You bought the caravan a few years ago and thought it would suit you for a long time.
Then you started travelling.
Now you know what you’d change.
Maybe you want a different layout, more battery capacity, better off-road capability or simply a larger van for longer trips. Perhaps the children no longer travel with you and you don’t need bunks, or you’ve realised the caravan is bigger than you actually want to tow.
So you find the next caravan and start negotiating a trade.
There’s one number you should know before that negotiation gets serious:
How much do you still owe on the current caravan?
For caravan owners around Toowoomba looking to upgrade, the value of the existing van and its finance payout can materially affect the next purchase.
Your Loan Balance Isn’t Necessarily Your Payout
Start by obtaining a current payout figure from the existing lender.
Don’t simply look at the balance shown on an old statement and assume that’s what is required to close the loan.
A payout figure is calculated for a particular date and can take account of amounts required under the existing loan.
If settlement happens later, the figure may need to be updated.
This gives you the number that matters when comparing the debt with the caravan’s sale or trade value.
Then Work Out What the Caravan Is Actually Worth
There can be several different numbers floating around when you’re upgrading.
There’s the price similar caravans are advertised for privately.
There’s what you think yours is worth.
There’s the dealer’s trade-in offer.
And there’s what someone might actually pay for it.
Those numbers aren’t necessarily the same.
A dealer trade can be convenient because the old and new transactions can be coordinated, but a trade value may differ from what you could potentially achieve through a private sale.
If you’re considering both options, compare the net position, not just the headline selling price.
What If the Caravan Is Worth More Than the Payout?
That’s the easier scenario.
Suppose the existing finance payout is $55,000 and the caravan is traded for $70,000.
In simplified terms, there is $15,000 remaining after the existing finance is cleared.
That amount may potentially contribute towards the next caravan transaction.
But don’t automatically put every dollar of available equity into the next purchase.
Think about what else you may need cash for, particularly if the new caravan requires accessories, insurance, towing equipment or changes to the tow vehicle.
What If You Owe More Than the Caravan Is Worth?
This is the situation that needs more attention.
Imagine the current payout is $80,000 but the dealer offers $65,000 for the caravan.
There’s a $15,000 shortfall.
Trading the caravan doesn’t make that debt disappear.
The existing lender still needs to be paid out before its interest in the asset can be dealt with appropriately.
That means the shortfall has to be addressed as part of the overall transaction.
Depending on the circumstances and lender, there may be options to consider, but don’t assume the entire shortfall can simply be added to the next caravan loan.
Why Does Negative Equity Happen?
There can be several reasons.
Perhaps the original caravan was purchased with a small deposit.
Maybe a long finance term was used.
There could be a balloon or residual amount.
The caravan’s market value may have changed faster than the loan balance reduced.
Expensive accessories may also not add the same amount to resale value that they cost when purchased.
For example, spending $15,000 on upgrades doesn’t necessarily increase the caravan’s trade value by $15,000.
The result can be a period where the finance payout exceeds what the caravan could reasonably be sold for.
Don’t Hide the Shortfall Inside the New Caravan Price
When you’re comparing an upgrade, keep the numbers visible.
You want to know:
What does the new caravan cost?
What is the current caravan worth?
What is the existing finance payout?
Is there equity or a shortfall?
How much cash are you contributing?
What is the proposed new finance amount?
If those figures become blurred together, it becomes difficult to tell what you’re really paying for the new caravan.
A $110,000 caravan and a $110,000 finance requirement aren’t necessarily the same transaction.
A Bigger Deposit Can Solve More Than One Problem
If there’s a shortfall on the existing caravan, additional cash may reduce the amount that needs to be financed.
But again, don’t empty the savings account without looking at the complete household position.
Perhaps you have $30,000 available.
Using all of it to complete the upgrade may reduce the new loan, but what happens to your emergency savings?
What if the tow vehicle needs replacing?
What travel plans do you have?
The amount contributed should make sense beyond simply getting the transaction approved.
Check Whether Your New Caravan Requires a Different Tow Vehicle
This is particularly important when upgrading to a larger or heavier caravan.
The new caravan may suit your travel plans perfectly but no longer suit the vehicle sitting in your driveway.
Before committing to the van, check the relevant towing capacities, weights and requirements.
If the tow vehicle also needs replacing, the real transaction could become significantly larger.
For example, what looked like a $120,000 caravan upgrade may become a caravan plus a new tow vehicle.
Tell us about both purchases before finalising either finance application.
What If You’re Selling the Current Caravan Privately?
A private sale may potentially produce a different price from a dealer trade.
But if finance is still owing, the existing lender’s interest needs to be dealt with as part of the sale.
A buyer will understandably want to know that the finance is being cleared and that the transaction is being completed appropriately.
Don’t accept a deposit and promise the buyer everything will be sorted later without first understanding the payout and settlement process.
Contact the existing lender and establish what is required.
Don’t Spend the Buyer’s Money Before the Loan Is Cleared
If you’re selling privately and finance is owing, remember that some or all of the sale proceeds may be required to pay out the existing lender.
If the sale price is lower than the payout, you may need to contribute the difference.
Work that out before agreeing to the sale.
A buyer paying $60,000 doesn’t help if the lender requires $68,000 to release its interest and you don’t have the additional $8,000 available.
Know the numbers first.
What Happens to a Balloon or Residual?
If your current caravan finance includes a balloon or residual amount, that remaining debt forms part of the overall payout position.
It doesn’t disappear because you’re trading the caravan early.
This is why a low repayment at the beginning of a loan can look very different when you decide to upgrade earlier than expected.
If you’re considering a balloon on the new caravan finance as well, think about your likely ownership period.
If you tend to upgrade every few years, you want to understand what the loan balance could look like when the next trade occurs.
The Cheapest Repayment Isn’t Always the Best Upgrade Structure
Suppose the dealer shows you a finance option with a very attractive monthly repayment.
Ask how it was achieved.
Was the term extended?
Is there a large balloon?
How much deposit has been assumed?
Has any existing shortfall been included?
What is the total amount being financed?
A repayment is the result of a finance structure.
It doesn’t tell you whether the structure itself is appropriate.
What If You Want to Keep the Existing Caravan?
Some households consider keeping one caravan while purchasing another.
Perhaps the older caravan will be used by family or kept for a different type of trip.
That’s possible, but the existing finance doesn’t vanish.
Both commitments may need to be included when the new application is assessed.
Tell us upfront if the existing caravan isn’t being sold or traded.
The borrowing position will be assessed on the debts you’re actually retaining.
Your Circumstances May Have Changed Since the First Loan
Just because you qualified for caravan finance several years ago doesn’t mean the next application will be identical.
Your income may have changed.
You may have taken out a mortgage or increased an existing one.
There might be another vehicle loan.
Living expenses may be different.
You could now be self-employed.
Lenders also have their own current assessment criteria.
The new caravan finance application needs to stand on today’s position, not the circumstances that existed when you purchased the current van.
Think About How You Actually Travel Now
An upgrade is a good opportunity to correct what you got wrong the first time.
After travelling in your existing caravan, you probably know much more about what matters to you.
Maybe you thought you needed a huge caravan and discovered you prefer smaller camps.
Perhaps you now want greater battery capacity because you spend more time away from powered sites.
Maybe storage matters more than an extra television.
Use that experience.
The objective isn’t simply to buy a more expensive caravan.
It’s to buy one that better suits how you actually travel.
Don’t Let the Trade-In Distract You From the New Caravan Price
When negotiating a trade, there can be a lot of numbers moving at once.
The dealer may increase the trade allowance while changing the discount on the new caravan.
That’s why it helps to understand the transaction as separate components.
What is the purchase price of the new caravan?
What is the trade value?
What is the payout?
What is the changeover amount?
What finance is actually required?
Keeping those numbers clear makes it easier to compare one proposal with another.
Upgrading Your Caravan Around Toowoomba?
If you’re planning to trade or sell a financed caravan around Toowoomba, establish the current payout before you negotiate the next purchase.
Then obtain a realistic value for the existing caravan.
That tells you whether you’re bringing equity or a shortfall into the new transaction.
From there, you can make a much clearer decision about the new caravan, deposit and finance requirement.
Found the Caravan You Want to Upgrade To?
Send Thrive Broking the new caravan quote, current caravan payout and expected trade or sale value.
If the tow vehicle may also need replacing, tell us that too.
We can look at the complete transaction and investigate caravan finance options based on the actual amount required.
Before you negotiate the monthly repayment on the next caravan, find out exactly what financial position you’re bringing with you from the one you already own.