RV market expects a turnaround


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Like the housing and automotive businesses, the recreational vehicle industry has been hit hard by the economic turmoil. Many people who otherwise would have considered an RV this spring or summer instead are worried about losing their homes or jobs.

Dealers aren’t stocking their lots with inventory. In 2008, RV shipments were down 32.9 percent from 2007, according to the Recreation Vehicle Industry Association, and shipments are expected to go even lower in 2009.

The dried-up credit market is affecting buyer and seller, too. Credit restrictions are causing RV buyers to delay purchases while forcing RV dealers to keep inventories low.

There is some good news though. Qualified buyers with good credit should be able to find a lender who is eager to give them a loan. Kristin Taylor of Kidd RV Resort Consulting in Tallahassee, Fla., says, “The American Bankers Association released a report saying ‘RVers’ are deemed very trustworthy when it comes to credit lending and are preferred above all credit seekers.”

Stimulus help

The RV industry and hopeful RV buyers may benefit from provisions included in the recent economic stimulus package. Phil Ingrassia, vice president for communications for the National RV Dealers Association, says the tax provisions involving RVs may help boost sales. The American Recovery and Reinvestment Act includes a tax provision that allows a portion of the sales or excise tax paid on the purchase of a new motor home to be deducted. The deduction is applicable to taxes on the first $49,500 of the purchase price. Individuals with an adjusted gross income of up to $125,000 and joint filers with an adjusted gross income of up to $250,000 are eligible for the deduction.

“We’re hopeful that federal credit and stimulus packages will help free up credit and contribute to the RV industry’s recovery,” says Richard Coon, president of the Recreation Vehicle Industry Association.

Existing tax breaks

Even before the stimulus legislation, RV owners had some tax advantages. The interest paid on most RV loans is tax-deductible as home mortgage interest, provided the following qualifications are met:

  • The RV must be used as security for the loan.
  • The RV must have basic sleeping, cooking and toilet facilities.
  • The RV must be rented out less than 15 days per year.
  • Interest expense deductions on the RV must exceed the taxpayer’s standard deduction.

Taxpayers may not claim the interest from more than two qualified homes on their tax returns. Ask your tax adviser for more information or check out related information on the IRS Web site.

2009 outlook is cautiously optimistic

When trying to predict how things will go for the industry this year, RV experts have mixed assessments. Shipments are expected to be lower again this year than they were before 2008, but there are signs of a turnaround. “We’re optimistic about the industry’s long-term future,” says Coon. “Primary demand for RVs remains strong. RV show attendance and sales this year have been encouraging. Sales at shows across the country exceeded expectations.”

Coon says dealers exhibiting at recent shows in about a dozen states reported surprising attendance and sales, which they attributed to “pent-up demand and the desire of consumers to burst out of the malaise affecting the economy. Sales exceeded expectations, and consumers generally displayed a positive attitude.”

Taylor agrees, saying, “Generally, the financial outlay of RV-related businesses has been an indicator that our economy is on its way out of a recession. Many of the resort owners we work with are investors and stay in tune with the future of our economy.”

There are also reasons to be hopeful that RV-related lending may loosen up as the year progresses. “Inclusion of RV consumer loans and RV dealer floor-plan loans in the Term Asset-Backed Securities Loan Facility (or TALF) could ease credit and stimulate RV lending,” Coon says. “We believe credit will flow back into the RV market as lenders increasingly recognize that RV consumers are excellent credit risks.”

Less gloomy in the luxury market

The high-end motor-home market seems to have taken a gentler hit than the RV industry in general. Karl Blade, president of Oklahoma-based Newell Coach Corp., which specializes in luxury motor homes, says, “Most of our customers are cash buyers. Those that finance can still find financing if they have good credit.”

Those who don’t have the cash on hand may be taking a little longer to make the purchase but still aren’t willing to settle. “When they buy, they still want all of the amenities,” Blade says.

Taylor says, “We’ve found that Class A motor-coach owners have discretionary income.” This allows them to buy and maintain pricey RVs while also buying a lot at an upscale RV resort.

A study conducted by PKF Consulting, a travel and tourism consulting firm, found that “typical RV family vacations are on average 26 (percent) to 74 percent less expensive than other types of vacations studied.” That means even during challenging times, the cost of RV ownership can be a worthwhile investment, especially for people who travel a lot — or would like to.