Buying an RV or a Boat?
Recently I provided some insights to NerdWallet regarding buying a boat or RV, as a CERTIFIED FINANCIAL PLANNER™ and former camper owner. And then to top it off, my family and I drove 7 hours to visit some friends this Memorial Day weekend and I noticed it’s the unofficial start to the camping season. We probably passed 100+ campers on the way! I wanted to take the opportunity if this is on your mind to think through a few more points that aren’t fully outlined in the NerdWallet article.
Be careful of falling in love with the IDEA of these summer toys. You may think you’ll be at the lake or camp site every weekend, but the reality is – life happens. You’ll have a friend’s BBQ, kids sports event, church, or a number of other activities that make it to where you can’t use it nearly as much as you thought. Even if you have a healthy supply of paid time off, the reality is you probably can’t take 3 day weekends all summer long. Anyone I know that’s considering buying a camper, I encourage them to rent one a few times to see if they really like it as much as they think they will. The same can happen with boats. It’s always fun the first time and you say you’ll do it every weekend, but let’s see if that feeling lasts on the 4th or 5th rental. It’s a relatively cheap way to see if you’re actually into this kind of thing vs buying and being stuck with a payment.
These are depreciating assets (goes down in value over time) and technically that means they are not great to borrow on! Don’t think you’ll sell it for what you owe, especially if you’re only paying the minimum down payment. You’re very likely to lose money on the deal when you take into consideration excise taxes on the purchase. Let’s not forget that most people can likely finance a camper for 5-15 years. So if someone is payment conscious, it will seem better to go buy a new one where they can finance over a longer term (smaller payment) vs buy it used and the bank will only lend out maybe 5 years. This also means you should hope you’re buying the right model for the foreseeable future. There are a ton of models of boats and campers. Once you buy, you’ll have your list of “I wish it just had x”.
What kind of vehicle are you towing with? Just because you read that your truck can tow 10,000 pounds doesn’t mean it should. You need to do your research to understand the impact tongue weight has on your vehicle. You’ll have to make the decision to find a camper or boat that your current vehicle can pull or now you’re talking about upgrading vehicles AND buying the toy. Remember, the truck dealership wants to sell you a truck and the camper dealership wants to sell you a camper. You are the person in the middle trying to see if the two will actually work together.
There are more costs than just a potential payment. Even if you pay cash you need to account for:
How will you store it? (and is there a waiting list)
Covered storage is more expensive (in my area that’s $100-$150 a spot)
Uncovered may be around $50+
At home (if you have an HOA, is it allowed?)
Insurance & Registration Cost
Depends on the toy we are talking about, but figure on another $50-100 a month
Camp site (if you can find one)
Many states have gone to a reservation system that are booked out a year in advance for some of the best spots.
Typically costs are $25-$30 a day for the site if you want to hook up to electric, water and plumbing.
Gas
Yes, I know everyone is talking about gas prices anyway, but when pulling a camper or boat, you’re talking 8-10 miles per gallon. How far are you towing? This can be a significant cost very quickly with today’s prices.
Repair
Something will go wrong, just count on it. If you’re not handy, that means you’re taking it to the dealer, getting in line, and hoping they can get parts back in a reasonable amount of time. You could miss several weeks or months of using your boat or camper due to this issue
Given someone is still interested at this point, I would now interject – how does this impact your long-term financial plan. Between the payment, gas, storage and use fees, you’re very likely talking $500 a month for a camper, or $6,000 per year. As a CFP® professional, I’m not looking to talk clients out of spending their money on things they enjoy and are capable of affording. In fact, that’s exactly how I want them to use their money. We all like shiny objects and day dreaming of what life would be like if we were skiing behind the boat or in the forest in the camper. However when we act on those things too quickly, they can be detrimental to our future finances. Let’s assume that the individual is 35 and they instead set aside $6,000 each year for three years and it grew at 6%, then added nothing to it and it continued to grow 6% a year until 65, that would turn into roughly $92,000 at retirement. Not too bad! Let’s play more and say they continued to save $6,000 per year from 35 to 65 at 6% they would have roughly $474,000. Even better, what if that’s in your 401k where you may get a match and we are talking more!
If I’m talking to someone who hasn’t prepared for the future and is wanting to spend that kind of money, I’m probably trying to point more to that $474,000 number and preparing for an emergency fund or retirement first. I love the quote, I think attributed to Lincoln, “Discipline is just choosing between what you want now and what you want most”. These kinds of decisions are exactly that. Or if someone already has an emergency fund and is preparing for retirement, I’ll then try to understand how this goal fits into the list in terms of prioritization. It’s not wrong to buy a camper or boat if you’re financially set on the more important things, but it’s important to note, it’s not just a payment on the toy itself.
Toys are fun (and sometimes a headache)! They are even more fun when you are for sure committed to them, financially in the right place in life and it doesn’t disrupt your overall financial plan.