When buying a new or used motorhome, the price can be a sticking point. You might be daydreaming about jaunts across the UK and Europe and whiling away hours browsing the web looking for a model that suits your needs, but if you can’t afford to make the purchase, you’ll never hit the road.
We’ve all been there. This is an issue that first-time buyers and seasoned motorhome enthusiasts all face. A motorhome is a huge investment, and whilst there are many ways to help lower the cost of your purchase (part-exchanging for example), the best way to make buying a motorhome more attainable, is to buy it on finance.
In this guide you’ll find out what you need to know about buying your first or next motorhome on finance. By the end of this guide you’ll be clued up on what motorhome finance is and the options available, and the things to consider before buying a motorhome on finance.
What is Motorhome Finance?
Motorhome finance offers you the chance to make buying a motorhome model that you ordinarily wouldn’t be able to purchase more affordable. It’s similar to mortgaging a home. You pay a small chunk up front in the form of a deposit, before spreading the rest of the cost out over a period of time in manageable monthly instalments.
It is worth adding here, that buying a motorhome outright is the cheapest option. That’s because if you buy on finance, you will have to pay interest on the loan making your total outlay larger. However, for most people, buying a motorhome outright is impossible. This means finance is the best way for those individuals to get their hands on a motorhome and begin their adventures!
However, when it comes to finance, there are a variety of options available, which offer different perks and drawbacks. That’s why it’s important to understand which finance options are available to you!
Motorhome Finance Options
Personal Contract Purchase (PCP)
PCP is often the best option for making your motorhome more affordable. When buying a motorhome on PCP finance, you will pay an initial deposit up front, which is then followed by a number of monthly payments, which pay back a proportion of the loan amount that you have already agreed to.
Then, once the agreed repayments are complete, you will be required to pay one more, larger, one-off final payment. This last payment helps you clear the remaining balance of the loan. After paying this, you will own the motorhome outright.
Up until you have made the final payment, you will not technically own the motorhome. It’s also worth mentioning that the low monthly payments mean that you may end up paying more in interest over the term of the loan compared to other finance options, such as the hire purchase option.
When creating your PCP finance plan, everything is flexible and negotiable. That means you can work with the dealer to ensure you have a deposit, monthly payment plan, final payment, and length of agreement that suits you.
Hire purchase (HP)
HP finance deals allow you to pay a deposit up front, similar to a PCP agreement, however, with HP you then pay off the rest of the balance and the interest in a set of pre-agreed, equal monthly payments. This means it is a similar deal to PCP, but does not include the large fee payment at the end of the deal.
Repayments on a HP finance deal are often higher than the repayments on other types of finance deals. It’s important to know, however, that your repayments do not change until your agreement has ended, so they won’t increase in price.
This means that as long as you continue with your repayments, you will always know exactly how much you’re paying and for how long. Once the agreement comes to an end, and you’ve paid off the balance, you will own the motorhome outright.
With HP, you’re also able to make your monthly payments smaller by paying a bigger deposit upfront.
Personal Contract Hire (PCH)
PCH offers you a third finance option, to help make having a motorhome more realistic. However, PCH is more like leasing a motorhome, than owning one. This is because you are paying to hire the motorhome as opposed to taking out a loan to buy it.
With PCH, you will pay a deposit upfront, before paying pre-agreed, set monthly instalments. The price of these instalments will often be lower than with other finance agreements.
Once the PCH repayments come to an end, you will simply return the motorhome back to the dealership.
Should I Buy A New or Used Motorhome on Finance?
Most motorhome dealers will offer you the chance to purchase a new or used motorhome on finance. Obviously, if you opt for a used model, you’ll spend less money, making it more affordable if you have a smaller budget. This is because the loan required to purchase the model will be much lower than if you go for a new model. However, if you opt for a new model, you will have the freedom to customise the model more and you’ll have no mileage to worry about.
It’s worth also adding that in some cases you may even be able to secure a finance loan to purchase a caravan when buying from a private seller. Not all finance providers can offer this, but some will. This means you should spend some time doing your research if you do want to buy privately.
Benefits of Buying a Motorhome on Finance
There are many reasons people opt to purchase a motorhome on finance. We thought we would break down some of the key benefits that might help you decide whether you want to purchase on finance or not.
- Budget-friendly: We’ve already explained that due to interest, some finance deals end up costing you more in the long-term than just buying the motorhome outright. However, most people can’t afford to do that, so finance helps people stretch their budget further. Without finance, many people simply wouldn’t be able to buy a motorhome.
- Increase your choices: By increasing your budget, finance also helps widen your options. By having more money to spend, you’re able to choose from a larger, more varied pool of models. Without finance, you may have to compromise, and buy a model that doesn’t suit your needs. However, by utilising finance, and having more money available to spend, you might just get your dream motorhome, with all the features you desire.
- Enjoy your motorhome sooner: Finance offers you the chance to get your hands on a motorhome without having to first spend a period of time saving up for the purchase. It helps everyday people realise their dream of owning a motorhome, without the added stress of having to find vast sums of money to make it happen.
- Financial flexibility: Finance deals are incredibly varied, and you are often able to personalise your deal to suit your needs and budget. That means you can work with a broker or dealer to choose the length of time it takes to pay back the loan, as well as the initial deposit amount, and the amount of each repayment.
- Part-exchange is still an option: If you already own a motorhome and it’s still in relatively good condition, many motorhome dealerships will allow you to include that model as part of your down payment when buying a motorhome on finance. This will reduce the size of your initial deposit, making your purchase even more affordable.
Things to Consider When Applying for Motorhome Finance
If you are interested in buying a motorhome on finance, then there are a few things that you will want to consider before making your purchase. Here are a few tips that we thought we’d offer up, to help you out along the way.
Shop around for the right package for you
It’s important that you shop around when looking for finance packages. Don’t just settle on the first one you find. You want to be 100% sure that you’re fully aware of what is available, and able to arrange a package that perfectly suits your budget and needs.
It’s always a good idea to weigh up the positives and negatives of all finance packages, before settling on one. Do you want larger monthly payments, but a shorter term? Do you want to pay off the loan over a longer period, but have a smaller monthly outlay? Do you want to own the motorhome outright at the end of the deal or are you happy to hand it back. These are all questions that you will want to know the answer to, before signing on the dotted line.
Understand the full cost of your finance option
It is important that we reiterate that the lowest monthly payment plan is not always the best one to go for when choosing motorhome finance deals. You may find a deal where the monthly payments are higher, but over the length of the deal, the total outlay is far less. Obviously some people are not able to afford higher monthly payments, but it’s always a good idea to fully understand the full cost of the deal, including interest, before you sign.
When liaising with finance brokers or motorhome dealers, it’s always a good idea to find out the ‘total amount payable’. This is the definitive, total amount of money that you will pay throughout your finance agreement. Once you know this, it will allow you to make a more enlightened choice when selecting a deal.
Understand your credit rating
A poor credit rating can limit your loan options, which means it's crucial to know your credit rating before applying for finance. Being aware of your credit rating will save you time by preventing applications for unsuitable loans. To improve your credit rating, you will want to consider the following steps:
- Pay your accounts on time and in full each month to demonstrate reliability to lenders.
- Avoid accumulating excessive debt.
- Register on the electoral roll at your current address.
- Cancel any unused credit cards.
- Check your credit report for errors and report any inaccuracies promptly (this is extremely important!)
Make sure you tell the truth
It may be tempting to lie on a motorhome finance application. Some people will want to exaggerate certain things in order to try to swing the application in their favour. However, this is a very bad idea and can cause you lots of issues down the line.
If they discover you have lied, you may end up having your application declined and this may even affect your credit score. Or, even more seriously, you may even end up committing credit fraud. Which is a very serious offence.
Don’t be afraid to ask
As with most credit applications, applying for motorhome finance may seem confusing at first. That’s why it is important that you ask questions about anything you’re not sure of.
You must be sure that you fully understand everything the dealer is telling you. It’s also a good idea, if you’re feeling a bit overwhelmed, to ask the dealer to put everything in writing, so you can take it home and read it at your own pace.
Don’t forget, dealers and finance providers are usually happy to help, so don’t feel embarrassed asking questions!
And if you’re really stuck, you can always ask for professional advice from the people at the Money Advice Service and Citizens Advice Bureau.
Spidersnet