Financing vs. paying cash for a flying RV (financial gurus please chime in)

[Snowflake]

Those days are gone Rob. It worked for you and that’s great.

I don't agree. Anyone with equity can use it to leverage into more equity over time. Someone living in a rented apartment with no significant savings and no significant assets certainly can't do it. Someone part-way through a mortgage on a house/condo, who hasn't absolutely maxed out what the bank would give them to buy it in the first place (it's insane what they'll give you, we never went beyond 1/3 of what the bank said we qualified for), has the ability. The interest rate isn't important either, really, as long as it's lower than you can get with other investments.

This was a common strategy at the time. I had a neighbor do the same, not with airplanes, but other stuff. He had a great job, leveraged his house for cars, boats, pool, etc…. lived large.
Lost his job, had no liquidity in any assets, and lost everything.

Not at all the same thing. I made a targeted attack on *one* asset, the airplane. Rolled it into my mortgage the first chance I got. From then on, I had only one debt, the house, and we were far enough into the mortgage that if everything went sideways we'd be able to sell the house and have enough to live off for a while or for a down-payment on something smaller. As it turns out, my wife and I both had unemployed sections during the mortgage. I was laid off twice. It still worked out.

tl;DR - There are good and bad ways to leverage assets, it comes down to having a plan (including an exit plan) and planning for contingencies.

 

[YellowJacket RV9]

I don't think anybody here can make a valid case that owning an RV is a wise financial decision. The "smarter" decision would always be to invest that money. But that wasn't really the OP's question. There seem to be two schools of thought:

1 - Work hard, save money, hopefully be healthy and wealthy enough to pay cash for a plane some day in the future if "life" doesn't get in the way
2 - Find a not-completely irresponsible way to own a plane earlier in life

In scenario number 1, owning that plane is never a given. This forum is probably full of lurkers who will buy or build "some day". I went with #2, and hopefully have 30 more years of RV ownership and fun ahead of me. The other bonus to that scenario is that as we get older, our earning potential generally goes way up, to the point that we can probably easily recover from the earlier financial hit. That's why we generally invest a little more aggressively when we are young and conservatively as we near retirement. Again, I'm not suggesting buying an RV is a smart financial move at any time, but when I built mine, I paid as I went except that I financed $10k from my parents for a used engine. Seemed like a huge loan at the time. A couple years later I was making enough that I just wrote them a check for the whole amount. Clearly the OP is thoughtful with his finances and not spending frivolously. Long story short, if it were me, I would bet on myself, and probably split the difference. Maybe finance part of it after a hefty down payment. Drive an old car, live within your means, enjoy the RV.

Chris

Extra advice: A wise man once told me to buy two jet-ski's before I got married. He told me that way when I got hitched, I could sell one and look like I was being "responsible".

 

[Oroyo]

My number one rule for “toys” is if you can’t afford to lose the money, don’t buy it, regardless of where the money comes from.
If you can afford to lose it, you don’t need to finance it, which is a hard rule for me as well.

I agree but I think he’s more asking about which is keeping more money in his pocket, forgoing insterest he’s going to gain with money he has vs spending on money he could borrow. If it costs 5% to borrow it but you’re making 7% in the market, then borrow is giving you more money back.

 

[Oroyo]

I don't think anybody here can make a valid case that owning an RV is a wise financial decision. The "smarter" decision would always be to invest that money. But that wasn't really the OP's question. There seem to be two schools of thought:

1 - Work hard, save money, hopefully be healthy and wealthy enough to pay cash for a plane some day in the future if "life" doesn't get in the way
2 - Find a not-completely irresponsible way to own a plane earlier in life

In scenario number 1, owning that plane is never a given. This forum is probably full of lurkers who will buy or build "some day". I went with #2, and hopefully have 30 more years of RV ownership and fun ahead of me. The other bonus to that scenario is that as we get older, our earning potential generally goes way up, to the point that we can probably easily recover from the earlier financial hit. That's why we generally invest a little more aggressively when we are young and conservatively as we near retirement. Again, I'm not suggesting buying an RV is a smart financial move at any time, but when I built mine, I paid as I went except that I financed $10k from my parents for a used engine. Seemed like a huge loan at the time. A couple years later I was making enough that I just wrote them a check for the whole amount. Clearly the OP is thoughtful with his finances and not spending frivolously. Long story short, if it were me, I would bet on myself, and probably split the difference. Maybe finance part of it after a hefty down payment. Drive an old car, live within your means, enjoy the RV.

Chris

That’s the smartest way for regular folk to get money. House money is the cheapest you can get so regardless of whatever money you can apply to other “logical” endeavors, if we “need” a plane then the best way to fund it is likely home equity.

 

[PhatRV]

. Drive an old car, live within your means, enjoy the RV.

This sounds like me. The whole point of saving money over the years is you get to enjoy some of it later in life.

 

[JonJay]

Regardless of your path, understand the risks.
Don’t assume your financial position won’t change, for the better, or the worse.
To bring this back into the RV realm;
while I don’t consider RV’s to be a “liquid” asset, they currently are trading quickly for reasonably high values, so, liquidating in an emergency, today, is plausible. Less risk than some toys for sure. Tomorrow,? Who knows.

Also, none of us here are financial gurus, they are flying around in their jets not an RV.

Still, a lot of advice to ponder from folks who have made it work, one way, or another…..
Good luck.