How to finance a new motorhome – your FAQs answered

Motorhomes are a massively popular form of leisure in the UK.

Some are super-luxurious and on the whole, no new motorhome can probably be described as ‘low cost’.  They’re wonderful vehicles and can save you a fortune in holiday accommodation over the years – but you’ll have to buy one first.

Here are some FAQs on the subject of motorhome finance.

What do I need to get a loan for a motorhome?

Loans, whatever their type, are typically advanced based upon a potential lender’s/provider’s assessment of the risks involved in your proposal.

Broadly speaking, your application will normally be subject to a credit history check and a review of the affordability of your borrowing based upon your income and other outgoing financial commitments.

These checks may be more or less demanding, depending upon the nature of the finance option you’re considering.

Isn’t this all just borrowing to buy the motorhome?

Yes and no.

Going to a lender and asking for a large amount of cash to be put into your bank account so that you can go and buy a motorhome might today, in the new economic reality, be unlikely to result in a successful outcome for the vast majority of applicants.

That approach, to purchase your motorhome outright, might be considered to be pure ‘borrowing’.

More likely to succeed would be an application seeking to purchase a new motorhome through the auspices of either HP (Hire Purchase) or leasing/lease-purchase.

These are perhaps the most common ways of looking for specialist motorhome finance.

What’s the difference between these approaches?

If you have the cash, when you purchase your motorhome it becomes yours immediately.

In the case of:

  • hire purchase, somebody buys the vehicle and you then pay them a monthly repayment over the specified period of the contract.  The vehicle becomes yours only at the end of that term;
  • leasing, the vehicle is purchased by the leasing company and then leased back to you in return for a monthly payment. At the end of the lease, you can return the vehicle or in some cases, buy it outright – often at a preferential rate. Note that in most cases, you are committed to the lease for a specified period of time.

Which is the cheapest option?

That’s impossible to say. So much depends upon your financial circumstances and how you plan to use the vehicle. Some options may also give you more room to manoeuvre than others.

Remember that even a cash purchase, which is theoretically the cheapest on paper, isn’t necessarily so if considered in the broader context. For example, if your cash is all tied up in a motorhome then it’s not available for something else – unless you sell your beloved vehicle!

That is sometimes referred to as the ‘lost opportunity cost’ and it comes about when you have an opportunity to do something but can’t because your money is all tied up.

A specialist can look at your position and the available options and then comment further.

Can I always buy whatever vehicle I want?

Different finance companies may have different views on that one.

In general terms, you will probably see that they’re very flexible. They may not have any great preferences for or prejudices against, a given marque.  What they will be looking at though is the proposed cost of the motorhome versus its real trade value.

In principle, they may not be willing to purchase/lease or finance a vehicle if the amount the dealership is asking for is higher than they believe is sensible for the motorhome concerned.

Some finance providers may have a wide dealership network and they may be able to source the vehicle more cost-attractively than you yourself could in your local showroom.

 

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