For most of us, a motorhome is amongst the most expensive purchases we will ever make or consider; topped only by our homes. Finding the best way for you to fund your motorhome purchase can save you a significant amount of money.
There are many ways our customers fund their motorhome purchases – from cash to personal loans. We take a look at the pros and cons for some of the most common methods of accessing funds.
Motorhome Cash Purchase
Pro: You own the van outright immediately, and you won’t be paying any additional fees for financing.
Con: Not everyone has access to that amount of cash. If your cash is tied up in the van, it can’t be invested in other ways that may offer you a return.
Pro: Mortgage rates are still at an all time low. Provided you make arrangements to payback the extra funds quickly this can be a cost-effective way of sourcing funds.
Con: The value of your estate is reduced (at least until you pay back the money). The Bank of England has hinted that interest rates will rise, so if you are on a variable rate mortgage you can expect the amount of interest you’re paying to rise. If you are going to pursue this approach, you may need to consider switching to a fixed rate to lock in a low interest rate while you can.
Pro: Major lenders are offering good rates at the moment, so this could be a good option if you have a good credit history. Banks will often offer preferential rates for customers, so talk with your bank about their rates as well as the major comparison sites.
Con: You’ll need a good credit history. The total amount you pay will vary according to the rate you secure and the term of the loan (how fast you pay it back). Rates do change, so secure your loan before committing.
Hire Purchase (HP) Finance
Pro: For a loan to cover the value of a motorhome purchase, HP Finance is often easier to access than an unsecured personal loan. Provided you have kept up payments, you will own the motorhome outright at the end of the term of the loan.
Con: You may need to budget for a sizeable deposit. The motorhome is not yours until you make the final payment on the loan, so can be repossessed if you don’t keep up payments.
Personal Contract Purchase (PCP) Finance
Pro: PCP monthly payments are often cheaper than they would be on a HP Finance deal because a significant proportion of the motorhome’s value is deferred to the optional final payment.
Con: You will have a sizeable fee to pay at the end of the agreement, if you want to keep the motorhome. However, if you decide not to purchase the motorhome at the end of the agreement, you can return the motorhome to the dealer. This can be a positive because you can upgrade to a newer model without having to worry about selling the original motorhome. However, you will need to ensure that the returned vehicle meets the conditions agreed at the start of the term about its final condition e.g. mileage, bodywork condition, etc.
Pension Lump Sum
Pro: Driving off into the sunset as you retire from your job is a dream many of us share. Putting some of your lump sum towards a motorhome purchase is a good way to make this happen. A motorhome tends to depreciate much more slowly than other vehicles tend to, so you will still have some significant equity to cash in when you are ready to sell the motorhome. And you don’t need to worry about making loan payments while you’re away.
Con: You could be taking out a significant proportion of your pension fund, so you will need to speak with a financial advisor to make sure this is a viable option to support your retirement plans.
If you would like to discuss any of these options, we suggest you book an appointment with our sales manager, Gareth Wing, who will be happy to talk you through your options.
Call us to book an appointment with Gareth on: 01204 882211
Please be aware that interest rates can go up as well as down.
This article is not intended to offer advice about which financing option is right for you and TMC Motorhomes can accept no responsibility for any decisions you make about how to finance the purchase of your motorhome.
If you need to access independent financial advice, please contact a qualified financial advisor: https://www.moneysavingexpert.com/savings/best-financial-advisers