How Much Should I Pay for a New RV?
By: Bob Gummersall
[Ed Note 10/2011: The recommendations in this article are essentially timeless. Some of the material would provide guidance as well for the purchase of a used unit -- though the author's focus here is on buying new.]
Signing on the dotted line to purchase a new RV is exciting and for some scary. How do you know that you paid the right price? There is no way to be absolutely sure, but there are some ways to help you get close. There are three scenarios that I will discuss: Ordering, buying off the lot without a trade-in, and buying off the lot with a trade-in.
MSRP, Manufacturers Suggest Retail Price, is common to all three scenarios and varies widely between manufacturers. The dealers margin, difference between cost and price, can be as little as 15% and as great as 35% or more of the MSRP. The dealer's invoice price is not necessarily his real cost. Many times the manufacturers add incentives, offer financing help, and offer model year end assistance. So how much should the dealer and the salesman make on your deal? The answer to that question is subjective because the value of the dealer after-sale support is hard to quantify.
The specific dealer and or salesperson are also common to the three scenarios. Some dealers do not provide good-after sale service even when they make good profit on the deal. Some dealers provide great after-sale service no mater how much they make on a specific deal. Some salespersons have lots of tenacity and will us it to go the extra mile to help you. Some of the better salespersons have a very loyal following of customers and have earned that loyalty by providing after sale service. You must decide how important the dealer/salesmen is to you and then decide how much profit you think they should make. Evaluating the dealer's service department can help you establish this value. Some service departments are great and some are not. Interview the service manager and get a list of customer references that you can call. I believe that a very good dealership/salesperson is worth at least a bonus of 5% in their profit. If all else is equal, go with the best dealer/salesperson even if it's further away from you home base.
The Manufacturers Brand is also common to all three scenarios. If you surf the web you will find many plus and minus Brand evaluations. Some of us post horror stories of great loss and inconvenience on one Brand or another. We know that things will go wrong on every new RV, some more than others, so the good reputation of the specific Brand is worth a significant value. I have my own ranking but I think you should develop your own list and establish specific value for each Brand. The higher ranked brands always make higher profit because they can sell every RV they can make. All other things equal, I believe that an outstanding Brand is worth a higher selling price, because you will get most of the difference back when it comes time to sell or trade your RV.
Scenario 1: Ordering a New RV. Once you settle on the specific model, color, and options, create a Bid Specification and send it to all the dealers that sell that Brand in the geography that you are willing to travel to. Announce to the Dealers that you will award your business to the lowest price bid, modified by your estimate of the value of their specific dealership. Please don't jerk the dealers around. Do this only when you have cash or financing arranged and a desired delivery date established. To make this fair, you should sell your current RV yourself or put it on consignment with the dealer.
Scenario: 2 Buying off the Lot without a Trade-in. This scenario requires you to compute what you think is the value of the desired RV by using the methods above. You must also be flexible on specific model, length, features, color, etc. because you have to pick from what's there. Most dealers order, but maybe not pay for, RVs to have inventory on their lot. The cost of this inventory process is usually referred to as "Floorage Cost" which includes the interest, overhead, space, advertising, etc that is attributed to each unit. The longer the unit is on the lot, the lower the dealer profit will be. On last model year inventory, manufacturers usually help the dealer move it off his lot. If that model is one you like, you can often negotiate a real low price on this new unit. Be sure to get the warranty in writing, especially if it is a demo. Even if the mileage is 10,000 miles, make them start the odometer and date clock as if it were new with only delivery miles on it. Dealers always want to have one of what you want on hand, so that you can satisfy your buying urge instantly and probably pay more than you have to for it. Once you have established the price you are willing to pay, you must remain like a rock. If that price is totally unrealistic, the dealer/salesperson will almost immediately drop you. If it is close or at the price they are willing to sell for, then they will start working hard to get you to come up to what they say is their lowest possible price. This process can be fun for some people and because I spent a lot of years in selling and marketing (Computers for IBM) I am one of those people. I love to watch them try all the sales psychology on me. This can be painful to some people who should not do this without help from an experienced Rving friend. Be prepared to walk out of the negotiation and let them think about their position. If they are close and it's near the end of the month, they will call you back. That's because the end of the month volume is critical to every salesperson in establishing bonuses. There are lots of other techniques to use in this scenario, so ask the people that you most respect how they would go about the process. Gather your courage and go for it.
Scenario 3: Buying off the lot with a trade-in. Many people just don't have the energy, courage, or resources to sell their current RV, so if they want a new one they must trade in their old one. Here's what I recommend. First of all establish the "real" value of your RV through all the tools you can put your hands on. Look at the NADA and Kelly's Blue Book at your local library, bank or dealer. Surf to http://www.nadaguides.com and look up the high, medium, and low retail prices. The value of your RV is near the wholesale price, loan value, or similar number. If you look at classifieds, you must take some off that average asking or retail price to establish the wholesale price. Now you are in the position to follow Scenario number 2, down to the point of establishing the final price. To be fair to the dealer, tell him you may trade in you RV as a part of the deal. It is important to get the dealer's best price on the new rig before you counter off, subtracting the real value of your trade in. I recommend not getting into the price difference game, unless you have two dealers trying to get your business. That is difficult because they all don't have the same inventory to pick from and there are often many price affecting differences between two models of the same Brand on the lots.
I have tried to summarize my experience and knowledge of the buying process and offer this information in good will and with the wish for you to get many miles and smiles from your next RV. Safe travel.