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Old 12-15-2014, 10:07 PM   #11
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Lots of good feedback has been provided. Doing the math can be helpful to determine what would work best for you. One thing I quickly found out when I was buying my little TT is that an all cash offer didn't get me a better deal since the dealer wouldn't be getting their additional portion had I financed it.
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Old 12-16-2014, 12:55 AM   #12
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Here is a simple way to look at what benefit there is if you finance or pay cash.

First, lets look at paying cash; Your money is sitting in an investment, either a bank day to day account, mutual funds, etc. You need to look at the interest income, capital gains, etc. not earned from the money over the term of the loan, that is one number. That number is more available than you think, just look at last years tax return and pull that number, asthat is what you can expect to lose x the number of years of your loan.

Then compare that number with the total interest paid on the amount borrowed for the same period. That number is simple to determine also. Take the total payments of the loan, minus the principle and that is your second number.

That tells you what your cost of money is for your purchase. Two varibles enter into this equation, income tax not paid on earned interest, because you used cash to make the purchase. And, interest expense allowed on the loan which is deductable from your income in the years paid. That is minor in the equation when just comparing the two numbers.

Remember, that your not a big shot because the gov't allows you to deduct the interest, thats just allowed under the current tax laws.

Save the visit to your tax preparer, they will do what I just explained, if their any good, and possibly charge you too. Tax attorneys are worthless, they only fleece your pockets, if your the guy with the return that is being audited, not should I do this or that.

It's not hard, and you really should know how to do this, after all it is your money!
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Old 12-16-2014, 08:54 AM   #13
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I have a different outlook. My father in law purchased an expensive car and shortly after died. Instead of making the large payments, and his wife didn't drive any more, called the bank and told them he died and to come and pick up the car which they did (no more payments). If we should ever upgrade to an expensive motor home that is what I will also do.
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Old 12-16-2014, 09:34 AM   #14
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One important factor to consider is the amortization schedule on a loan. You pay the bulk of the interest up front. Therefore, if you plan to keep the RV long term and have your money making more on interest, it might be more beneficial to finance. If you don't typically keep things long term and likely won't have the RV more than, say, 3-5 years, you'd need to be making significantly more through investments to make it feasible to borrow.
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Old 12-17-2014, 11:43 PM   #15
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Originally Posted by dustman_stx View Post
One important factor to consider is the amortization schedule on a loan. You pay the bulk of the interest up front. Therefore, if you plan to keep the RV long term and have your money making more on interest, it might be more beneficial to finance. If you don't typically keep things long term and likely won't have the RV more than, say, 3-5 years, you'd need to be making significantly more through investments to make it feasible to borrow.
True for a "mortgage" on real estate, not true for a loan on an RV. One caveat would be an early payoff penalty, but even those type of loans are not to common.
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Old 12-18-2014, 09:37 AM   #16
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True for a "mortgage" on real estate, not true for a loan on an RV. One caveat would be an early payoff penalty, but even those type of loans are not to common.
Then I guess bankrate doesn't know what they are doing. I can go to bankrate.com and run an amortization table on the auto loan calculator page that clearly shows heavier interest paid early on just like a mortgage does. To my knowledge, RV loans are calculated just like car loans. Does bankrate.com have it wrong????

Auto loan calculator - Bankrate.com
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Old 12-18-2014, 10:26 AM   #17
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No...bankrate has it right.

For most (I'd say "any" but there may be outliers) loans with a fixed interest rate, a fixed term, and a fixed payment, the early payments will be more heavily weighted toward interest while the later payments will be more heavily weighted toward principal.

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Old 12-18-2014, 10:53 AM   #18
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The interest charged is based on current balance X interest rate. That is why you pay more $$ in interest at the beginning of the loan.


This is another reason why not to borrow money, you pay mostly interest early in the loan and very little principle, i.e. your money goes to the bankers.
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Old 12-18-2014, 11:15 AM   #19
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I should have been more clear, when I mentioned the part about paying a loan off early and the penalty for that. It goes into the type of loan you originally agreed to when making your RV purchase. Here is a more in depth explanation of my point. So, be informed and ask your lender!

Interest Calculated by ‘Simple Interest’ Method:
Just as the name suggest, this method is the simplest among all. It is not only simple as with the respect of its calculation but also with the respect of the amount of interest it determines.

This is basically a method whereby interest is calculated by applying interest rate on the principle in every period. This one gives the lowest amount of interest.

‘Compound Interest’ Method:
This particular methodology of determining interest over the loan you take may prove to be a little perplexing. Not only the method of calculation seems difficult, the amount of interest may also be in excess to that calculated in the prior method. Fundamentally, this method includes all the previous accumulated interest in the principle before the interest rate is applied to it, for calculating interest in any specific period.

‘Rule of 78’: Another Method

This method is another common one used out there for the calculation of interest. It, basically, goes by the principle that more interest should be charged to the earlier periods than to the later periods. This is meant to penalize those who tend to pay back interest earlier than it is scheduled to be paid.

This method involves calculating interest as per the weights allocated to each specific period. Allocation of weights occur on a reverse basis, that is to say, earlier periods are assigned bigger weights and later periods, lesser. Under this rule, essentially, if someone plans to pay back loan exactly in the scheduled amount of time, he’ll end up paying exactly as much amount of interest as he will otherwise pay under ‘Simple Interest’ method.

This is the important part;

There are two basic types of auto loans: simple interest loans and pre-computed loans.

With a pre-computed loan, the interest owed over the life of the loan is calculated using a standard amortization table. Once you sign on the dotted line for this type of loan, you're obligated to pay back principal plus the full amount of interest that will accrue over the entire term of the loan.

To sum up, interest on a pre-computed loan is calculated in advance and you're on the hook for every penny of it when you sign.

In contrast, with a simple-interest loan you're charged interest each day based on the balance you owe. So the quicker you pay down your balance the less interest you pay. A simple interest loan with no prepayment penalties rewards customers who pay ahead.

Pay ahead with a pre-computed loan that applies the "Rule of 78s" method to prepayments and you'll be slammed with a penalty, disguised as a rebate.

Hope that helps. What you need to take away from this is ask the important questions. Also, as a general rule, credit unions are more in your corner so to speak, and are generally more "friendly" because your a member.

You can do all the Bankrate calculations you want, but it's really all about whats burried in that "fine print" of the loan agreement.
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Old 12-18-2014, 11:30 AM   #20
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Originally Posted by dustman_stx View Post
Then I guess bankrate doesn't know what they are doing. I can go to bankrate.com and run an amortization table on the auto loan calculator page that clearly shows heavier interest paid early on just like a mortgage does. To my knowledge, RV loans are calculated just like car loans. Does bankrate.com have it wrong????

Auto loan calculator - Bankrate.com
Nope, they have it correct for the loan type in their program, the problem is the assuption by the borrower at the time the loan is cast.
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