How is Financing a Bowlus Different From Financing a Car?

How is Financing a Bowlus Different From Financing a Car?

While automobiles are considered necessities, recreational vehicles are not, so RV loans are considered “recreational” loans. As a result, there is very little consistency between automobile financing and RV financing regardless of whether you are financing a motorhome, travel trailer, or Sprinter van conversion. This article is to provide you an overview. However, it is always best to do your research before you head out and start looking so that you have a full understanding of how RV financing works.

Since you are financing a non-necessity and for up to 25 years, the lender (bank or credit union) may hold you to a higher credit score and profile when financing a camper. Even with a score over 700 and a “clean” credit profile free of collections, bankruptcy and the like are going to get loans at a “reasonable” rate that doesn’t resemble what you may get if you are financing an automobile or home.

What is a reasonable rate? Generally, the interest rate for an RV is much higher than an auto loan, so shop around. Although a recreational vehicle may provide you with a good rate, you may find better rates with your personal bank or credit union. They know you and, as a result, are able to look at your total financial picture.

Realize that you will pay a premium on your recreational vehicle loan that you won’t on your car loans. Now despite all this negative news, there is some positive news, which is you will likely negotiate a long term loan up to 25 years for your RV. This helps to reduce your monthly payments. However, realize no other camper, motorhome, or aluminum travel trailer other than a Bowlus will last for 25 years, so consider how that may impact your financial planning. Additionally, with a recreational loan, you can write off the interest as most recreational vehicles are considered self-contained homes if they have a bathroom and kitchen. Always consult your financial planner or accountant when making these types of decisions to understand if they are the right decision for you.

The last financial consideration is additionally, under Internal Revenue Code Section 179, a business can deduct the cost of “tangible personal property” used in that trade or business up to the amount of the expense limitation. In 2018, that expense limitation is $1,000,000. There are some additional taxable income and total assets placed in service limitations that would apply at the business level that should be reviewed to make sure a business is qualified to take the full deduction. Additionally, under Internal Revenue Code Section 168, certain qualified “tangible personal property” used in a trade or business, can take 100% bonus depreciation on property placed in service after September 27, 2017. In both situations, a Bowlus , including the On The Road and Endless Highways models, qualifies as tangible personal property, and it could be completely expensed in the business if an asset used in the trade or business. It is up to the business to determine if the business use qualifies in their individual business. Please note, Bowlus is not an accountancy firm and does not give taxation or financial advice. However, this may be useful in your planning, and you may wish to consult your accountant and financial advisor to see how this section of the IRS Code may apply to you.

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