FAQ 15: Should I Buy an RV in Cash or Finance It?
Consult your bank account.
Over the past two years, I've helped quite a few people choose the best adventure rigs for their travel plans. One common question is whether they should pay in cash. The answer might seem obvious at first. Of course, if you have the money, you should spend it on your adventure rig. Right?
But that's not the best solution for all situations.
Here's how I paid for my adventure setup.
Before I started my RV journey, I bought my FJ Cruiser in cash. I had initially saved up this money for a down payment on a house. But, once I decided full-time travel was better than a tiny container home, I could only think about RVs and rooftop tents.
I have no regrets whatsoever.
Samson was worth every penny ― and still is.
I financed my RV with a $4,000 down payment a month later. Aside from the fact that I didn't have more cash to pay for the second half of my setup, I had good reasons for financing my RV:
Financing allowed me to hold on to the cash I did have left while paying just $180 monthly for my "mortgage."
Financing the RV made it possible for me to keep an installment loan on my credit report, which is critical to maintaining a high score.
You can typically deduct the interest you pay on your mortgage as a second home during tax time, and I took full advantage of this.
Should you pay for your rig with cash?
When you can pay in cash, you have more leverage when hunting for an RV. You can also purchase older and custom rigs that creditors might otherwise not finance. Examples include RVs over 20 years old, DIY van builds, and school buses that get converted to skoolies.
However, let's say you have $30,000 in cash. You already have a capable truck, so you spend $28,000 on a travel trailer big enough for you and your two dogs. The first few months are great, but a few months into full-time travel, you blow your transmission or your trailer disconnects while towing, and there's damage.
Do you have enough cash left to pay for the damages and repairs?
What about the cost of towing the trailer and/or the truck to a new location?
Can you afford changes to your plans and a potential hotel stay?
If you plan to pay in cash, ensure you have enough left to address concerns like these. Otherwise, consider financing the full or partial cost of your travel setup.
Should you pay for your rig by financing it?
I've already shared why I chose to finance one-half of my travel setup. Here are some instances when financing might make sense for you too:
You don't have enough cash on hand to cover the cost of your adventure rig and potential emergencies.
You know you may need the cash you have later on to cover other costs, such as medical care or business expenses.
You are comfortable choosing an adventure setup that a creditor will finance, such as a standard RV.
You plan to choose a travel rig that will meet the IRS's requirements for a tax deduction as a second home.
You intend to pay off the loan early to avoid high interest and eliminate the monthly payments.
You understand that some creditors will be 100% opposed to paying for full-time RVing, and you are prepared to shop around.
You have good to excellent credit and believe you will get a reasonable interest rate for your loan.
Ultimately, the best approach to paying for a rig is to choose what you can afford. My original budget was $65,000. I only had $25,000 in cash, which meant financing at least $40,000. I'm glad I reduced my budget to less than $40,000 and that I repaid my RV loan as soon as possible.
What option will you choose?
Alexis Chateau | Free Ramen is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
If you’re a paid subscriber, you’ll receive another email next week. It covers the following:
How to get cash to pay for your adventure setup
What kind of loans to get to finance your rig
What credit score you should aim for
Quick tips for boosting your score in 6 months
Alternative sources of credit if you’re denied
Happy New Year!