The average person can become a multi-millionaire and create a secure retirement. Buying toys like recreational vehicles, motorcycles, and other stuff is a sure way NOT to become financially independent. For most people who like to go camping, renting instead of purchasing is smarter. If you go to a RV dealer, the salesman will likely tell you that a RV is an investment. That is absolutely false – a RV is a depreciating asset.
Years ago one of my customers, John (not his real name), and I had a discussion on how to create personal wealth. John was about to retire at the age of 49 and was a multi-millionaire. He had worked at the same new car dealership for 30 years, starting out washing cars. Over the years he advanced and eventually became the director of service. We were discussing how most people in car dealerships lived week-to-week. Even though most made pretty good money, they were strapped with car payments, RV payments, and other consumer debt. John told me that he enjoyed camping, an occasional motorcycle trip with friends, and other activities. When he went camping or motorcycling with his friends, he always had the newest camper or motorcycle – but on Monday morning he dropped off his toy at the place he rented it from. Genius!
The Real Cost of Buying a RV
One thing many people do not consider when purchasing an RV is the cost and inconvenience of maintenance, repairs, and storage. RV service departments are incredibly inconvenient – usually you can’t drop it off and pick it up the next day – leaving a RV at a dealership for 30 days or more to get repairs or maintenance done is not uncommon. One can, like I do, perform their own work. But I have a master mechanic’s set of tools and the skill to do my own work. In addition, it is against the city ordinance to store my trailer at my home, so I have to pay to store it.
Buying a Typical Travel Trailer
You can purchase a nice travel trail like our 2014 Milan RSL26 for around $25,000 if you are a competent negotiator. Nowadays the average buyer finances an RV for 10 years. Those with average credit are now paying over 6% interest. The table below shows that with a 20% down payment and financing $22,500, the monthly payment will be $261.13 and the total paid at the end of 10 years is over $31,000. That’s over $9,000 in interest!
Cost of Ownership
But this is not the true cost of ownership. At a minimum, one needs to add in the cost of insurance and maintenance. Other factors might include yearly DMV fees if you live in a People’s Socialist State such as California, monthly storage fees, etc.
At a minimum, the monthly cost of ownership, assuming you financed your rig in the scenario above is almost $400 per month. Over 10 years you will spend over $50,000 for that $25,000 trailer.
Cost to Rent
Over the years, I have seen a lot of rental motorhomes in campgrounds from Cruise America. But it is rare to see a rental travel trailer. Here’s a link to a service that matches local trailer owners with potential renters.
I did some comparison shopping for renting a travel trailer similar to ours that were available in my local area. (The closest Cruise America is almost 60 miles away and they don’t rent travel trailers).
Most of the rentals included insurance.
Now how does this compare to owning your own travel trailer?
Ah, much cheaper. Now, I haven’t made any calculations on what the rental rate might be in 9 or 10 years (inflation, you know). But in 9 or 10 years you will be able to rent a fairly new trailer versus towing your old 9 or 10 year old trailer. Additionally, the daily rate isn’t much less than what it costs to rent a Class C motorhome, which usually cost more than double the cost of a travel trailer. Why is this? Because there are many more motorhomes available to rent and competition drives the prices down. If more travel trailers become available for rental, those rates will go down. Now let’s do the same exercise for a motorhome rental from Cruise America.
The Real Cost of Buying a 25 Foot Class C Motorhome
The most common Cruise America motorhomes I see are 25’ Class C units. The lower priced rigs list for around $80,000. However if you are a really, really good negotiator, you should be able to buy one for around $55,000. Using the same financing terms as the travel trailer example, we come up with this: with a 20% down payment and financing $49,500, the monthly payment will be $574.48 and the total paid at the end of 10 years is almost $69,000. That’s almost $20,000 in interest!
Cost of Ownership
Again, the monthly payment is not the true cost of ownership.
At a minimum, the monthly cost of ownership, assuming you financed your rig in the scenario above is almost $600 per month. Over 10 years you will spend over $95,000 for that $55,000 motorhome.
Cost to Rent
I got these prices for a 25’ Class C motorhome from the Cruise America website for the location closest to our home.
Now how does this compare to owning your own Class C motorhome?
Again this is for a late model motorhome. What are your chances of a breakdown in a 10 year old motorhome you own, versus a Cruise America rental? The savings for renting is significant.
What if You Invested All the Cost of Ownership Money?
Instead of buying an RV, instead invest in mutual funds. Since 1923 when the S&P 500 was created, the return on investment has averaged over 12% per year. So what if you took the RV down payment and opened an account and each month take the amount you would spend on an RV and invested it. Instead of over 12% ROI, we’ll be conservative and project a 10% return.
Typical Travel Trailer
If you remember, the 10 year cost of ownership was almost $52,000. Look what you would have if you invested all that money instead:
Yes, you will have almost doubled your money in 10 years. Hallelujah!
How about a motorhome?
25 Foot Class C Motorhome
If you remember, the 10 year cost of ownership was over $95,000. Look what you would have if you invested all that money instead:
That $95,000 will have grown to $174,000 !!!!!
So Why Don’t We Rent?
First of all, we paid cash for our travel trailer. Consumer debt the worst financial decision one can make.
Secondly, we have owned our trailer for almost five years and have camped over 500 nights in it.
The cost to have rented a trailer for that many nights would have been over $65,000. With all the furnishings, utensils, supplies, upgrades, maintenance, and repairs we have done (more money than our Business Case Model shows), we have spent less than half of what renting would have cost us. Plus, as often as we camp, it is much more convenient to own, even though we have to store it away from.
Everyone’s situation is different. If you are thinking about buying a RV, create your own business case. BTW, if you know me and have my email address, send me a note and I’ll send you a copy of the Excel spreadsheet I built to do the comparisons.
Disclosure: this post contains a link to outdoorsy.com. I have not used their services, so I cannot comment on the customer experience. If you click the link and rent an RV, popupbackpacker.com will receive a commission to help pay to maintain this blog.