You're on the hunt for an awesome pre-owned RV or trailer, and you're thinking about getting a loan instead of paying for it all at once. Good news - in Canada, you've got a ton of great options to choose from. It might even feel like there are too many choices, and it's hard to know which dealers or lenders are giving you the straight scoop. No worries, though. This article is here to help you get a jumpstart, so you can snag that RV loan with total confidence.
The answer to this depends on you and your unique situation. Financing your home-on-wheels can lighten the load of making a big purchase all at once, while also helping you build credit with the right lenders. If you've got the cash handy and it won't mess with your everyday life, it's usually a good idea to skip the debt. But a lot of folks aren't in that boat, and they're better off making budget-friendly payments with the same end goal in mind. That said, it's super important to make sure your lender is legit. Keep reading for more info on that topic below.
What Credit Score Do I Need to Finance an RV or Camper in Canada?
In Canada, you've got options to finance an RV or trailer with just about any credit score. Actually, this number isn't the only thing lenders look at when deciding whether to approve your loan. Even folks with high credit scores might be caught off guard by an approval that's not at a prime rate. Good credit or not-so-good credit, it's super important to get a second opinion so you can score the best rates out there. Keep an eye out for dealer brokers who work with multiple lenders – your best bet is finding one that limits the number of credit checks they do and doesn't make extra cash by selling you a higher interest rate.
Secured Loan vs Unsecured Loan: What's the Difference?
Like we mentioned earlier, there's a whole bunch of lending options for snagging an RV or trailer loan. If you're a top-notch customer with amazing credit, your best bet is to look for an unsecured loan. Canada's biggest banks usually offer these as either a line of credit or a cash loan. While this option is awesome, it's also pretty tough to get since you need near-perfect credit and not much debt. Remember, even though this loan doesn't use your RV or trailer as collateral, they might still have the right to take it back if you default – just like they could with any of your assets.
Most of the time, RV and trailer loans are offered as secured loans, where the lender uses the financed asset as collateral. One cool thing about secured loans is that lenders often give you a pre-approval, so you know your rates, limits, and terms before you start. Another plus for buyers is that most secured loans need the unit to have a proper book valuation to get approved. If the RV or trailer doesn't meet the book value, they might ask for a down payment or even suggest you find another option. Keep in mind that book value isn't the same as market value – we'll explain the difference below.
Book Value versus Market Value Explained
It's actually pretty straightforward. The "Blue Book" sets a consistent valuation for every year, make, and model of an RV or trailer, going back decades. Insurance companies and lenders use these valuations as a basic guideline for coverage. They usually break it down into three categories: "clean" (low miles and/or no damage), "average" (some miles or maybe minor damage), and "rough" (high miles or noticeable flaws). Market prices might go up and down, but blue book values stay steady with depreciation every quarter. Blue book value doesn't include any upgrades or extras, and it's almost always lower than the real market value.
Now, "market value" is the number that actually reflects current prices based on similar units. This price can change a lot as demand and availability go up or down, and it usually factors in upgrades and add-ons. That said, most lenders don't see these upgrades as a big deal and often don't consider labor costs at all when figuring out the value. The current "market value" of an RV or trailer is usually determined by the lender or insurer at the moment you ask about it. You can get a good idea on book value by looking within a few model years of your exact RV Canada-wide on KIJIJI. Still, this is only a basis for reference and may not project exactly to what a lender marks the value.
What are the Differences Between an RV Loan and other Loans such as an Automobile Loan?
When folks think about financing an RV or trailer, they often compare it to their experience with financing a car. Sure, there's some overlap between the two, but there are also some pretty big differences. First and foremost, an RV or trailer isn't seen as "essential" for daily life, especially in Canada, where its use might be more seasonal. This added risk means lenders worry that people might not take care of their RVs or trailers as well as they would their everyday cars. This extra risk is the main reason interest rates for RV and trailer loans are usually 3-5% higher at the lowest point, with the exception of some manufacturer financing options, which we'll explain below.
Manufacturer Rates Explained: The Pros and Cons
Manufacturer financing is sometimes offered by OEM chain dealerships, usually for brand-new RVs or trailers, as a way to lure people into financing directly with them. The rates are often better than what you'd find through private lenders, and they might throw in extras like cashback or no payments for a while.
Pros of manufacturer financing:
- If you're set on buying new, you'll probably find the best rates.
- You could score some sweet deals like cash back, zero down, or no-payment plans.
- You might be able to haggle the rate. Some OEMs give their sales team incentives to sell at a higher rate. If the salesperson thinks you're about to walk away, they might reel you in with an even better "one-time" approval.
Cons of manufacturer financing:
- Your choices are limited to that specific manufacturer and usually only new units.
- You still have to qualify for the best rates. If you don't, you could end up with a worse rate than what a private lender would've given you. Most OEM dealers won't offer alternatives outside of the manufacturer's financing unless you're totally turned down by their program.
- Sales pressure can be intense since the team might get bonuses for selling you at a higher rate. They might also have quotas to meet, which can lead to pushy sales tactics.
Avoiding Lenders who Charge Early Payment Penalties
We totally recommend sticking with reputable lenders who make it super clear in their agreement that they accept early payments and won't hit you with penalties for paying off your loan early. You'll usually find this info in your agreement under a "prepayment" section.
Leasing vs. Financing an RV or Trailer: Which is the Better Option?
You might be wondering if leasing is a better option than financing. In our opinion, leases can be kind of tricky, so we'd suggest staying away from them. The main perks of leasing a vehicle are the ability to trade it in and the tax breaks for Canadian businesses. Unfortunately, in Canada, it's tough to justify an RV or trailer as a work necessity. Some sketchy lending companies might lock customers into terms with really bad consequences. They might make you pay all the interest up front and add it to the sales price, or have steep prepayment penalties that make trading in for a newer model a no-go. Other downsides include strict mileage limits, customization restrictions, and terms that leave you owing money at the end.
When you finance an RV or trailer, you basically co-own it with the lender until you've paid it off. Once you've paid off the loan and the balance is zero, the lien is released and you become the sole owner. In the meantime, you're usually free to make upgrades and customizations as long as they add value. These loans also don't come with mileage restrictions. In Canada, trustworthy lenders always let you make early payments, so you can save big on interest. Plus, when you crunch the numbers, you might find out you're not actually saving as much as you thought. Check out this video that explains the math behind leasing vs. buying a vehicle
Do Co-Signers Help to Get Better Loan Options?
Sometimes, having a co-signer can help you snag approval from a lender who would've turned you down otherwise. But, in most cases, if you're already approved, adding a co-signer won't help you get a better rate. That's because lenders usually base their offers on the worst credit situation. Plus, for secured RV or trailer loans in Canada, most lenders only let a common-law partner or spouse be added as a co-applicant. This is because the RV or trailer is used as collateral for the loan. If they need to repossess it, things get complicated when it's co-owned by multiple people, compared to being owned by partners in a common-law or married relationship.
Can a Loan Boost My Credit Score?
Some RV or trailer lenders in Canada do report to credit bureaus like Equifax or TransUnion. With these lenders, making regular, on-time payments can give your credit score a lift, as long as there aren't other factors dragging it down. Keep in mind that your score might dip a little at first when you take out a loan, since your debt ratio goes up. Talk to the lender or dealer you're working with to find out how their lenders report to credit bureaus.
In Conclusion ...
Keeping these tips in mind, along with some good ol' common sense, will help make sure you're scoring the best loan deal out there. Don't forget to read your contracts and get the lowdown on your payment amount, how often you'll pay, and how long your loan will last. And be in the know about any fees, since lenders and dealers usually charge admin or doc fees. Do your homework and ask all the questions you need to feel good about the terms. Just remember, it's the dealer or lender's job to make sure you're confident in your loan choice.