Sales of recreational vehicles (RVs) are going through the roof thanks to a confluence of factors, including an improving economy, low jobless rate and — perhaps most crucially — very low gas prices.
According to the Recreational Vehicle Industry Association (RVIA), total RV wholesale shipments jumped 11.7% (226,286 units) over the same period last year. The figure for June 2016 alone was 40,072 units, representing an 18.7% increase over June 2015.
Not surprisingly, it's been a good year for credit unions that do RV lending.
Whitefish Credit Union in Whitefish, Mont. closed about 150 RV loans in 2015, and they're easily on track to beat that number for 2016, having already closed 140 loans year-to-date.
According to Paul Iversen, SVP of consumer lending at the $1.35 billion-asset credit union, the term "recreational vehicle" doesn't just mean a simple fifth-wheel trailer. It can be anything from simple campers to luxurious motor homes.
"On that basis, we have been offering RV loans since our inception more than 80 years ago," he said.
Iversen noted that underwriting for RV loans are similar to those applied to regular auto loans — the big difference lies with the term. "For a car loan, we might have a 7-year repayment term, but for an RV, it could be up to 15 years," he said. "We look at such parameters as ability to repay, debt-to-income ratio and credit score."
At Whitefish CU, RV loans are available only to its members, and they only conduct purchase transactions — no leases, since that would require a wider network and increased manpower.
Iversen estimates that about 10% of his credit union's consumer loan portfolio comprises these RV loans.
The general stereotype of an RV owner is that of a white-haired, deep-pocketed retiree, but Iversen said that image is somewhat misleading. "We have done RV loans with people in their 30s and 40s," he noted.
Regardless of the age or income of the members, summertime is the busiest time for RV deals — Iversen said the bulk of these loans are processed between May and October.
Retaining Resale Value
Jana Erny, VP of retail lending at Numerica Credit Union, a $1.7-billion institution based in Spokane Valley, Wash., said Numerica has seen the number of RV loans increase by 26% over the past year.
RVs average around 20% of overall loan production during peak months at Numerica. "The average was closer to 15% during the recession and is traditionally closer to 25% during times when consumer confidence is high," she explained.
Numerica weighs various factors when considering an RV loan applicant, including their debt-to-income ratio, size of loan, employment history, credit score, age of vehicle and length of loan. The credit union's average RV loan is valued at about $30,000, and Numeica does not offer leasing options.
Because RVs maintain their value and re-sale appeal, Numerica is able to offer longer-term loans on the vehicles similar to Whitefish CU. In some cases those terms even stretch out to 15 or 20 years, said Erny
"RV-ing is something that appeals to families of all shapes and sizes," Erny said. "From grandparents who use an RV to visit family across the U.S. to a young family looking for a way to 'unplug' and enjoy the great outdoors, there are many reasons people are looking for RV loans."
Right Vehicle, Right Location
Of course, the Pacific Northwest is tailor-made for RVs, given the extensive open spaces for camping and recreational travel year round.
"While we do see RV loans year round, there is a peak season from March to July," Erny stated. "There is a trend over the last few years that the lending season is becoming longer. Just a few years ago, we saw loans peak in June whereas this year it seems to have been in May."
As for the increasing popularity of RVs, Erny explained that RV purchases represent a discretionary expenditure, and that there are many reasons why a family or individual makes the decision to buy one. "However, there is a strong correlation between demand and gas prices," she specified. "The average price of gas in our region is about $2.35 [per gallon]. That is down sixty cents per gallon from this time last year. Whether you are saving money overall or filling up the tank, those savings add up."
Erny added that when consumer confidence is high and gas prices are low, the bell curve [tracking sales of RVs and autos] moves in tandem. "However, the auto loan season is typically much longer than the RV season," she concluded.
