In recent months, as RV sales fell off a cliff and the industry scrambled for any suggestion that things aren’t quite as bad as they appear, an especially tenuous claim has been advanced that RVing is actually cheaper than other forms of vacation travel. Yes, RVs may be gas guzzlers, and yes, RV parks are charging more than ever for even basic sites. But given that RVs also provide shelter and cooking facilities, they emerge as clear winners when compared with flying and renting a car at a vacation destination, renting a hotel room, eating all meals in a restaurant, yada, yada.
All of which may be true as far as it goes, and even more so the more people you can load into an RV. But it doesn’t go far enough. As I wrote on Memorial Day weekend, in response to a report making such claims from the RV Industry Association, “the argument that RVing is an economical way to vacation works only if such a vehicle gets deposited in your driveway for free and it never suffers any mechanical issues.”
One immediately obvious problem with the RVIA’s study, conducted by an outfit called CBRE Hotels Advisory, was that the operating costs it cited for various RV classes were seriously out of step with those reported by Go RV Rentals, which issued a contemporaneous study attempting to show the cost advantage of renting an RV vs. owning one. But the big unknown in both reports was the $64,000 question (almost literally) of what it actually costs to own an RV. How much overhead is there to owning an RV that the airline-flying, hotel-booking vacationer doesn’t have to shoulder?
A second potential problem with the RVIA study was how it had calculated RV purchase costs—or, more specifically, what it would cost to finance an RV at a time of high interest rates. As I wrote on the July 4 weekend, the RV Dealers Association had reported that the average RV sold in May went for $51,896, with most of that amount financed over 16 years at a 9.61% interest rate. Those are huge numbers. What were the chances that CBRE Hotels Advisory was using anything close to being comparable?
As it turns out, none at all.
Now that I’ve seen the entire 125-page analysis, it’s clear that the old saw about the devil being in the details was coined with this study in mind. To start with the second point first, although the study is titled “The 2023 Vacation Cost Comparison,” the financing figures it uses are several years out of date and therefore applicable only to RVs bought before the pandemic. For example, the study assumes that a new travel trailer was financed over 10 years at a 5.49% interest rate, that a new Class B was financed over 12 years at a 4.69% interest rate and that a new Class A motorhome was financed over 20 years at a 4.49% rate. Nice numbers—if you already have them, but not anything you got this year, last year or in 2021.
But financing is only a piece of the overall cost of ownership, to which has to be added the initial cost of the RV and from which—as CBRE notes—can be subtracted the tax-deductible cost of interest, just as with second-home mortgages. For reasons it never explains, however, CBRE completely ignores the costs of maintenance and upkeep, which are not insignificant and arguably much higher for a vehicle than for a second home. Moreover, the study computes a hinky “weighted average” for what it misleadingly calls the “total cost of ownership,” by separately calculating costs for new RVs and for used ones, then combining the two, with 36.2% of the total based on new ownership and 63.8% on used ownership. In other words, your results not only may but definitely will vary, unless you somehow land one of those mythical part new, part used RVs.
Yet here’s the real curve ball CBRE throws into the mix: even before getting to the bottom line, the study assumes that every RV will be sold after seven years—and therefore that the true cost of ownership can be reduced by the anticipated “residual value” of the RV at time of sale. So, for example, a new Class B that was purchased for $93,000 will have an expected residual value in seven years of $55,800, which means its cost to you (before accounting for interest) is just $37,200. Mix in the fantastical financing costs and the weighted-average methodology and assume 25 days of use a year, and before you know it you’ve reduced your per-day cost of Class B ownership to just $197 (or of Class C ownership to $233, to cite another example).
It’s entirely understandable why RVIA would try to buck up the troops with claims of a supposed RV cost advantage, what with RV shipments continuing their relentless slide—down 49.2% through the end of June compared to last year. But it’s a bogus, or at least meaningless, juxtaposition. As the numbers above illustrate, the comparison is between hard and fast numbers on the non-RV side—the price of a plane ticket, hotel room and car rental that you can reserve today—and the assumptions and weighted averages applied to a hypothetical family that owns a hybrid new-used RV that never needs repairs. And while it may make some abstract accounting sense to discount today’s costs by future residual value, that kind of math is meaningful only for businesses, not for a family of four trying to figure out how to budget a trip to the Grand Canyon.
RVIA, alas, has waded into the weeds on this one.
Most recent posts
Renting Dirt 