RV Prices May be Stabilizing

[dale farley]

On January 6, 2010, the National Sales Manager of Capital RV Sales sent the following notice to its potential customers. Maybe this is the beginning of price stabilization? May or may not have any impact on bus conversion prices?


The New Nada Book is out & good news for RV Owners this is the first time in many years the prices didn’t drop by 5-8% they held this last quarter!!!!

[merle&louise]

I have noticed that Newell has actually raised their prices by cancelling the price reductions on their website. Things are looking up!

[Jon Wehrenberg]

Strictly a guess, I don't think our used coach prices will rise, but I see depreciation being non-existent for a while. If I'm wrong and prices do rise that is good.

[phorner]

The way I see it, the only way for current prices to rise at all will be if demand somehow begins to substantially exceed supply.

And there's a lot of supply....

[garyde]

I am not feeling the Love. Marathon is asking $2 mil for 2010's and used Coaches 3 or 4 years old going for $700,000 to $1 Mil.
Not much selling for that, but retail prices have not adjusted.
Owner's selling their own Coaches probably are the only ones discounting significantly.
It will be interesting to see the landscape a year from now.

[Jon Wehrenberg]

Actually I think the market pricing reflects a number of issues, all of which combine to create a skewed picture.

There are people who are going to afford a $2 Mil coach no matter what the economic climate. As the finacial crisis ebbs more of them will be back into the market.

The late model used coaches are likely to retain a greater portion of their value because they can be financed. So the buyers of those coaches can also be more active in the market. That segment may actually include folks that are more likely buyers of older coaches, but the lack of financing pushed them into newer ones.

The older coaches are disproportionately cheap because the number of buyers that do not need financing are few and far between, dealers do not want to inventory something that cannot be financed, so to sell a coach it ends up being the individual owner mostly, and since the population of cash buyers is relatively small they have no choice but to drop the price to unrealistic levels.

If this financing situation does not change in the next few years people who have been wanting the XLII style coaches with slides are going to see some real bargains.

[ajhaig]

Is lending on these older coaches an attractive business?

One problem is that you need to term out the loan so long to get the payments affordable:

Assume you finance a 12 year old coach for 20 years and the owner keeps it for 10 years - what is the market for a 22 year old coach and how many people on this site would consider buying a 1988 coach? And the lender still has 10 years left on the note.

Another issue is if a loan goes bad on one of these older coaches, by the time the lender gets their collateral back the coach is almost guaranteed to be a basket case. It's anyone's guess what the loan default rate would be on an older coach, but you can bet that the loss rate on the bad loans would be enormous.

Maybe the current environment is the new reality?

I'd like to get a deal on my next coach, so take my comments with a grain of salt!

[mikedee]

I think Jon has it about right on the price points/ finance options. We have been messing in the Vegas real estate market and have found has some of the same dynamics. The better lower end property under $200 K is selling like crazy to cash buyers and cash investors. Get the price up to $400 K and the property will sit, not a lot of people with that large of cash assets.

One way we move Vegas property over the market is take a decent down, charge a pretty high interest rate, and carry the paper. Easier on a piece of non moving real estate that a bus. Holding the paper has been the story of the car companies for the last 25 years.

[Jon Wehrenberg]

AJ,

This is a personal opinion and may be exclusively mine, but any financing structure such as long term loans that ultimately leave the buyer upside down because the depreciation rate is faster than loan amortization is an extremely bad business and is almost guaranteed to fail.

We are all big boys and girls so if we are in a position to buy a Prevost it is likely we can figure this stuff out. It is the people who may be getting into a coach before they are financially capable that will want such a program as 10 or 20 year loan amortizations. Every body should understand that a 15 year old coach may still have 20 years of life, but to get that life span an owner has to maintain the coach. We are almost at the point where the simpler coaches have long ago reached that age, and the ones now approaching that age are going to be maintenance issues. If a person is so stretched they need 10 or 20 year terms on a coach, how can they maintain power awnings, power windows, power shades, slides, slide seals, plus replace very expensive batteries, tires, etc. in addition to all the normal maintenance?

Di and I never hesitated to borrow money for our businesses, especially when they were growing at a pace faster than we could finance from cash flow. But planes, cars, buses and the like were non essential purchases and if we couldn't pay cash, we couldn't afford them. That way when times got tough we were not stuck with a depreciating asset we could not get out from under.

[jack14r]

I was at Tiffin Motorhomes yesterday because I sell them some mirrors,at the high they built 17 a day,at the low they built 3 a day,today they build 8 a day.They would like to increase production as their backlog is growing but some suppliers cannot supply certain products at a higher rate,I bet that some suppliers do not have the cash or credit line to increase their production and they are living from week to week.Tiffin is very optimistic about 2010 and they think that there is a lot of pent up demand.I know that their product is not a Prevost but at least someone in the RV business making progress.

[Orren Zook]

Jack,

It's not just the RV industry with issues, right now I've got some major HD truck component suppliers with 16-18 week lead times for products that should be setting on their warehouse floor... and many others with order fill rates running around 80% or less. Many of the same brake, suspension and drive train components are used on our coaches. The just-in-time mentality of the major players has created a tremendous backlog for both the OEM's and aftermarket. As the sales increase, OEM's are not able to project sales as the market needs increase and don't want to warehouse additional product while they retool manufacturing. It's a catch 22 right now.

[GDeen]

....... Vegas real estate market ....... The better lower end property under $200 K is selling like crazy to cash buyers and cash investors. .........


You rang?:cool:

[Jon Wehrenberg]

I wholeheartedly agree with Jack.

Typically when a business is growing they can finance their increased production (that means increases in inventory, work in progress, and receivables) through cash flow or a line of credit. Money is tight during growth periods as all businessmen know.

But when the growth stops and the business contracts, the business is depleting inventory, its receivables are shrinking but still providing cash flow, and because most business owners do not like laying off people they spend more than they should leaving themselves ill prepared financially for the upturn in business. Those businesses that still survive now have little cash, little inventory, lousy financial statements and balance sheets, and are struggling to find capital to finance the new demands of the market because the indicators the banks look at to increase the lines of credit all look crappy.

Getting out of this situation is going to be tough and long term. The good news is if the converters and manufacturers of coaches are going to struggle to match market demand there may become more buyers than product and prices will not only stabilize, they may actually climb until production rates can match demand. We can only hope. Now may be the perfect time to buy.

[jack14r]

Orren,I agree that some basic parts are in short supply,I have had problems in the past year buying items such as bearings,belts,etc.for my rebuild shop,if I needed 2-4 of an item I could always get it but if I needed 10-20 they were usually back ordered.I was really surprised at the optimism at Tiffin,and it is for real.