Note from RV52 – I had seen some interesting posts from a fellow named Brandon Macomber. He had some interesting information regarding RV repossessions. Since repossessions is a big subject when discussing standard “stick” houses, I thought it was an interesting subject. I wrote Brandon and asked him if he would write an article for RV52. Here is Brandon's article and it looks like a great teaching article.
How to save 25 to 40% when buying an RV
The short answer is that you can get almost half-off the price of an RV by buying a repossessed RV direct from the lender. Or at least as direct as you can reasonably get to the lender. Depending on the lender you may be required to work through a 3rd party.
Why purchase a repossessed RV?
Why would anyone want to purchase a repossessed RV, 5th wheel, travel trailer or camper?
The answer is simple: to save money and get a great RV.
A repossession says nothing about the CONDITION or QUALITY of the RV, it only speaks to the ability of the buyer to continue to make payments on the RV. These are two VERY different subjects.
An average buyer will save between 25% to 40% when buying a repossession directly from a lender or bank.
This beats paying full retail price when you might be able to find the unit you desire at a huge discount as a repossession directly from a Bank or Lender.
It is important to understand that buying a repossession is a unique buying option that dealers and wholesalers are familiar with but the average private or retail buyer is not.
Why are repossessed RVs lower priced
The average retail buyer buys a from dealer or will try and find a private party selling the a vehicle. Often the buyer may use one of the large sites like RVT.com (see how to page on buying an rv) or even eBay.com.
Either way, the retail buyer will pay retail or close to it because dealers need a large profit spread to cover their extensive cost of operations.
Most private party sellers think their vehicle is something special therefore having a high price attached to it. Additionally, private party sellers “peg” their price to their outstanding note plus a little. Given that many pay retail without negotiating, they are upside down on their price for the life of the note.
(upside down means they owe more on the loan than the RV is worth)
The savings when buying a repossession is attributed to 2 simple things:
- you are starting at lower price point because the bank ONLY CARES ABOUT RECOVERING THE NOTE
- no middle man or dealer to drive up the price.
Most RV dealers need to make a minimum of 20% profit to cover their overhead.
Repossessions from a bank or being sold for a bank by a third party (not a dealer) don't have those large overhead expenses of an RV dealer. Banks and other lenders are most intereseted to get the units off their books and recover their note. The rest is gravy, but not worth it to the bank to focus on.
The reason the RV is on their books is because when the repossessed the RV it became an asset on their balance sheet. The loan moved to a “bad asset” which became a liability. To correct for this bookkeeping nastiness, the bank is very interested in selling the RV. Banks are rated very heavily on their balance sheets and if they have lots of bad debt and non-banking assets they will incur a steep penalty in the overall banks value and the banks ratings.
By buying a repossession, a potential buyer is buying the units at wholesale cost and can bypass the paying the dealership their needed profit, which is usually between 25% to 40% of what they paid.
How does an RV buyer find RVs, travel trailers, 5th wheels or camper repossessions?
Repossessed units are all over the country.
Many people will incorrectly associate repos with ideas of salvaged units, damaged units, old or new units that are for sale at auctions or dealers.
RV repos come in all varieties and conditions.
Most of RV repossessions are in perfect working order and tend to be newer.
Most repo units available today are new or newer units since repossessions, by definition, require a loan against them. Some are even dealer repos that have been taken back from a dealer who is having financial troubles or has closed its doors.
The best avenue for buying a repo is to buy directly from the lender or bank.
Typical searches to find banks with repossessed RV are “RV repos”, “RV Repossessions”, “Repo Motorhomes”, etc. If you perform an internet search that is not specific to bank repossessed units, you will have no shortage of options.
Be careful when searching for repossessions – anyone can list and/or sell pages of repossessions but most of the time they are overpriced since they are trying to sell the RV based on “market price” rather than a markup above the note or payment to them by the repossessor.
Do your homework and use the following information below to help you locate some possibilities.
Remember, you are looking for the owner of a bad loan *AND* an RV who makes money by lending money not by selling an RV. This is a big but important nuance.
Are all repossessions equal?
Not all repos are equal.
Many RV dealerships advertise repossessions for sale. Dealers offereing repossessions are NOT the same as purchasing a unit directly from a Lender or Bank.
Dealers treat a repossession the same as their other new and used inventory; they are out to make as much profit as possible. Keep in mind that dealers need that profit because of their large overhead costs to keep the facility operating. If anything, the dealer and its management will see maximizing the profit as a challenge to be achieved.
Buying a repo from a dealer does not save you money; especially if the dealer has actually purchased the unit from the Bank and now owns it. Some dealerships will allow consignments from Banks but you will still have a higher inflated price.
A true RV repossession comes directly from the lender and is at a fairly large discount compared to the market average.
Pricing is determined by the sellers perspective
Moreover, the reference point for the dealer's sales price is the average market price for that type of RV. A bank's pricing reference point is the outstanding balance on the note.
These two reference points will be substantially different target prices. A Lender or Bank has no interest in holding out for higher prices; their goal is to clear the note and manage their banking balance sheet by lending money out on assets that will perform. A repossession is a non-performing asset for them.
Are RV Dealers Obsolete?
In all fairness though, the dealerships will always have a place in the RV business.
Internet companies that sell bank repossessions are mainly dealing with the educated buyers who already know what they want and are more concerned with saving money. If a buyer needs assistance deciding what to buy and how to get financing, an RV dealership provides that support and service for these types of buyers.
Familiarize yourself with RVs by visiting a dealer
For buyers that know what they want and are not afraid to do a little research, buying a bank repossession can save a lot of money. If a buyer is new to the RV market and may be purchasing their first unit, I encourage them to go to their local dealership and get educated on the unit they desire. Do a walk around and get educated on the units that fits their needs, touch it, feel it and take it for a test drive. When you have a few models in mind, start your search for a repossessed unit and you will save.
A great starting place to get to know YOURSELF and what you want in an RV would be to take the RV52.com Lifestyle quiz:
Do repossessed RVs have warranties?
Many prospective buyers who look at repos are concerned about warranties.
All new RVs come with a factory warranty that is transferable to a new owner. A repossession does NOT affect the warranty.
Sometimes there is a modest warranty transfer fee depending on the state. A buyer can go to any of the manufacturers' websites and find details on the warranty for the unit that interest them.
What paperwork should be expected with a repossessed RV?
Always check that the unit you are looking at has a Title or Manufacturers Certificate of Origin (MCO).
Many repo units that are sold at auctions have what is called an Affidavit of Repossession. This means that once a unit is repossessed, the lien holder (bank) must sign an Affidavit of Repossession. The lien holder is certifying that the vehicle has been repossessed. This allows the lien holder to sell the RV without the owner's signature or Title.
Check with your local Department of Motor Vehicle though, as each state has different laws accepting the use of an in-state or out-of-state Affidavit of Repossession to obtain a new title in the buyer's registering state. By buying directly from Bank, Private Lender or Credit Union, they have taken care of the necessary paperwork since they are in fact the lien holders on the unit by providing and signing all applicable paperwork to you without issue.
RV Repossession Listing Services
While some lenders sell the Repo units themselves, some use a listing service like CrankyApe.com, many banks simply are not interested in the extra steps required to actually sell the RV's. I would recommend that you deal with the ones who don't own the inventory they list, since this shifts their focus from moving more units to maximizing the price on each unit. Furthermore, taking and owning inventory will add costs such as transport costs, storage costs, and the cost of buying the unit from the lender as they would need to recoup their investment.
Avoid services that require up-front fees
Stay far away from repos that require a deposit, a buyer's fee, or some other form of payment or money exchange prior to viewing the unit. Make sure that the offers you submit on a unit are non-binding until you have inspected/verified the unit. Units should come with a mechanical report, CarFax report, or some kind of unit report depending on the year of the unit. Also, check to see if there an actual person to talk to about the process or about the unit you are interested in.
Be prepared to search for repossessions nationwide
Ebay Market research indicates 50% of high ticket sales are made to out of state buyers. RVs fall into this category, so most likely prospective RV Repo buyers will have to travel out of state get their new unit. For some buyers, this is a problem; for others, its part of the plan to save money.
The higher the price of the unit, the more a prospective buyer will save. Regardless of distance, never buy the unit without seeing it first. If you cannot see the unit, have an independent inspection service do a walk around on the unit if you are not in the selling state.
Purchasing a repossessed RV – cash or credit?
Most buyers of RV Repossessions are cash buyers. If you don't have cash, you can finance the purchase as you would normally. Usually the selling Lender will finance the units assuming you have favorable credit and can make a down payment as you with a regular retail purchase. You can also finance the unit with your own local Bank or Lender.
Can you assume a repossessed RV's loan?
There are some units that Lenders will list as a Take-Over-Payments unit. You are essentially buying the remaining balance on the note or making payments on the note. Sometimes this is also referred to as Pre-Foreclosure. If a unit falls under this category, the loan is assumable or the lender has taken the unit back and is just looking to get back what they loaned out on the unit.
If there is a lien on the unit, this will be noted on the title and should be accompanied by a Lien Release. A Lien Release is a letter from the bank saying that they have no further financial interest in the unit and any outstanding balance has been satisfied. However, if you are buying a true bank owned repossession, the selling lender or legal owner will not have this issue as they are satisfying their interest or lein by selling directly to a new buyer.
Finding the RV you want – make time work FOR you
Two of the biggest drawbacks of looking for and purchasing a bank owned repo is the availability of make/model choices and distance or location of a unit. Sometimes the unit a buyer is looking for is not in the current inventory pool.
If the buyer has time on their side, then they have a pretty good chance of finding an RV that will fit their needs and wants.
If someone is looking for an immediate purchase, then considering to buy a repo may not work for them. The repossession pool of inventory relatively high as a result of the economic situation we have been facing over the last few years.
Repossessed RVs – be prepared to travel to find your desired unit
The distance or location of a unit is an unknown factor when looking for a unit. You could be a buyer in Texas and your unit is in New Jersey. For some this is a problem but for others who are familiar with the normal pricing of a vehicle in the retail market, they will save a lot of money.
A rule of thumb is that the higher the price of the units the more a buyer will save. Higher priced RVs have a tendency to be sold out state or across country whereas lower value unit buyers tend not to travel so far.
Buying a repossession is a great way to save on an RV, Travel Trailer, or Camper. There is a 3 year back log of repossession inventory right now so there are lots of options. Be sure to follow the steps above and you will have an adventure searching for you that great RV at a great price.