The Yearly Costs Of Owning An RV (Part 1 of 2)

Recreation Vehicles

October 7, 2009

105

October 7, 2009

There are a number of items that must be considered when determining the yearly cost of buying a new RV. We hear so much about fuel costs, whether it is a motorized or a tow vehicle. But, fuel really is peanuts in most cases. Likewise, maintenance and repairs, while not necessarily cheap, are relatively small in the big picture. The financial purchase, whether it is a cash deal or involves a finance contract, will almost certainly out weigh both fuel and repair costs. Then of course there is insurance, licensing, and taxes, if applicable.

But, none of these expenses are the largest cost. In fact, in many cases, the greatest ownership expense may well exceed the total of all of them. That cost is annual depreciation, or the depleting value of the vehicle over time. This has even more impact as it accumulates over time and becomes due upon trade-in or at time of selling.

So let’s look at each and see how they compare.

Fuel Costs: Towing a heavy trailer or powering a self propelled RV requires a lot of energy. Depending on the weight and aerodynamics of the unit, this energy need may be very high. This energy is fed by fuel, either gasoline or diesel. Fuel mileage figures can range from as low as 4.5 to upwards of 14 M.P.G. Based on the distance driven yearly by the average RV owner this would translate to about 322 to 1,000 gallons. Assuming a $2.50 a gallon price, the costs would be in the area of $805 to $2,500.

Maintenance and Repairs: A zero dollar repair cost should be realized during at least the first year or as long as the vehicle is under full warranty. After this period the costs can easily vary from nothing to several hundred dollars per year. Repair and component replacement generally should fall within the fore mentioned range for several years, however this may raise substantially when the vehicle is in its fifth to seventh year of service. Maintenance, on the other hand, costs from day one. Generally, a motorized vehicle will require some additional service during the first year, such as an earlier than normal oil change, transmission filter replacement, etc. This would probably average $200 to $700 per year with the occasional spike for an air intake filter, air dryer filter, etc. The replacements of tires and batteries are considered maintenance items providing they do not fail abruptly. Both normally need replacing in the five to seven year window. This need for replacement is due to aging and sidewall cracking as far as the tires are concerned and the batteries becoming unable to perform as they should.

Purchase Price: Whether a purchase is made involving a financial loan or handled in cash, there is a yearly cost. The cost, if financing, is the interest paid during the year that did not go towards the principle, or outstanding balance. Additionally, there may be other one-time charges like an application fee, administration charge, etc. The interest rate and total amount borrowed determines the amount that this money will cost you per year. Cash purchases do not involve paying out interest, but in contrast, are about loss of income interest. Basically, if that purchase was not made that money could be earning interest in a bank GIC or similar investment instrument.

Insurance, Licensing & Taxes: These expenses will vary depending on where you live and the cost and type of your RV. To give you an idea how greatly these can be skewed by location, two identical Newmar Essex coaches, one in the U.S. and one in Canada. The U.S. unit’s premium was about $1,600 per year while the Canadian look-a-like paid around $5,500. Taxes and licensing leave little option short of registering your unit out of state. This has been done in the past. The majority of those that registered their RV’s out of state elect Montana. Generally this involves forming an L.L.C. in that state to facilitate the owning body. Legal advice is recommended should you wish to pursue this avenue. There may be issues you need to be aware of or other possible limitation or restrictions.

Oddly enough, regardless of the type, whether towed of motorized, all RV’s conform to a similar age to percentage rate deprecation. This also holds true for all price points from entry level to high line. The following is a depreciation schedule that is experienced in the market place today.

Year	Depreciation
1*	15%*
2	10%
3	6%
4	6%
5	6%
6	5%
7	5%
8	4%
9	4%
10	3%
11	3%
12	2%

Note: The depreciation shown in year one is adjusted to reflect the typical dealer discounts of plus 20% from list. If it is calculated based on the suggested list price, the first year depreciation would be near 35%.

Remember, this is only a guide line, in many cases the real purchase price may be difficult to determine if a trade was involved. Therefore to get an approximate depreciated value of an RV, it may be easier to calculate the depreciation from the original suggested list price. Using this method, just substitute 35% for year one. Now, keep in mind, values may vary higher or lower based on many factors. These factors include, but are not limited to, popularity of the make/model, current market demand, vehicle condition, geographic sales area, economic conditions, and much more.

Well, do the math. No one said the cost of owning an RV was cheap. Next week, we will examine practical and theoretical ways that may reduce some of these costs including the high rate of normal depreciation.

Until Next Week – Lug_Nut – Peter Mercer