The simple financial fact of life is that after your home, statistically speaking, a motorhome is likely to be the second most expensive purchase you’ll ever make.
That means it’s advisable to think carefully about your funding and that’s where we at Derby Motorhomes can assist.
Here we’ll talk about the major sources of motorhome financing used by most purchasers.
By this we mean money you have that you’re going to use for paying for the vehicle in one go via cheque or bank transfer etc.
This might include pension lump-sums you’ve taken.
Pros: Easy. No interest costs or related charges. No credit scoring issues if you have some challenges in that domain. The vehicle becomes yours immediately.
Cons: Depending on your whole financial circumstances, using “spare” cash to fund the purchase of a motorhome may not necessarily always be the best use of your liquid capital. You cash is immediately gone and isn’t available for other emergency uses.
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 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, this makes you effectively a cash purchaser for a motorhome dealership. This can be a very cost-effective way of accessing capital;
Cons: can take a little time and involve some paper-filling 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 may typically involve you in credit-scoring. If you’re borrowing against equity in your home, remember that your home might be at risk if you fail to keep up the repayments.
Hire Purchase (HP)
This is a very familiar form of finance.
It works very simply. If approved, the lending company will purchase the vehicle and give you permission to keep and use it as the “registered keeper” in legal terms.
You’ll then repay the sum agreed over a specified period of time and typically the vehicle becomes legally yours after you have made the last 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 an offence).
Pros: a very familiar form of funding. It can be more cost-effective than paying by cash, depending upon your exact overall financial circumstances. Decisions may be reached fairly quickly once your application is made.
Cons: your motorhome may be legally seized if you fail to maintain the repayments in-line with the agreed schedule. Typically, HP involves you finding a deposit (perhaps around 10%) from your own financial reserves. You will typically need to meet certain minimum credit risk scoring criteria.
The conventional bank loan has been with us for a long time and is well understood.
Pros: familiar system. May be 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.
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 FCA (Financial Conduct Authority) to advise on motorhome financing options and typically may be able to help with motorhome finance even if you have a less than perfect credit history.
Why not call us for a further discussion?