The pros and cons of buying an RV

Sales of RVs have accelerated as people consider away-from-home yet still socially distant adventures.

Summer break plus the prospect of the pandemic in the rearview mirror has many people excited to plan a vacation. Road trips continue to be the preferred way to travel, according to AAA, and that preference, in part, is fueling an interest in RV purchases.

It's easy to see why: Recreational vehicles allow travelers to control the safety and cleanliness of their environment, an ongoing concern even in a post-pandemic world. Plus, you often can bring many of the comforts of home on the road with you—including pets. But before you drive full speed ahead into #rvlife, consider these pros and cons.

RV ownership

Pro: There's a big range of price points

As with cars and homes, RV prices range widely, from about $10,000 for a no-frills, pop-up camper to a half million dollars or more for luxury RVs. "You might be looking at a relatively small trailer that could be pulled by a typical family vehicle; others could be looking at those big land yachts that cost as much or more than an actual house," says TIAA thought leader Daniel Ruppel. "That scale is really going to affect things."

Con: The sticker price is just the start

There's also sales tax to consider, which can be significant, depending on the RV’s sticker price and where you buy. "In all but five states, there will be sales tax, typically, for the purchase of that RV," Ruppel says. "And if the sales tax is 4% or more, on some of these big RVs, that’s a pretty hefty sales tax bill." Even if you purchase an RV in a state with no sales tax, you may owe sales tax in the state in which you reside and where the vehicle is registered.

Pro: There may be tax benefits

Depending on your financial situation, the sales tax on your RV purchase may qualify as a "major purchase" for a one-time tax deduction on your federal return. Should you finance the RV, you also may qualify for a mortgage-interest deduction, much like a vacation home.

"If you don't usually itemize, [an RV purchase] might push you into an area where itemizing might make sense," says Ruppel. "It's best to consult with a tax advisor before acting based on these deductions, as they may not bear out as well as folks think."

Con: Depreciation is a real concern

When it comes to value, brand-new RVs are more like brand-new cars than homes in that they depreciate steeply once you drive them off the sales lot. Unless you have money to burn or very specific specs in mind that you're not willing to budge on, consider looking into buying a used RV.

Pro: You could potentially earn rental income

"Some folks who own an RV may participate in a business, in essence, where they are renting out that RV, much like a vacation home," Ruppel says. Think Airbnb. "Rental income can help defray some of the costs you would otherwise bear completely."

There are RV share programs where owners can rent out their RVs for part of the year, he adds. Keep good financial records, as the expenses associated with renting out your RV are potentially deductible on your Schedule C.

Con: With rental income comes risk and responsibility

When you consider that the median annual usage for an RV is 20 days a year, renting it to other travelers the rest of the time seems like a no-brainer. Keep in mind, however, that you'll assume financial risks similar to a landlord. "There's the aspect of potentially renting out an RV part-time and it comes back damaged," says TIAA thought leader Rob Stevens. "It's like renting a home. Are you willing to take someone to small claims court? It's a practicality you have to be prepared for."

Pro: The RV community is knowledgeable about costs

"You can use social media to do your homework," says Shelly-Ann Eweka, Senior Director, Advice & Financial Planning Strategy at TIAA. RV experts and influencers abound on You-Tube, Instagram and other social platforms. "You can watch some of their videos and see how much they spend on costs for water, propane, maintenance, and things like that."

Insurance and off-season storage are two significant costs you'll want to account for in your budget, and don't forget to factor in smaller costs that add up quickly, like tolls.

Con: Some costs can be harder to account for

As much as you can anticipate the costs associated with RV ownership, some factors—such as the price of gas—are inherently volatile. "[People often say] 'Your mileage may vary'—YMMV—and in this case, it matters quite literally," Ruppel says. "Some big gas guzzlers are getting seven miles to the gallon." Be sure to build some flexibility into your budget to account for the fluctuating price of gas as well as maintenance and unforeseen repairs. "A lot of the maintenance costs and parts are generally higher than your typical vehicle because it's rather specialized," he says.

If you're undecided after weighing the pros and cons, why not try before you buy? "If you really are not used to RV life and don't know if you're going to like that lifestyle, it might make sense to do some trips renting an RV first," Eweka says.

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This material is for informational or educational purposes only and does not constitute fiduciary investment advice under ERISA, a securities recommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on the investor’s own objectives and circumstances.