The freedom of travel… It’s the great Australian dream.
But the caravan or RV you choose will ultimately depend on your needs as well as your budget.
And financing could take one to seven years depending on your financial capacity.
Here, we seek the expertise of a leading industry financier, Credit One, in analysing the various options available for caravan and RV broker finance.
Credit One’s general manager Jarred Lembo says the best options (ie, secured caravan loan, caravan chattel mortgage, personal loan etc.) depend on the scenario.
“We explain what are the options and do terms and rates differ,” he says.
Credit One also has access to a full suite of lenders. This gives the client a choice based on what best suits their needs (eg, if the client is planning to pay the loan out early, Credit One can go to a lender that has lower early termination fees).
Lembo said clients are given comparative choice; thus advised of all options available to them, from secured loans to unsecured loans, consumer and commercial options.
“With relationships between our teams and the lenders, we have the option to discuss each individual scenario in detail to get the best answer,” he said.
“And we also offer tailored packages – clients may wish to add insurances, warranty, etc. which, through business partnerships, we are able to package together for the client with one repayment.”
So what exactly are these finance options, and how do they work?
SECURED CARAVAN LOAN
With a secured caravan loan, the caravan is used as security. An amount is lent that is either equal to, less than or greater than the value of the caravan. Under a secured caravan loan the financier advances funds to the customer to purchase a caravan.
The customer takes ownership of the vehicle at the time of purchase, and the financier takes an interest in the caravan as security for the loan.
Once the contract is completed, the financier lifts their interest in the caravan, giving the customer clear title.
CARAVAN ASSET LEASE
A caravan asset lease enables the customer to have the use of their caravan and the benefits of ownership, while the financier retains actual ownership of the caravan.
In this arrangement, a financier purchases the caravan on behalf of the customer, who then pays the financier a fixed monthly lease rental for the term of the lease.
At the end of the lease the customer can either pay a residual on the lease and take ownership of the caravan, sell the truck or re-finance the residual and continue the lease.
COMMERCIAL HIRE PURCHASE
Commercial hire purchase (CHP or HP) is also known as a corporate hire purchase, hire purchase or offer to hire.
Under a CHP arrangement the financier agrees to purchase the caravan on your behalf, and then hire it back to you over a set term.
You have use of the caravan for the term of the contract, but you are not the owner.
You take full ownership of the caravan at the end of the term when the total price of the vehicle (minus any residual) and the interest charges have been paid in full.
A chattel mortgage is a commercial loan product where the customer takes ownership of the caravan at the time of purchase.
Under a caravan chattel mortgage the financier advances funds to the customer to purchase a caravan, and the customer takes ownership at the time of purchase.
The financier then takes a mortgage over the caravan as security for the loan.
Once the contract is completed, the charge is removed which then gives the customer clear title to the caravan.
Finance brokerages such as Credit One specialise in loans Australia-wide for all types of recreational vehicles including caravans, campervans, camper trailers and motorhomes.
Different options allow you to manage your finances well. Depending on your plans, you can pay off your loan early, have a varying interest rate so you can take advantage of rate cuts, or choose to pay a lower monthly repayment with a lump sum at the end of the loan term.
Fixed Interest Rate – With this type of loan, your monthly payment is fixed for the entire term of the loan. This is perfect for those who are budget-conscious and want to know exactly what they need to pay month after month.
Variable Interest Rate – Means that your repayments could go up or down depending on the current interest rates. Lenders may have different ways in implementing rate cuts and increases so make sure to ask about this if you are considering a variable interest rate for your caravan loan.
Balloon Payment – This arrangement means you pay a lump sum at the end of the loan term and you also have the option to refinance the lump sum in case you do not have ready money for it. One of the main advantages of having a balloon payment is that your monthly repayments are low.
Early Loan Termination – If you have extra money, you may want to pay off your loan early to save on interest payments and to free yourself from the burden of paying month after month. Lenders may charge an early termination fee though so make sure to ask about this option if early loan termination is a possibility for you.
Additional Payments – This is one of the best features many of our lender partners provide. When you pay more every month you can actually save on your interest payments and pay off the caravan loan early.
Common requirements for caravan financing often include identification; proof of income; bank statements; and credit record.
In forthcoming issues of Caravan World, we’ll cover the following caravan finance topics:
Securing the deal: How do I know I’m getting the best rate when it comes to RV finance?
Insuring your financed RV: How, where, why and who?
Ready to buy: Get your finance pre-approved before you hit the shows for the best deal!
The full feature appeared in Caravan World #571. Subscribe today for the latest caravan reviews and news every month!