When interest rates and prices for RVs rise, it’s not always easy to buy a rig and hit the road. Some market trends may cause shoppers to consider alternative financing options for camper purchases. One trendy choice is rent-to-own RV payment plans. However, there are some things you should know before signing your name on the dotted line.
We think you must take the time to make an informed financial decision when considering any significant purchase. So let’s dive in and see if these payment programs are right for you!
Why Can Getting an RV Loan Be Challenging?
Getting an RV loan can be almost as challenging as buying a house. Lenders see RVs as recreational or luxury purchases. As a result, the requirements and expectations for applicants are much stricter than opening a credit card or purchasing a vehicle. Any negative marks on your credit history will be more significant when applying for an RV loan.
Generally, applicants need at least a 660 credit score to get approved for an RV loan. In addition, lenders want to see that you have a healthy and stable income that will allow you to repay the loan. Lenders may be cautious about approving you if you already have high debt on your credit.
If you plan to finance a large purchase in the future, it’s a good idea to prepare your credit. Pay off any outstanding debts that you can and make your payments on time. Lenders don’t want to see missed payments or debts sent to collections on your credit history. Do yourself a favor and take the time to give yourself the best chance of approval.
Pro Tip: If your credit score is good, use these tips on How to Finance Your Camper With an RV Loan.
What Does Rent-To-Own Mean?
Rent-to-own is a payment agreement where an individual rents an item for a specified period. A portion of the monthly payment goes toward the purchase price. At the end of the loan agreement, the customer can purchase the item at a reduced price based on the market value of the item.
The customer is typically under no obligation to purchase the item and can often return it without penalty. However, they’d lose any money they paid to the lender during the process. In addition, this isn’t always an option for every agreement.
It’s crucial to carefully review the terms of any rent-to-own agreement before signing. These agreements can vary significantly and may include certain obligations or restrictions. It’s also a good idea to compare the cost of the rent-to-own RV to the price of purchasing a similar RV outright. Then you can determine which option is more cost-effective in the long run.
How Do You Find an RV Rent-To-Own Program?
Unfortunately, rent-to-own programs aren’t the norm for RV financing. As a result, there aren’t nearly as many places to look for these types of programs. However, you may find them available through RV dealership or private owner financing. Let’s examine each option to help you find one of these programs.
RV dealerships often have a plethora of lenders that they use to fund transactions. If you’re looking for a rent-to-own program, it’s best to inquire about this at the start of your shopping. If the dealer doesn’t offer this program, you’re wasting time shopping there. However, the dealer may provide some resources for financial institutions offering these programs.
Pro Tip: Before you head to the dealership to shop for an RV, make sure you know all of the Pros, the Cons, and the Truth About RV Dealerships.
Private Owner Financing
People always buy and sell things independently, including RVs. While many private RV sellers may be cautious about offering a rent-to-own option for selling their RV, it’s not always impossible. The buyer and seller would likely want to ensure they have done their due diligence to protect themselves. However, a carefully-constructed legal contract between the two parties could be the perfect option.
Unfortunately, these take a lot of work to find. Most private sellers will likely be unwilling to take the risk. In addition, when they’re selling an item like a camper or other vehicle, they want a clean break. They don’t want to deal with the item years later.
What Are the Benefits of RV Rent-To-Own Programs?
There are some reasons why RV rent-to-own programs are beneficial to buyers. Let’s look at some of these deals’ benefits and why you might consider them.
Helpful if You Have Lower Than Average Credit
Mistakes happen, and not everyone has a perfect credit score. If you have a lower credit score, these programs can allow you to get into an RV now instead of waiting for years. RV loans can be incredibly challenging to acquire, especially if your credit history is less than stellar. This may be the only option for individuals struggling to find a lender for standard financing options.
Part of the Monthly Payment Is Put Toward the Purchase Price
You reduce the overall purchase price each month you make a payment. Depending on the length of the agreement, you could shave off thousands of dollars from the end purchase price. For shoppers struggling to get standard financing, they may get financing for a lower amount down the road. Rent to own allows them to lower the overall amount they would be financing. However, you do end up spending more overall with the additional rental fees.
Lower Down Payment
Standard financing options can require a consumer to pay at least 10% of the purchase price as a down payment. However, these rent-to-own RV programs often have much lower down payment requirements.
Those using this option can put $0 down when closing the deal. This is an appealing option for those trying to get into a rig quickly and may need more time to save thousands of dollars. The programs eliminate the massive hurdle standing in the way of many buyers.
Terms Can Be Negotiable
Rent-to-own programs often have much more negotiable terms than standard financing. Depending on who you’re dealing with, you can negotiate almost every part of the loan. How much of the payment goes toward the purchase price, the loan length, and the penalties for backing out of the deal are usually negotiable. Brush up on your negotiation skills, or you could have a bad deal.
You Own the RV at the End of the Lease
One of the most significant benefits of these programs is that you can own the RV at the end of the lease. Once you meet the terms of the lease, the camper is yours. These programs can allow many people the opportunity to own an RV that they wouldn’t have otherwise. If you dream of enjoying RV life, this option is worth considering.
What Are the Disadvantages of an RV Rent-To-Own Program?
While these programs have some benefits, there are also some vast disadvantages. A charming sales team member isn’t likely to tell you this side of the deal. Let’s look at some of the disadvantages of these options.
Higher Cost Overall
While these deals may have some short-term benefits, they can bite you in the rear in the long haul. You’ll pay higher interest rates and fees than standard financing options. Some of the worst rent-to-own deals we’ve seen are borderline criminal. Consumers can pay month after month and make a minimal amount of progress. The financier watches as they cash in on the deal.
Terms Vary Drastically Depending on the Program
There’s no consistency regarding these types of deals. The terms used for each sale vary from one customer to the next. The only thing consistent about the terms is that the lender makes a tremendous amount of money on the deal. You must read the fine print to avoid making a financial mistake. Some lenders can make a rotten deal sound sweet to unsuspecting consumers.
You Must Make Every Payment
Some rent-to-own programs have strict rules and requirements about payments. The lender may have the right to repossess the item after the first missed payment. Mistakes happen occasionally, or your financial situation may change quickly. If that’s the case, they could send the agreement to collections in the blink of an eye and have a repo man haul your camper away.
Do All RV Dealerships Offer Rent-To-Own Programs?
Rent-to-own programs are not typically available at most RV dealerships. You’ll likely have to search for a specialized lending institution for RV loans and rent-to-own companies. However, while most dealers don’t offer these programs, some do. Take the time to research to get the best deal possible and find a trusted company to fund your purchase.
Pro Tip: Buying your RV is only the beginning. Owning and maintaining one can also be expensive. Make sure you can afford the upkeep before you consider a rent-to-own program.
Are Rent-To-Own RV Programs Worth It?
Rent-to-own RV programs can help get more people into RVing. However, we don’t recommend them to most shoppers. Campers lose their value incredibly fast and are worth a fraction of their original price in only a few short years. RVing isn’t likely the best option if you’re struggling with money in the first place. You may dig yourself into a deeper hole financially. Some deals may even be nearly impossible to get out of without destroying your credit.
Would you risk making a rent-to-own deal for an RV? Tell us your thoughts in the comments!
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