Are You Wondering How Much Your RV Will Depreciate?
We will answer that, and show you how you can get the most value out of it?
Regarding a financial investment, I’ve got some bad news for you; RV’s are a famously poor investment.
It isn’t all bad news though. Thanks to the internet – there are some fantastic ways for you to offset the loss in RV value.
There are not many sizable purchases that lose their value as quickly as an RV.
Immediately after the purchase when you are driving off of the sale’s lot; you are leaving 20 percent of the value upon the pavement.
It’s an expected hit that many of those already initiated into the lifestyle have experienced.
Many people do find this financial initiation to be worth the life that it affords.
There are ways to limit the negative impact that that this purchase will have on your finances. If you time it right, you can take advantage of this loss in value to more easily slide your way into the camper lifestyle.
There are a few moments that many consider being an ideal time in an RV’s lifespan when you will want to make the purchase.
MSRP vs. Invoice
When calculating the depreciation, it is essential to know the difference between the MSRP and the invoice price.
Typically, the RV dealers will mark up the sale price by 30 to 35% with the expectation that there will be a decent amount of negotiating.
Rate of Depreciation
The depreciation is a hard number to pin down. Due to the nature of negotiation, the prices will not be at a set point across every dealer.
The average markup from the invoice price to the MSRP is roughly 33% on average, but this number is not a hard rule.
To further complicate this calculation, that 33% is the initial set price that is expected to be a starting point for negotiation. It isn’t intended to be the final cost.
There will be an additional layer of variation between the classes of RVs.
The Class A and Class C trailers are expected to diminish in value at a similar rate, but that will be different from fifth wheels, and the less expensive Class Bs and the budget class (but still fun) travel trailers.
I produced the following data from the collected depreciation reports that I have found around the internet.
The values were inconsistent because the actual value depreciation depends upon a set price which is a variable rather than a fixed number.
Also, this is an aggregated value from all of the RV classes. Use these numbers as a general guide to get a rough idea of the depreciation.
Later, you can do further research into your specific model to get a clearer picture of how quickly depreciation will pull value from the RV that interests you.
Anyways, let’s continue because a vague shape of the depreciation is better than no shape at all. With that in mind, let’s look at the averages.
Year 1: 20.50%
You will see the most drastic dip in value in the first year. Immediately following the purchase, the value of your RV will be expected to drop over 20 percent.
That may not seem like a big deal for some of the smaller trailer purchases, but those higher priced campers are going to be rather painful.
Year 2 23.25%
Barely nudges that depreciating needle. I guess buyers are still satisfied with that 20% discount that the seller oh so kindly paid for them.
Year 3: 28.33
On a hundred thousand dollar RV, the next potential owner just saved another $5,000.
Also, by the end of the second year, 30% of RV’s are expected to break down, so think about that if you are using expected depreciation to inform your potential purchase.
Year 4: 32.17
You will probably save yourself the cost of a major mechanical failure and knock those savings up to just under 40% if you look for RV just a tad bit older than this.
Year 5: 39.37%
Once again, when you are using depreciation to inform your purchase, you should be aware that the expected breakdown rate has increased to 80%.
Year 6: 42.27%
Year 7: 44.08%
Year 8 and 9: 47% – 50%
Values are inconsistent, but those are the general ranges. Nearly every RV has a major break down by this year, so purchasing after this point could help you to avoid an undesired expense.
Year 10: 56.18%
Year 15: 72.33%
Year 20: 89.50%
At the time of this article, Rooms equipped with slide outs become standard at 20 years ago. It was a revolution in RV design that you begin to find in most blueprints at the turn of the 21st century.
When you start searching for RVs that are over 20 years old, you will begin to notice that the prices bottom out around $2,000 to $3,000.
Wait for 5 to 8 Years to Save on the Depreciation
Depreciation is just a fact of ownership. However, you can let others carry the most substantial part of the burden and turn what people consider to be a disadvantage into an advantage.
By the five year mark, there will be an expected depreciation of 36.86%. When you are purchasing something as expensive as a home, that is quite the discount.
Saving on this loss in value isn’t the only benefit.
New is Less Reliable Than Old
I realize how this is counter-intuitive. When we purchase something new to get that product in the best possible condition. RV’s are an unusual case in this regard.
Why? The manufacturing process is not as reliable as you might expect with a product such as a watch or a hairdryer.
I suppose it makes sense if you think about it. An RV is a house capable of propelling itself at 70 miles per hour. That is bizarre.
With those kinds of forces at play, it isn’t surprising that some things are going to shake loose. Humans really can be quite inventive.
RV’s are expected to have significant issues within the first few years of ownership. By the 8th year, it is pretty much guaranteed.
The conventional wisdom in the community is to purchase your RV after the weak links have broken and replaced by the original owner.
At this point, the RV is considered to be in better shape than making a new purchase. Weird Right?
Ask for the Invoice Sheet
During negotiations, there are two types of power that both sides can wield. What is known and what is not known.
By asking questions and acquiring data, you are essentially gathering chess pieces that you can use to maneuver yourself into a good deal.
Asking for the invoice sheet takes one of those pieces out from the dealership and puts it into your pocket.
Not all dealerships will give you this sheet, but you can quickly look up the invoice price online on the website https://seedealercost.com/.
It is a handy tool. If you don’t find it there, I would recommend going to a forum dedicated to the brand of RVs that you are looking to purchase.
RV Depreciation and Gas Mileage
Gas Mileage doesn’t affect the selling price of RVs as drastically as it does on cars.
The engines are built to last; they have to be tough to produce the necessary torque to haul such massive weights around the country.
Typically, these engines will last far beyond 200,000 miles.
There is also a sneaky fact that many don’t consider when purchasing a “new” RV.
The depreciation is an important factor, but there is another one that must be considered. As many people know, time, as well as weather, have a way of eroding anything that isn’t constantly maintained.
While the engine should be okay, there are problems that can develop in a vehicle that has been sitting idle for too long.
For this reason, when searching for the perfect RV, you won’t want to purchase an old RV that has very low gas mileage.
You will want an RV that has a bit of time on the road to prevent what many call “Lot Rot.”
Lot Rot is responsible for several deteriorating factors. One common issue with stagnated cars is rust.
The undercarriage can take quite a hit; rust can eat through pipes and turn a crispy clean looking car into a non-starter.
The brakes can be just as bad. You may just have to replace them if they start to develop that third place copper color.
As the insides fade into dust, the paint can also start to go bad.
Time and disuse can really do a number on an RV, so even though it sounds weird, look for an RV with a few miles attached to it.
Renting Out Your RV
One thing that differentiates RVs from cars is that the loss in value of the RV is strongly tied to the year rather than the mileage.
With this inevitable decline in value, many part-time RV owners have become proactive in protecting the value of their financial investment.
When you consider the fact that most owners of RVs spend about two weeks in their precious campers, it becomes increasingly difficult to justify a second set of “house payments.”
The remaining 50 weeks of the year are leaving the camper to the possible damaging effects of lot rot.
For many, something has to be done.
Enter Outdoorsy and RVShare; these are two great services that are quickly becoming popular within the part-time camper community.
These services connect those that want to rent an RV for a short vacation and for those that are tired of losing thousands of dollars to a vehicle sitting in their driveway.
They are both toted as simple services that can entirely offset the money that is lost each year in the dwindling value of your RV.
Both of these programs have insurance plans in place that protect the rented campers from any incidental damage.
Of course, you will need to decide if it is worth the risk. Careful consideration must be made before handing over your house keys to perfect strangers.
How Much Can You Make?
According to RVShare, you can make $120 to $365 per day.
That impressive sum can be a regular occurrence with the right RV and the right renter feedback.
According to one website, you can expect to receive $5,000 to $30,000 per year in revenue.
Take the time to calculate the depreciation cost of the RV that interests you.
Part-Time RV Living – Write-Offs
There is an additional opportunity for those that are interested in renting their camper out part of the time.
The current tax laws allow owners who use their RV’s for business purposes to write off a percentage of the cost that is relative to the amount of time that the RV is used for business vs. the amount of time it is used for personal use.
To reiterate, if you use the RV for personal use 20% of the time, and to use it for business 80% of the time; you will be able to write off 80% of the RV cost.
This doesn’t just apply to the price of the RV and the interest on the monthly payments. This also applies to the running costs of the RV.
The fuel that you buy. You can write that off. Does the RV need a 300 dollar oil change? You can write that off.
You can even write-off those expensive repairs and that inevitable water damage that every camper eventually acquires.
Of course, you will still need to pay the 20% that is associated with personal use, but do you understand the value?
This is a very simple business that will demolish the costs of depreciation, and make owning an RV financially viable.