assessed as having sufficient financial standing to indicate that you can afford the sums involved and the monthly repayments. That typically will include a credit history check.
This is another theoretical option for motorhome financing.
It usually works with the bank providing the money for you to go out and purchase the motorhome, with you having again made a financial contribution overall. That contribution may be typically a larger percentage than might be associated with HP.
The question as to whether the bank will demand some sort of security over the loan would be one to discuss with the bank in the individual context of your application.
There are a few points worth keeping in mind with bank loans:
- some people might prefer to keep their motorhome financing separate from their everyday banking affairs;
- some banks may move rather slowly in terms of application reviews;
- not all banks are well-disposed towards loan requests for what they may see as “luxury items”!