Motorhome Finance

Getting started

Holidaying or travelling around the globe in your own home on wheels provides so many fantastic opportunities for adventure and relaxation but in order to get started you need a motorhome and getting one of those is often easier said than done.

Buying your motorhome is likely to be one of the more major purchases you will make in life. The best options are not cheap but there are lots of methods you can use to finance the purchase of your new motorhome. We cover the main options in this article.

Setting Your Budget

No matter how you plan to pay for your motorhome the very first thing you need to do is set your budget.

A budget is vital as it is very easy to get caught up in the excitement of choosing a motorhome and if you don’t have a budget in mind it is easy to overstretch your finances and regret it at a later date.

There are a few major questions to consider when setting your budget and these are:

• Are you going to buy the motorhome outright or rely on finance options?
• How much can you afford per month?
• What are your finance options? I.e. Do you have a home, can you get a bank loan and can you meet the requirements most finance companies expect you to meet?
• How much deposit can you make?
• How long do you want to take any loans out over?

For most people the answer to making any large purchase such as a motorhome is a finance option of some kind. Even if this is the case you need to have a realistic idea in mind of how much you can afford to pay upfront and then on an ongoing monthly basis. Most finance providers have online calculators to give you a rough idea of how much finance costs and this is a great starting point to help you to create your budget.

Once you have decided upon your budget then you can start the fun bit – which is to look at motorhomes. Luckily deciding upon your budget early will help you to get a good idea of what your money can buy you so you can start looking for motorhomes within your budget.

Choosing Your Motorhome

This is the most exciting bit about buying your motorhome, aside from taking delivery and setting off on your first road trip. The great thing is that you should already have a good idea about your budget and you might even have decided on your finance options and this will help you make your choice.

There are many things to take into consideration when you are choosing a motorhome but the main thing that will affect your choice is your budget and chosen finance options. Here are just a few things to consider.

• Whether your budget allows for you to buy a new or used motorhome.
• The features you want your motorhome to have. You may have to make some compromises here and there. So, make sure you are armed with a list of the features you would love to have, those you must have and then those you are willing to compromise on. This will help you make your choice a great deal easier.
• If you are buying a used motorhome then you need to consider the age, mileage and condition of the vehicle.
• The size of the motorhome and the size of vehicle your driving license allows you to drive. If you have a newer licence you might be shocked at the size you are able to drive as standard without taking extra tests.

Choosing your motorhome is a whole different subject on its own so we have only covered the absolute basics here and it is well worth doing your research on this before making a purchase.

What Finance Options Do You Have

The most common method that most people finance their dream motorhome is with some sort of finance option and for good reasons. Motorhomes can be expensive – it is a worthwhile expense but it can be costly nonetheless and not many people have this much spare cash to buy one outright.

There are a few ways you can finance your motorhome such as:

Savings

If you are lucky enough to have a hefty savings pot then you might be able to cover most or even all of the costs this way. This is the cheapest option for you to choose but this might leave your savings looking a little depleted. You want to keep some money for the holidays themselves.

Bank Loans

A bank loan is often where people start when looking to make a big purchase and if you have a good relationship with your bank and a good credit history then this is an option you can consider.

Usually if your loan is agreed then you will receive a lump sum into your account to spend on your chosen purchase, in this case a motorhome. Then you pay your bank the amount borrowed plus interest at the rate agreed when you took out the loan. This is where your monthly repayment budget comes into play and you want to borrow the amount you can afford to cover each month.

Equity Release

You could consider an equity release scheme which is where you ‘sell’ part or all of your house in order to gain a lump sum of money now under the agreement that you will stay in the house and retain ownership and use until a later date. There is a bit of a catch with this one and that is that the money might seem free and easy now but it does need paying back later and this can come as a bit of a nasty shock when the time comes either for you or your relatives.

Finance

The final option we are going to talk about is finance options. These are contracts you take out with a third party finance company where you borrow the amount of money you need to make the purchase. You then agree to pay to pay it back at a monthly set amount over a certain period of time. You pay back the amount borrowed plus some interest to the company.

There are a couple of common options people can choose and its important you understand the differences before starting to talk about finance options with your motorhome dealer:

Personal Contract Plan (PCP)

This is a finance plan taken out by an individual for a vehicle, in this case we are talking about motorhomes. It is similar to a hire purchase scheme but with a major difference which is implemented to help keep the monthly costs low.

With a PCP you usually pay a lower amount on an ongoing monthly basis but you have a last payment of a much higher amount at the end of the agreed contract length. This is called a balloon payment and in most cases is less than the value of the vehicle at the time the contract ends. This is worth checking and is not a guarantee as there are many factors that can change the amount a motorhome is worth.

This balloon payment at the end can give you some options to play with and you can choose to make the final payment and own the motorhome outright, sell the motorhome at this point or simply hand the keys back to the dealer and walk away! You will need to check your contract carefully to ensure that these options are available to you as not all finance contracts are the same and your provider might have different clauses that change things.

Hire Purchase

A hire purchase agreement is similar to a PCP agreement in that you borrow the amount of money you need in order to buy the motorhome from a finance company and take out a contract over a period of time. This is usually a few years and you pay back the borrowed amount plus interest on a monthly basis. This differs from a Personal contract plan in that you don’t usually have a balloon payment at the end of your contract. However, your monthly repayments are often higher to reflect this.

With both the HP and the PCP agreement you don’t own the motorhome until you have fully paid for the contract and if you find yourself unable to make repayments then your motorhome will be taken in order to pay off the debt. This is why setting your budget right at the start of this is so important. You don’t want to overstretch yourself financially and find you can’t make the repayments.

These finance options are often the easiest way for people to make a large purchase such as a motorhome and they can work well as long as you are careful and ensure you can keep making the repayments.

What Is The Difference Between A Bank Loan And PCP or HP?

The other popular method of financing the purchase of a motorhome is with a personal loan from the bank. This is still very much an option and how possible this is will depend on many of the same things as being eligible for finance such as your credit history, your financial situation, your job and monthly income.

In theory the process is very similar. You borrow an amount you need and pay it back with monthly repayments over a certain period of time. The major difference is that with a bank loan you have the money agreed and in your bank account in full before making your purchase so you don’t need to worry about dealing with the finance side of things when making your purchase.

As far as the dealer you bought your motorhome from is aware of, the motorhome is yours outright and you won’t miss finance repayments to the finance company. However, the reality is a little more complicated than this. You might technically own the motorhome but you are still beholden to your bank and the repayments you agreed to when borrowing the money. If these repayments are missed then you are in danger of your motorhome being repossessed or potentially even your home too.

Another difference is with the deposit. If you are able to pay for the motorhome outright you don’t need to save up for a deposit – as long as your bank will cover the whole amount of the motorhome. You also don’t need to worry about mileage limits or the age of the motorhome. You have more freedom to make the choices you want within the budget but this can come with its own problems such as it can be tempting to buy an older motorhome that needs extra maintenance and work. This work can soon add up.

Things To Consider When Choosing Finance

Choosing finance is a popular choice with a fair number of motorhome owners choosing this option to purchase their motorhome. It can be a great choice to make but you do need to take a few things into consideration before signing the agreement.

• Your deposit is an important consideration. Some finance packages may not require it but many will and the amount may depend on the overall price of the motorhome you choose. Obviously paying a high deposit works in your favour if you can afford it. The more you pay upfront the less you have to pay each month and in interest.
• The age and condition of the motorhome will come into consideration – especially if you are taking out a personal contract plan where the final payment is dependent on the worth of the motorhome at the end of the contract.
• Mileage is something to consider. Some contracts might have stipulations on how much mileage can be added each year to the motorhome.
• When looking into finance make sure you look into your APR. The interest rate makes a big difference to your plan and the overall costs. You also need to look into whether these interest rates are fixed or variable and for how long.
• Insurance is an important consideration when buying a motorhome but it is also something to take into account when taking out your finance too. Check your policy to see if there are any insurance stipulations in the contract.
• It is great to have your finance sorted out upfront but it is worth checking with your motorhome dealer too. They may only deal with one or two finance companies which will mean you have to go through those companies to finance your motorhome. This isn’t necessarily a bad thing as dealers can often negotiate interest rates and deals you might not have access to.
• Make sure you are happy with the length of the loan and the monthly repayments. You might have to choose between higher repayments over a shorter period of time versus lower payments but over a longer period of time.
• Make sure you ask about any arrangement fees or administration costs and whether these are included or an extra payment you need to make.
• Finally check your monthly repayment amounts and that you are happy you will be able to afford this for the life of the contract. The consequences of not keeping up repayments are losing your motorhome and potentially much worse including your assets and losing your good credit history.

This is a snapshot of some of the things you need to take into consideration when taking out a finance package and you will need to make sure you do your research fully before signing on the dotted line. Don’t be afraid to ask your motorhome dealer questions to make sure you understand what you are agreeing to fully before signing.

Benefits Of Choosing A Finance Package

It might seem daunting to take out finance, and for good reason! You are agreeing to a contract that means paying out monthly for a long period of time. However it isn’t all bad. There are a few benefits to choosing finance to buy your motorhome.

These benefits will vary from finance company to finance company and even from package to package so make sure you are fully aware of the package you have chosen and all it’s benefits and pitfalls.

• The most obvious benefit is being able to spread the cost which can make a dream suddenly a lot closer to reality.
• Finance can make buying your motorhome a lot more affordable. Not many people can afford to buy a motorhome in full and upfront. Many of us can afford a monthly repayment.
• If you are buying new then you can often add in those extras to make your motorhome extra special and luxurious into the deal. You might even be able to get them included in the finance package.
• You can get some great finance deals with some great interest rates if you go through motorhome dealers and finance providers.
• These finance companies can usually make quick decisions on whether to lend to you or not which means you can be driving your new motorhome on holiday much sooner than you thought.

The Pitfalls And Problems You Can Find When Choosing Finance

As with anything, choosing finance can bring problems as well as benefits and here are just a few things to be aware of when choosing finance to buy your motorhome. This is not an exhaustive list but it does cover a few of the main points of finance contracts. Always make sure you do your research on a finance company and the deal they are offering before signing.

• Making your repayments is of the utmost importance. The consequences for missing payments is the effect this has on your credit history and losing the motorhome you worked so hard to buy in the first place. In worst case scenarios racking up debt can cause you to lose your home and other assets too. It is worth having a plan in place in regards to how you are going to pay your monthly installments. You also need to  consider what you will do if you are unable to make a monthly payment.
• With finance comes interest and if you aren’t careful then this can be difficult. Luckily most finance companies are reputable and shouldn’t tie you in to unreasonable contracts. If you do find yourself having trouble you can always contact your local citizens advice for help and advice or talk to the Financial Ombudsman.
• Sometimes extra fees can be hidden into your package. These can be things like arrangement fees and extra insurances. So make sure you know exactly what you are paying for and whether these are included in the finance package or not.

Choosing Your Finance Company

There are a lot of options these days when it comes to financing and buying a motorhome but you do need to check with your motorhome dealer. They often have a preferred finance company they deal with and can offer you special deals you wouldn’t normally have access to.

However, it is worthwhile to be aware of what is available and what types of finance agreements you can take out before going to look for your motorhome. This is why we have listed below a few of the main companies for you to take a look at. The examples listed were as accurate as possible at the time of writing but may have changed so make sure you go and check yourself to find the best options for you.

Black Horse Finance

Black Horse offers both hire purchase and personal contract purchase options for you to choose from and has an online finance calculator that you can use to calculate your options. We did a quick calculation for an example.

With a monthly budget of £350 as a repayment for 60 months with an interest rate of 5% you would be able to borrow £18,596 and would repay a  total of £21,000.

Hitachi Finance

Hitachi is a well known finance company offering finance for caravans or motorhomes and advertise interest rates as low as 3.9%. These rates will be subject to the dealer and your options available at the time.

We have done a quick calculation based on the same as above. Borrowing a total of £18,500 over 60 months with a 3.9% interest rate would mean you pay back £20,356 and have a monthly repayment of £339.28.

Auto Finance Online

Auto Finance Online offers a package that might be suitable even if you have a lower credit rating but the cost of this is a higher interest rate than Hitachi at 6.9% and this is dependent on your credit history. If you have a bad credit history this can rise to 29.9%APR.

We ran the same figures through their online calculator and borrowing the same amount of £18,500 and assumed a good credit history. This gives you an average interest rate of 8.9% APR and will cost a total of £22,803. The calculator doesn’t give you a monthly repayment cost and you would have to apply to find out more details.

Pegasus Finance

Pegasus Finance advertises itself as the UK’s number one in motorhome finance and has rates from 5.9% and you can borrow up to £350,000 if you need. Their finance calculator works on an average illustrative interest rate of 7.9% APR. To borrow £18,000 at this rate you would pay a monthly repayment of £364.11 and a total of £21,846.

These examples can only provide an overview snapshot of the types of figures involved in purchasing a motorhome through finance and the rate will vary depending on your credit history, your deposit and many other factors. Your motorhome dealer should be able to help you and might even be able to offer you packages through themselves. If you are not applying through a dealer then you can apply for quotes for any of the above finance companies and they will be able to advise you fully on the requirements you need to meet to take out finance with them.

Buying a motorhome is an exciting process so just make sure you have your plans, budget and finance options researched and in place. Then you will be soon hitting the road in your very own motorhome for the first holiday of many.