The Rapid Depreciation of New RVs: Why Buying Used is a Better Option
The allure of hitting the open road and exploring new places is a dream for many. Recreational vehicles (RVs) have become a popular choice for adventure seekers and travel enthusiasts, but there's an important financial aspect to consider: the depreciation of RVs. Buying a brand-new RV may seem enticing, but it's essential to understand that these vehicles lose their value quickly. In this blog, we'll explore the reasons behind the rapid depreciation of new RVs and why opting for a used RV might be the smarter financial move.
Immediate Depreciation
Recently I had a customer who wanted us to buy their used travel trailer. We love the opportunity to buy quality used rvs, however it doesn’t always make sense. When you buy new you are taking an immediate hit in the value. If you are not planning on keeping your new RV for years to come, you strongly need to consider buying a used RV.
Just like automobiles, RVs start losing value as soon as they're driven off the lot. This phenomenon is often referred to as "immediate depreciation." New RVs can lose up to 20-30% of their value within the first year of ownership, and around 50% or more within the first three to five years. This steep decline in value can be a harsh reality for those who thought they were making a wise investment in a new RV.
Upfront Costs
New RVs can come with a significantly higher initial purchase price compared to their used counterparts. This means that right from the start, you're investing a lot more capital, and the rapid depreciation only exacerbates the financial loss.
Maintenance Costs
New RVs aren't immune to wear and tear. In fact, during the first few years of ownership, you might experience more issues than with a used RV due to manufacturing defects or other unforeseen problems. Repair and maintenance costs can quickly add up and further contribute to the overall expense of owning a new RV.
Technology Advances
RV technology evolves rapidly. Buying a new RV with all the latest features may seem like a good idea, but those features can quickly become outdated as new innovations emerge. This can negatively impact the resale value of your RV in the future. In contrast, a used RV might already have a more reasonable price point and still offer the essential features for an enjoyable trip.
Depreciation's Impact on Financing
Financing a new RV often means borrowing a larger amount of money. When the RV depreciates quickly, you may find yourself in a situation where you owe more on the loan than the RV is worth. This is known as being "upside down" on your loan, and it can be financially crippling.
Insurance Costs
New RVs are more expensive to insure, which further increases your overall cost of ownership. Insurance providers often calculate premiums based on the RV's initial purchase price, so the higher the value, the more you'll pay in insurance premiums.
Why Buying Used is a Better Option
Now that we've explored the pitfalls of buying a new RV let's discuss why buying a used RV can be a more financially sound choice:
Lower Purchase Price: Used RVs have already undergone significant depreciation, making them more affordable than their new counterparts. You can often find a gently used RV that has been well-maintained for a fraction of the cost of a new one.
Slower Depreciation: Used RVs depreciate at a slower rate compared to new ones. You won't experience the steep value drop that new RV owners face in the first few years of ownership.
Proven Reliability: Used RVs with a few years under their belt have a track record that you can research. This allows you to make a more informed decision about the RV's reliability and performance.
Reduced Insurance Costs: As the RV's value is lower, insurance premiums are also more affordable, which can save you money in the long run.
Established Resale Value: Used RVs tend to have a more stable resale value. If you decide to sell or trade-in your RV down the road, you're less likely to incur substantial losses.
Conclusion
While the idea of owning a shiny, brand-new RV might be appealing, the rapid depreciation associated with new RVs is a substantial financial drawback. If you're looking to maximize your investment and have a more cost-effective RV experience, buying a used RV is often the smarter choice. You can enjoy the open road, explore new places, and embark on countless adventures without the financial burden of immediate depreciation that comes with a new RV. So, when it comes to hitting the road in style and comfort, remember that sometimes, older is wiser.