What is the Best Way To Finance a Motorhome UK – 7 Methods Compared

Owning a motorhome can make your adventure life a lot easier and more fun. With your own motorhome, you can decide on the spot to go for a weekend getaway with your friends without even planning. All you need to do is, pack a few clothes, and you’re all ready and set to go.

Motorhomes are expensive, yes, but when you make the right choice based on your requirements and personal circumstances, you’re in for a lot of fun.

The benefits of purchasing a motorhome are numerous, from deciding your own route to not compromising on that “home comfort” everyone loves.

Is financing a motorhome worth it?

As we already stated, purchasing a motorhome is expensive, but you don’t need to break the bank to afford one. Motorhome financing is very much important, depending on your current financial situation.

You can choose to finance your motorhome for more than 15 years, depending on how much value it’ll hold in the future.

What are the different ways to finance a motorhome?

Motorhome finance isn’t a complicated process; you just need to find a finance package with monthly payments in line with your financial capacity.

Having your own motorhome gives you a sense of community when you hit the road with other motorhome owners. So, you can make your motorhome purchase smooth and easy with the right finance options.

Bank or Personal Loan

Banks offer loans based on your credit score, credit rating, and the risk involved in approving a loan to you. After careful analyses, if the bank deems you a good risk, they’ll approve the loan amount needed.

Like most finance providers, banks only give out secured loans, which translates to lower interest rates. However, do your findings on other finance companies to be certain of the rate.

Most people opt for the personal loan options because they intend to secure cash to get the best deal. The interest rates that come with personal loans are higher in comparison to a bank loan but less than credit card payments.

But, going with this plan can be a bit risky if you aren’t certain about your finances and ability to pay up before your interest rate accumulates. Most personal loan providers like auto finance online offer finance packages, so you can check out that option and any other provider you might know.

Lastly, make sure you compare APRs and other charges before taking a loan to buy a motorhome.

Hire Purchase (HP)

You need to make a fixed deposit of 10% for the hire purchase agreement before you begin monthly instalments. However, the deposit percentage might vary depending on the duration of the repayment period.

Every month, you’ll pay a fixed amount as authorized by your finance provider, and after you’ve made the final payment, you’ll take full ownership of the motorhome. You can check out black horse finance for hire purchase payment options. If you still haven’t figured out if to go for a newer motorhome model, it’s worth shopping for one now.

Mortgage Redraw

This option is perfect for those who have home mortgage plans and need extra money to buy a new camper. You can take out cash from what you have contributed towards your home loan; however, this might increase the interest repayments on your home loan. So, it’s best to get advice from your mortgage personnel before proceeding with this option.

Savingws (Cash)

Paying fully for your motorhome using your own cash without having to borrow is blissful. However, spending a huge sum of money on one purchase isn’t advisable, as it might limit your spending capacity. So, to always have an emergency fund available, you can put down a large deposit for the new motorhome and gradually pay up the balance.

For those in retirement, whether semi-retired or fully retired and have a lump sum of money kept away, it’s usually a better option to pay once and have your motorhome delivered to you.

However, if you feel you’ll have enough cash left in your bank for emergencies after making your payment, you can proceed with this option.

Equity Release

You can opt for equity release if you have a property that you can take out an advance loan on its value. A lifetime mortgage is a form of equity release, and you’re only required to pay back the loan when you sell the property or if the policy holder dies.

Personal Contract Purchase (PCP)

If you are looking to exchange your current motorhome for a newer model, you might consider this option. However, it differs from a “normal loan” because you aren’t making payment for the full value of the motorhome, and neither will the ownership rights be transferred to you at the end. Let’s look at the three major parts of PCP;

Deposit

This is where you’ll have to pay 10% of the motorhome’s value as a deposit. When you deposit a bigger percentage, your borrowing amount becomes lesser.

Loan

You’ll get a loan amount based on the predicted value of the motorhome over 24 to 36 months — time frame of the deal. Your deposit will be subtracted from the predicted loss, and you’ll have to pay the remaining amount plus interest within the stipulated time frame of the deal.

ARPs are mostly between 5-7%, but you can never be too certain. So, it’s best to check different car dealers before getting into any agreement.

Balloon Payment

Motorhomes tend to add value over the years, and the balloon payment is a phrase used to describe the dealer’s predicted worth of the motorhome at the end of the agreed term.

Once the deal ends, you can then decide whether you want to upgrade to a new vehicle, walk away or just pay for the motorhome outright by paying the balloon payment.

Most people opt for this option because they hope after the PCP deal is over, their motorhome will be worth more than the balloon payment, and the equity will be used for an upgraded version.

However, during the course of the deal, you’ll be liable for any damage that happens to the motorhome, except the regular “wear and tear”, of course.

Broker/Dealer Finance

If you aren’t interested in taking out a loan due to certain issues like outstanding finance on your current one, you can get a finance agreement with a broker.

Remember, a broker is not a lender, but they’ll help with the application process of getting a motorhome. Using brokers who have connections with reputable financial institutions and banks will ensure you get the best interest rates according to your circumstances.

Same with car dealerships, motorhome dealers (like Oaktree Motorhomes) can help secure loans for their customers through their preferred banks.

They’ll often help get loans for a customer while the customer does the monthly repayments and annual interest rate. This is the perfect way to finance your new motorhome using a credible independent lender.

What to consider when choosing the best way to finance a motorhome in the UK?

Before making the choice to purchase your dream caravan, you need to put certain things into consideration.

And also, if you intend to get a loan from a company, go through their website and history, and be certain they are legit. When making huge investments, you need to apply caution so as to guarantee you’re getting the best.

Do you want to buy a new or used motorhome?

Buying a new motorhome will definitely cost more, but you’ll have the freedom to customize it to your taste, plus you’ll enjoy zero mileage.

However, if it’s above your budget, you can go for a used motorhome; plus, you won’t plunge yourself into debt when you purchase a used, affordable motorhome.

However, you’ll be limited in customization, especially if the previous owner has done so already, and you might also need to do minor repairs on it.

Another downside is availability, so if you have a specific model in mind and intend to get a used motorhome, it might be difficult to find that exact model.

On the brighter side, if you’re applying for a loan to purchase a second-hand motorhome, you might get a lower loan amount.

Credit score

For your motorhome finance, you need a good credit rating, plus you’ll have a better chance of securing a loan as a homeowner in the UK.

Having a low credit score doesn’t disqualify you from getting a loan, but it’ll be difficult.

Alternatively, you can build it up by taking short term cards with high interest and ensuring they are payable by you, meaning you can make payments in full and within the given time frame.

Maintenance and running costs

When calculating your campervan cost, be sure to include motorhome maintenance cost so as to effectively have a complete figure of how much will be required.

Don’t have a limited number of people you’ll speak to, make your research thoroughly to figure out the total amount you’ll need for annual services – brakes, energy, etc.

Include daily costs like fuel cash, plus never fail to have emergency funds with you.

Insurance

Although this isn’t a prerequisite, you’ll need to get insurance for your caravan. What happens then in the unforeseen circumstance that you get into an accident with another vehicle?

Just get the paperwork done, and have your investment insured. Check our guide on motorhome insurance for more details.

Tax

The fees you’ll pay as motorhome taxes depend on your vehicle’s weight. Ensure you are aware of the weight of a motorhome before purchasing.

Security

It’s essential that you take measures to ensure the safety of your motorhome. You’ll need to purchase locks, steering clamps and any other security equipment that you deem important.

Conclusion

Before signing that finance loan for your motorhome, be sure you are choosing the right one so you save funds and not lose it.

Go for a finance plan you have confidence in committing to its monthly repayments.

When you opt for a plan with payable monthly payments, eventually, you’ll repay your loan and have your motorhome delivered to you.