Caravan sales experienced a massive surge during 2020 and through this year as Australians were forced to rethink interstate and international holiday and travel plans. The appeal of the classic getaway RV remains high even as many restrictions have been eased. As buyers look to purchase their new caravan, many are also looking for loans for caravan purchase and that can include requesting no deposit caravan finance. Jade Caravan Finance takes a look at some of the considerations for no deposit caravan finance that buyers should be paying attention to when applying for a loan.
What is a no deposit loan?
The term ‘no deposit finance’ does raise some confusion for those seeking both caravan finance and other types of loans for consumer goods. The potential confusion primarily lays in the differentiation between seller deposits and finance ‘deposits’.
When placing an order for a new caravan, most caravan dealers will ask the buyer for a deposit or upfront payment. This is typically requested so the dealer can hold that particular vehicle from stock to sell or so a manufacturer can proceed with building the caravan as ordered.
As most caravans are built-to-order, requesting an initial payment as a commitment by the buyer is certainly not an unreasonable request. With a showroom model which is available for immediate delivery, the deposit may be considered as a holding payment. The buyer has made the commitment and they then need time to arrange their finance or to secure a suitable form of payment from a bank, possibly a bank cheque.
In the lending market context, ‘no deposit’ refers to the inclusion of the entire purchase price of the caravan in the finance amount. This may be the purchase price of the basic RV or the purchase price plus a range of optional extras and accessories as selected by the buyer at the time of ordering their van.
A lender needs to approve the applicant for ‘no deposit’ caravan finance and that assessment will include the borrowing capacity of the individual, the credit score and other aspects of the financial status.
It is worth noting, that even when a buyer does make an initial payment to the caravan dealer, a no deposit caravan loan can still be achievable. In these circumstances it is not unusual for the buyer to ask the dealer to ‘hold’ the deposit while they finalise 100% of the purchase price in the loan. When the purchase is settled via payment from our lender, the dealer would return the holding deposit to the buyer. Often such holding deposits are in the form of a credit card payment which is then reversed. Buyers would need to discuss these options with their RV dealer at the time.
What type of caravan loans are ‘no deposit’?
A no deposit caravan loan is not a specific type of loan. The concept applies across our loan portfolio for all types of caravans including traditional, off-road, toy haulers, camper trailers, mobile homes and others. Predominantly no deposit will be more applicable and achievable with the purchase of brand new caravans as opposed to second-hand, used vans.
A no deposit loan can be requested for the most widely-used loan type, the Secured Caravan Loan. With this loan the caravan is used as security against the loan. It should be mentioned that while the buyer can request that the full amount of the purchase price be included in the loan, the approval is still up to individual lenders.
Lenders will assess borrowing capacity and credit scores when considering such applications. Addressing credit score issues prior to making a caravan loan application can be advisable. Your Jade consultant will assist with these aspects as we know which of our lenders are most suited to individual customer requirements.
How will no deposit affect the caravan loan?
Despite RBA Governor Philip Lowe saying that household balance sheets were in a good position as a result of lockdowns, meaning households had cash reserves, many buyers still seek to have the full purchase price of the caravan included in the loan.
By opting for no deposit loan there are a number of positive and negative factors to consider, including:-
- A no deposit loan enables the buyer to reserve their savings or other available monies for other purposes.
- With the current historic low interest rate prevalent across the lending market, it can make sense for many buyers to borrow 100% of the purchase price.
- In addition to the actual sale price, buyers may be eligible to have the many extras and options available with caravans also included in the loan. Thus saving using current funds for this purpose. Your Jade consultant will advise how this can be achieved.
- By including the full purchase price in the loan, the loan amount is higher than if say an initial upfront payment was made which reduced the loan requested. This would result in the total interest payable on those two options being different. The no deposit option being greater.
- The larger loan amount may require a longer loan term in order to achieve the desired repayment amount. This longer term means it will be longer before the full ownership of the caravan is achieved. This may not be of any consequence to many buyers. But if seeking to take out other loans in the future, reducing debt faster by repaying the loan sooner, may be beneficial.
- The interest rate should not be impacted in general terms by a no deposit loan. The rate is primarily assessed and offered based on an assessment of the ability of the borrower to repay the loan.
Many of these considerations are based on personal preferences and personal decisions plus the decisions of the lenders. Having a full discussion about whether or not no deposit caravan finance is best suited to your individual requirements with one of our consultants may assist you to arrive at a decision.
For a no deposit caravan loan quote, contact Jade Caravan Finance at 1300 000 003
DISCLAIMER: THE DETAILS AND INFORMATION IN THIS CONTENT ARE PREPARED AND PRESENTED PURELY FOR INFORMATION AND NOT INTENDED IN ANY WAY AS THE SOLE SOURCE OF FINANCIAL ADVICE FOR CARAVAN PURCHASING. IF ADDITIONAL FINANCIAL ADVICE IS REQUIRED, READERS SHOULD REFER TO A FINANCIAL ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY ERRORS, PRODUCT DESCRIPTION VARIATIONS, OR OTHER MISREPRESENTATIONS OF INFORMATION AS PRESENTED.