Sorry to break the news, but the moment you drive your new RV out of the sale lot, its depreciation clock starts ticking.
Yes, we all refer to a travel trailer as a "house on wheels" but it doesn't exactly appreciate as your regular brick house will. Not to frighten you or anything, but travel trailers shouldn't be used as an investment plan.
But there's good news; the rate at which your travel trailer depreciates can be slowed down. We bet you are curious to find out why, then stay with us.
What Are The Factors That Contribute To Travel Trailer Depreciation?
As an RV owner, you need to be familiar with RV depreciation rates before committing to any model of the travel trailer.
Buying an RV comes with ongoing costs, and the depreciation cost is definitely one of them. RVs lose their value in real-time, and while there are some factors that can help slow down the rate of depreciation, most times, it's often out of our power.
Let's go over some rv depreciation factors that might interest you;
The first thing many buyers look out for is the quality of the exterior of the RV. While it's true that it's impossible to sell your RV for its original purchase price when in good condition, its resale value can be almost just as good.
However, if the exterior of a travel trailer is significantly damaged, you might sell it for less than half its real value. RVs loses its value when there are obvious signs of wear and tear.
Nobody expects the condition of a used RV to be perfect, but if you ever intend on selling your RV later in the future, you might want to have it properly maintained from now. Travel trailers tend to experience a drastic depreciation curve when not given good care.
The average condition of an rv determines its resale value; the better the condition, the higher the value.
Noticeable Signs Of Water Damage
Rvs depreciate quickly when stored outdoors constantly, and that's because it's been exposed to moisture. The thing with water damage is that you might notice until it's too late, and then you start experiencing water leaks. Sadly, it doesn't end there, water leaks can cause irreversible damage, and often times might lead to a mold problem.
When purchasing a new travel trailer, make provision for an indoor garage to slow down the depreciation rate of your trailer.
Not all travel trailers depreciate at the same rate, and an RV brand plays a major role in its value. Popular brands like Airstream and Winnebago have a brand reputation for manufacturing travel trailers with the sturdiest materials. So, if you are buying a brand new RV with the aim of selling it off at some time, remember "brand power".
A used Airstream travel trailer will get the most value in a trade-in, and that's only because of its manufacturer.
Damaged Or Old Appliances
Nobody wants to spend extra on fixing appliances after making a purchase. The essence of buying a travel trailer from a used market is to save money, and getting an RV with damaged appliances defeats that purpose.
A well-maintained RV is always a better deal, and buyers will pay more for that. Typically, luxury class C motorhomes and travel trailers that come with fully functioning bathrooms, water heaters, a jacuzzi, and other high-end appliances might be an attractive buy initially, but when not properly maintained, becomes a liability.
Think about it, who wants a travel trailer with broken appliances? So, the more damaged they are, the lesser their value.
Storage has a lot to do with RV depreciation. RV owners mostly keep their travel trailers outdoors when not in use, and unless you are buying a new RV, the chances that the previous owner always stored it outdoors are high. Keeping your travel trailer outdoors means you are exposing it to extreme cold and hot weather, and this can take a toll on the quality.
When putting the purchase of a used RV into consideration, you'll want to place more value on a model that was stored indoors most of the time.
All travel trailers depreciate with age, it doesn't matter the model or brand. However, the average depreciation of a particular brand of travel trailer might be different from another. That being said, a travel trailer 10 years old has a lesser re-selling price than an RV 2 years old.
Most travel trailers fall into three categories; class A, class B, and class C. Class A travel trailers are the biggest types of travel trailers, and as expected they carry a higher price tag than the others. Not only that, they have a lesser depreciation rate as well.
A quick overview of how RVs depreciate by type; class A RVs have an average depreciation of 36% after 5 years, class B (trailers and fifth wheels) RVs have an average depreciation of 37% after 5 years, while class c RVs have an average depreciation of 38% after 5 years.
So, you might want to put into consideration the RV type before buying one.
Mileage doesn't matter much in motorhome depreciation, but it does with travel trailers. RVs lose their value faster when they are being driven for long miles. Before purchasing a used RV, you need to figure out how many miles it has covered in its lifetime. As a general rule, the more miles you put on your trailer, the lesser its value.
On average, a travel trailer is expected to drive 5000 miles per year, but if you are purchasing an RV from a previous owner who loved to go on road trips and adventures, then a significantly higher mile has been put on the RV, thereby reducing its value even further.
High mileage affects the structure of an RV, and you might have to deal with issues like joint splits, sealant cracks, and even engine breakdown.
State Of The Economy
The market economy can alter the depreciation rate of travel trailers. When there's a high demand for RVs or motorhomes for any reason, the market experiences an inflated price. Situations that can warrant this include the closing of borders to prevent the importation of new automobiles, and cases like this can cause the asking price to increase.
Consider MSRP Price
In a nutshell, the manufacturer's suggested retail price is what you'll see in a dealer's lot. However, this is usually an inflated price set to trick people, because the truth is that, you can beat down the price by 5 - 10%.
You might think you are getting a fair price for the travel trailer, but you aren't. The MSRP price is the price the dealership is offering to you, based on the recommendation of the manufacturer. Now, it's easy to get carried away and assume they are offering you the best deal, but always negotiate.
How Does Regular Maintenance and Care Affect the Depreciation of a Travel Trailer?
All travel trailers and recreational vehicles need routine maintenance, and the only way to offset depreciation is by significantly paying attention to your vehicle.
When your travel trailer is in great condition, it depreciates at a slower rate. It only makes sense that you should have your travel trailers and fifth wheels checked once a year by a professional technician. By doing this, you can easily spot problems with the engine, appliances, and exterior seals, before it becomes too late.
How Fast Does A Travel Trailer Depreciate?
Many factors play a role in how fast a travel trailer depreciates. Not all travel trailers have the same depreciation rates (the rate at which fifth wheels depreciate is not the same with a class C motorhome). However, on a general scale, you can expect your travel trailer to have lost about 30% of its value after the first five years.
How Does the Age Of A Travel Trailer Impact Its Depreciation Rate?
This is how the age of your travel trailer affects its depreciation rate:
Year 1: It would have depreciated about 20%. It is a general rule that as soon as you pay the purchase price and drive your travel trailer off the lot, it would have depreciated over 20%.
Year 2: There is not much difference in the second year as it would lose about 23% at this point. So, it would be the second buyer's gain at this stage.
Year 3: When your travel trailer is three years old, it would have depreciated about 28%.
Year 4-5: Your travel trailer would be at about 37% depreciation at this point. If you wish to use the depreciation rate to make your purchase, you should know that the estimated breakdown rate at this point is about 80%.
Year 6-9: The depreciation rate at this time frame would range from 41% to 50%.
Year 10: During the tenth birthday of your trailer, it would have depreciated about 55% to 60%.
Year 15-20: During these five years, the depreciation rates rise to about 70-80%.
It is imperative to keep in mind that there are multiple factors that can impact the depreciation rate of a travel trailer and the rates above are estimated values and not for a particular type of trailer.
How Do You Calculate Depreciation On A Travel Trailer?
When you are looking to calculate your RV depreciation, there are some factors to consider. These include;
Time Period: How long the RV has been owned is also considered. For instance, the highest percentage of depreciation always comes in the first year.
Estimated Resale Value: You will also need an estimated resale value or current market value before making your calculations.
Age: How old your trailer is will also impact the depreciation, as the depreciation rates increase the older the trailer gets.
Initial Purchase Price: The original purchase price of your RV is a very important factor when calculating depreciation. This is the amount you pay to get the vehicle.
If you want to calculate your RV depreciation, you can utilize this formula:
Depreciation percentage = (Initial Purchase price - current value) / Years owned.
The initial purchase price refers to the amount you paid when buying the trailer, then the current value is the estimated market value of the RV, while the years owned refers to how long you have had the trailer.
To get your value from this formula, you need to subtract the estimated market value from the initial purchase price and then divide it by the number of years owned. This would give you the depreciation percentage per year.
Are There Any Tax Implications Associated With Travel Trailer Depreciation?
There are no major tax implications linked to RV depreciation. Taxpayers are allowed to depreciate their recreational vehicles with the use of an accelerated procedure or a straight-line method.
Can Travel Trailer Depreciation Vary Based On Geographical Location?
Your travel trailer can depreciate differently based on your geographical location. These are the two major ways your geographical location can affect RV depreciation;
Climate and Weather Conditions: The location's climate and weather conditions can also impact RV depreciation. If you are staying in an area with harsh climates like high humidity and extreme temperatures, it can lead to faster wear and tear on your RV. This in turn would lead to faster depreciation rates when compared to areas with more subtle weather conditions.
Regional Demand: Demand for a travel trailer may vary from one location to the other. Places that are well-known tourist regions or destinations with a significant amount of outdoor recreational activities or camping sites will definitely have more demand for a travel trailer. In this case, there might be more demand for used RVs, which would result in slower depreciation rates.
What Are Some Strategies To Minimize A Travel Trailer's Depreciation?
If you maintain your RV properly, it might stand a chance in price when compared to new RVs. Ideally, why people purchase a new camper because they are skeptical about used RVs, and their concern is valid. However, if you keep your travel trailer in good shape, there won't be that much of a difference between it and a new vehicle.
Some tips you can implement to decrease the depreciation rate of your travel trailer;
Routine maintenance is the first key is reducing the depreciation level of your RV. Also, don't forget to keep maintenance records of your RV, as this will help validate your care for the RV. Any potential buyer will ask to see the maintenance documentation, and failure to provide that, just means you haven't been practicing proper maintenance.
Renovating your RV doesn't reduce its resale value, if anything, it makes it more appealing to buyers. When renovating, it's best to go with neutral colors that can appeal to all genders, that way, you won't have a hard time finding a buyer. Also, make sure to carry out quality repairs, and fix all broken appliances.
Tricky as it may sound, buying a used RV is your best bet to maintain its value. Think about it, in the first few years, a travel trailer already loses its value, as a matter of fact, once it's driven out of the storage lot, it has started the depreciation process. So, when you buy a used RV, the depreciation rate will be a lot lesser when it's time to resell, than if you had bought it as a brand new RV.
Shielding your RV away from extreme weather conditions helps protect it from premature wear and tear. You'd be surprised at the effect of UV rays on your travel trailer, or even constant exposure to moisture. As often as you can, and when your RV is not in use, find a proper indoor storage spot for it.
If you have an intention of putting up your RV for sale, then it may be best to update the appliances to a more modern option. Modernized and luxury interior wins all the time, as they are always in higher demand. Consider adding solar power systems, a convection microwave oven, and installing a power awning, and watch how easily your RV goes off the market.
Are There Any Resources To Help Track or Calculate Travel Trailer Depreciation?
If you are looking to calculate or track the depreciation of your Class A, Class B, Class C RVs, or even your fifth-wheel trailer, then there are some helpful resources you can utilize. The resources for keeping track of your RV depreciation include;
Travel Trailer Valuation Guides: You can utilize valuation guides to track your RV depreciation. They provide you with estimated values gotten from various factors including the condition, features, year, and model of the trailer.
Online Marketplaces: You can go on different online market platforms and check for RVs similar to yours as this would give you an estimate of the RV depreciation trend for that particular travel trailer.
Travel Trailer Appraisal Services: If you are looking to get a professional appraisal of your RV's value, then there are appraisal services proficient with travel trailers that you can consult. These services can estimate RV depreciation by assessing various factors like recent sales data, features, and market demand.
Historical Sales Data: Historical sales data can be found on some websites and platforms. You can use this data to track the depreciation trend of different types of travel trailers. With this, you are able to see how the prices are changing due to models, conditions, and other factors.
Travel Trailers Forums and Communities: There are various travel trailers communities and forums you can engage with so as to connect with experienced RV enthusiasts and owners. In these forums, you can gain valuable insights in the RV world and you can also drop questions or replies in the comments section if you are confused.
Other Tactics To Help You Cope With High Travel Trailer Depreciation Rates
There are various types of RVs from multiple brands and with different price points, which are all subject to depreciation rates. If you want to cope with these high rates, then these are some of the tactics you can use;
Rent Out Your Travel Trailer
Buying a new RV is quite a huge purchase and if you are not going to be utilizing your RV very much in the first year then it would be a good idea to rent it out. There are lots of benefits that come with renting out your travel trailer.
Renting out your RV makes for some good passive income as you would be able to rack up some additional income to help you with the RV depreciation rate. You would also avoid paying storage fees when your travel trailer has been rented out.
Most of the time, RV owners don't make use of their motorhomes for about 90% of the year, which is one of the several factors that see them affected by RV depreciation rates. So, renting out the RV during the times it is not being used is a great idea.
If you wish to rent out your RV, there are different websites available for you to list your travel trailer. This would help you cope with RV depreciation rates and also give others the thrill of RV adventures without having to purchase one.
Sell Your Travel Trailer In The Early Spring
To help you cope with the high RV depreciation rates, you can opt to sell your trailer in the early spring. At this point, you can take advantage of the limited supply and increased demand that accompanies the start of the travel season.
By choosing the sell at this time, you can attract more buyers and also have a higher selling point. It is important to note that you will no longer have ownership of the RV once the deal is completed.
In this informative article, we have provided everything you need to know about RV depreciation and how you can handle it. Whether you have a class A, class B, class C RV, or fifth wheel, it will surely depreciate over time, which is why it is best to utilize different strategies to minimize the depreciation rate.