RVs, watercraft, other toys can be fun, but costly

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Buying boats and recreational vehicles
By Michael D. Larson • Bankrate.com

Financing options abound

Summer doesn't have to be all about big trips and backyard barbecues. Some consumers would rather hit the waves for a good time. And while a pleasure boat has been described as a hole in the water into which you pour money, that hasn't deterred more than 69 million Americans from casting off in search of fun on the nation's lakes, rivers and oceans. In fact, according to the National Marine Manufacturers Association, Americans spent nearly $30 billion on boating and related items in 2002.

If you're looking to finance a watercraft, boat or other toy, these are your options:

Dealer financing: For as little as 10 percent down, you can be in action, but you'll need good credit and several years of credit history to get a good interest rate.
OEM financing: One option for motorized personal watercraft, as well as all-terrain vehicles, motorcycles and snowmobiles, includes a revolving credit card through original equipment manufacturers (OEM). Not too hard to get, but the interest rate is up there.

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Credit card: Quick, easy, accepted everywhere, no credit checks or paperwork. But unless you pay it off quickly, the interest rate on that boat might just sink you. Interest rates on credit cards are averaging 12-17 percent, but you can use Bankrate.com's credit card search engine to find a better deal.
Co-buying: You and your buddies might buy that ATV jointly, but what happens if someone wants out, doesn't pay or wrecks it the first time out? Look closely at the "what-ifs" to determine beforehand if your deal -- and your friendships -- will survive.
Personal loan: Credit unions and community banks can take the whole bill and feed it back to you slowly at agreeable terms. If you own a home, this may be the most cost-effective way to finance your fun. Search for the best rates with Bankrate.com's personal loan search engine.
Cash: Before paying cash, remember that personal sports vehicles lose their value significantly the minute they're sold. If part of your plan is to keep your new toy in good shape, then resell it next year and get a big percentage of your money back, you may want to reconsider financing it.
Family co-sign: Mom and dad may be willing to help you get that loan, but what would happen if you couldn't make the payments? Plan on paying this loan back just as if you owed it to the folks themselves -- because you do.

How much should you put down on your boat or RV?

Hit the road!

Of course, there's something to be said about cruising Route 66 rather than the river. These days, many Americans are deciding to buy RVs and hit the highways for their vacation thrills. They say purchasing a recreational vehicle is very much about attaining a new way of life.

But before you jump into anything, consider these facts about RV loans:

1. Landing a good financing deal on a recreational vehicle takes some work. First off, a recreational vehicle is considered a luxury item. You'll need good credit to qualify for financing.
2. Banks, credit unions and independent finance companies all offer RV financing. A list of RV financing companies is available on the Recreational Vehicle Industry Association Web site. Financing can also be arranged at RV dealerships. As with autos, you want to have a financing deal in place before shopping for your vehicle. That way the dealer will have to beat the interest rate to get your loan business, too.
3. Interest rates on RV loans are closely tied to auto loan rates. The rate on an individual's RV loan is determined by the finance amount, length of loan and a person's credit quality. Bankrate.com researchers found rates on new RVs ranging from 5.25 percent on up to 15 percent in a recent survey.
4. A big down payment or a big balance can help drive down the interest rate on a loan. Most lenders require less than a 20 percent down payment and many lenders require a down payment of less than 10 percent. There are even some zero-down loans.
5. Accepting a loan with prepayment penalties may also nudge the interest rate down a bit. But you'll pay a price for paying ahead on one of these loans.

If all of that scares you, you may just want to settle for a motorcycle. They get great gas mileage and only cost a few thousand dollars. Because of their smaller price tags, many people can pay for them by check. Without budget-straining monthly payments, you might even be able to justify the purchase to your spouse!

Which is better -- a rebate or dealer financing?

Updated: April 18, 2002