How Does RV Financing Work? What are Dealership Fees? And Why Do Some Dealers Charge Them?
3 Great Questions.
Let’s tackle them in that order, as the second two are obviously related. And because my answer to those ones is likely going to upset a few people; those that charge them, and those that have paid them before.
How Does RV Financing Work?
When you purchase an RV from the Dealership and have the Financing arrangements made through the Dealer, the loan is written on what’s called a Conditional Sales Contract Agreement.
This is often the preferred type of Loan by consumers for a few reasons:
- The RV (your purchase) is the only security needed against the loan.
Sometimes financing directly through your branch requires additional security on the loan, such as your home (done on a HELOC), or they may ask for another vehicle or asset for added security on the loan. The Dealership arranges the loan for you through the exact same Bank, but uses the Conditional Sales Contract.
- The loan is typically a 5yr term, and can be amortized up to 20yrs on a new unit; making the payment much lower than a branch type loan.
Some people reading this might be saying; “Yeah, BUT I don’t want to take 20yrs to pay the trailer off!”
Who does? And how certain are you that you will actually keep the exact same trailer for 20yrs? (Not that there’s anything wrong with that…) But If I could have foreseen all the changes in my life and situations over the past 20 years, well you get my point.
This type of loan isn’t about the 20 years anyways. It’s about you having all the options, and controlling your own budget; while Life happens and situations change over time.
So keep a few things in mind:
On a Conditional Sales Contract you are allowed to make extra payments or lump sums at any time without a penalty. This means flexibility to a lot of people, and gives you the freedom to manage your own finances in a way that works best for you. Some people work in a field that pays them more at certain times of the year, so they make extra payments when they are earning more, and then make the minimum monthly payment when they aren’t bringing home as much. This is just one example, but there are many situations when people want to pay a minimum amount only… like maybe winter months when they’re not using it as much; or December/January during the Holiday Season while the presents are being paid off.
You can also pay out the loan at any time without a penalty. So, if in a few months or years from now you decide to sell it, trade it in, or just happen to see a better type of loan at that time, you can take advantage of it. It’s your choice and option to do so.
I can’t honestly answer the question: is this the best type of RV Loan for me?, because I don’t know you or your situation. Over the past 12 years in the industry though I’ve seen a lot of different situations. This includes people financing through the Dealer, when they could have otherwise just paid cash. I believe they did so for the same reasons many people do, (and because this type of loan is only available through the Dealer at the time of purchase) they want the option to have it Financed this way now, and the option to change their mind in the future.
What are Dealership Fees? And Why Do Some Dealers Charge Them?
Yep. I said it. And some people will be upset that I did.
Now let me be clear, I’m not taking a shot at other Dealers just because we don’t happen to charge any fees at our Dealership. I don’t know what their Business model is, or how they manage they’re expenses or pay plans. But for the most part, and in pretty much every case I’ve known over the years; the Fees that are charged to Customers are collected as a profit. They are not normally collected to be paid to some Lender.
Fees such as “Administration fees” or “Financing Fees” are often collected in the Finance office to help the Dealership profit, and/or supplement the pay plan for those employees doing the work. Now maybe there is a benefit somewhere in your purchase to offset having to pay the Dealer a fee. That’s possible, though some Dealers may charge anywhere from $300-$1200 in fees, so hopefully it’s a big benefit for you.
Like I said, I don’t know how another Company runs its Business. All I’m saying is if you’re going to pay Fees, you’re entitled to know what they’re for. I’m just suggesting you ask the question and understand them before they start adding up.
There is just something about paying a Fee to a Business; to have them complete paperwork; or use a computer; to sell me a product I’m buying from them. Imagine if McDonalds advertised a burger for $1. I went through the drive-through and ordered it off the menu showing it as $1. But when I got to the window they then asked me to pay $1.25; to cover the time an employee spent ringing my order into the till. Hey if the same burger was $2 across the street maybe I’m ahead of the game anyways??.. but that’s not really the point.
Hopefully I’ve been able to answer these 3 questions without creating a bunch more questions, but if you have ANY other questions we want to help answer them too. Check out our Finance Page for some Frequently Asked Questions, and information on how Rates & Down Payments work. From that page you can also apply for Pre-Approval with no obligation or deposit required, if you just want to see how a payment would work for you.