Hand in hand with the business of selecting a motorhome goes the need to decide how you will pay for it.
The first is typically something that most people find extremely exciting. The latter is sometimes more daunting for some buyers. The good news is that, in the vast majority of cases, the process is relatively straightforward and not one to be feared because here at Derby Motorhomes we can help make it an entirely smooth process.
There may be a number of options open to you in terms of funding your motorhome – and we are always keen to try and ensure that you understand the pros and cons of your various choices of finance. That’s why we have produced the following brief motorhome finance guide.
So, let’s take a closer look at what is involved in motorhome finance and just what are your options.
Using your own capital
For many of us, this might be intuitively attractive.
In some respects, it is the easiest option and the one that offers you the least amount of work. Some buyers also prefer this method because it means they are free from a debt and more independent as a result.
While we would never argue against that, it is worth keeping in mind, though, that it isn’t always necessarily the most advantageous route. For example, if you suddenly needed cash for an emergency, having your money tied up in a motorhome or any other asset, may mean you’ll require some time to free it up.
That is because spending your savings on the purchase of a motorhome removes liquid capital from your financial reserves.
That simply means that once you have invested your capital into a motorhome, if you need cash in a hurry to deal with an emergency, it is no longer available to you at the stroke of a pen on a cheque. While good pre-used motorhomes are typically always in high demand, it may still take time for you to convert your vehicle into cash should an emergency arise.
It’s therefore worthwhile thinking a little about whether using your own money is the most sensible or prudent option – or whether you might want to consider borrowing the necessary funds.
Borrowing the money to purchase your motorhome means finding a lender prepared to advance the loan or extend the credit.
Perhaps the first point to keep in mind is that lenders are keen to find reasons to say “yes” to any financing application – that is their business, after all. But that business interest means, first and foremost, their determination to recover any finance that is lent.
While a lender is going to welcome an application, they will invariably require a credit history check – for confidence in your ability to make the necessary repayments. Credit checking is also a condition of the lender’s authorisation by the Financial Conduct Authority (FCA).
This validation process is also known as a credit risk assessment, though having a few minor problems on your credit history is not always a showstopper. Some of the brokers we use understand that very few people these days have an entirely blemish-free credit history record. That said, any motorhome finance provider will reserve the right to decline an application if they feel it is not in your best interests.
The vehicle’s valuation and sum requested
As you might expect, any provider of motorhome finance will need to protect their interests in terms of being sure that the sums they are advancing make sense against the value of the asset concerned.
What this means is that they will be reviewing the price you are proposing to pay for the motorhome against their own industry-standard valuations of such vehicles.
This is rarely a problem and exists for the protection not only of the potential lenders but also the applicant in terms of avoiding you paying more for the vehicle than it is worth.
We work with some of the leading motorhome finance providers (insert link to: and funds brokers in the UK.
Thanks to that network of contacts, we offer a wide range of finance options – each of which have their unique advantages and issues. A solution that is suitable for one buyer might not be optimal for another.
We would be happy to sit down and discuss just what your options are in a given situation. We will then typically be able to assist you in finding a motorhome loan package that’s both suitable and cost-effective.
Motorhome finance options
So, let’s take a brief look at some of those different finance options:
- this involves you borrowing a sum of money from a bank or other funds provider;
- you then purchase a motorhome using that loan and the vehicle is immediately and legally yours;
- you repay the loan over the period of time that you have agreed with the loan provider;
- personal loans may be secured or unsecured – and if security is required, this typically takes the form of a charge over the motorhome itself in favour of the lender;
- that allows the lender to repossess the motorhome (or whatever else you have used as security) in the event you defaulted on your repayments.
Hire Purchase (commonly shortened just to HP) involves the lender purchasing the vehicle and then allowing you to use it as if it were your own – under the auspices of your designation as the “registered keeper”:
- typically, you’ll need to find a deposit as your contribution towards the overall cost – the amount of the deposit is likely to be around 10-15% of the purchase price;
- you will also need to demonstrate to the funds provider that your overall financial position is such that you will be able to comfortably afford the monthly repayments – and that is usually done by way of the credit risk assessment to which we have already referred;
- each month you will make a regular repayment to the provider of the funds – with the term of the agreement typically extending over a number of years;
- once you make the final repayment, legal ownership of the motorhome transfers to you.
There are typically very few restrictions on what you can or cannot do with your motorhome when purchasing it under HP – but you cannot sell the vehicle without the advance permission of the provider of the funds because it really isn’t yours to sell until you’ve made that final repayment.
Personal Contract Purchase (PCP)
- PCP is where you put down a deposit (which can be cash, part exchange or a combination of both);
- although regular monthly payments are then made, they effectively represent only the value of the lease of the vehicle;
- the lender defers, until the end of the agreement, an amount roughly equal to its future value and guarantees to this (subject to you meeting the pre-set terms of the agreement);
- so, if all terms are met, you can simply hand the vehicle back to the lender at the end of the agreement or pay the lump sum to own the vehicle outright – or part exchange it for another.
In some circumstances, you may be able to borrow money against equity that you have in another asset.
- let’s say, for example, that you own a property realistically valued at £200,000 and an outstanding mortgage on it of £30,000;
- that means, broadly speaking, that you have £170,000 equity in your property;
- some lenders may be prepared to advance loans, using your property as security, providing the equity exceeds the amount you are looking to borrow;
It is worth remembering that your property may be at risk if you are unable to continue the repayments against any loan secured against it.
Derby Motorhomes for motorhome finance
Thanks to the in-house expertise and experience we offer here at Derby Motorhomes, there is no need to look any further for your specialist motorhome finance. Not only are we one of the leading dealers for Auto-Sleeper motorhomes in the UK but we also aim to arrange the finance you need with any number of reputable lenders.
If your personal financial status is backed by a healthy credit history, so much the better. But even if it less than perfect – and you have experienced difficulties with borrowing or credit in the past – we may still be able to find the finance deal that puts you behind the wheel of your new motorhome in no time at all.
We are FCA registered to advise customers on all aspects of motorhome finance. Why not get in touch today to see how we can help?