State of the coach market

[ajhaig]

Selling our coach is proving to be more challenging than I expected. I recognize that our floor plan (1991 Marathon bunk coach) may not appeal to the typical Prevost demographic. The coach isn't selling for lack of interest. The dealer that is representing our coach sent me the following e-mail today:

"We have spent parts of the last two days with the local couple that would like to purchase your coach but with the new financing changes the banks have imposed in the last month we are unable to arrange financing for them. The banks we use have all decided to no longer finance any Class A RV's over 10 years old and any Prevost over 15 years old. I have been talking to another couple"..."with an 803 credit score and the banks won't even look at the deal due to the age of the coach. I have contacted 5 brokers and 7 banks that do RV financing with no luck. We will continue to call banks as I hear of ones that may finance coaches over 15 years old."

The problems in the credit markets are well known. The fact that lenders are limiting the age of the collateral on these types of loans will have and is having a profound impact on the market value of all of our coaches. Historical depreciation assumptions will no longer apply going forward. I believe that the impact of these changes will be felt all the way up to the converter level.

Having spent 20 years in the investment banking industry, I realize that markets can change. However, based on my experience I expect that the problems in the credit markets will last much longer then most people expect and the days of "any one with a pulse gets a loan" are probably gone for good (feel free to chime in Loc).

One of the attractions to selling our coach through a dealer was the dealers' working relationships with various lenders. I really like the dealer that we are working with and will stick with them, but at this point they are not adding the value to the transaction that I expected.

So now I'm trying to figure out what the correct clearing price is for our coach in the cash market. I'm in the camp that says the value of these coaches won't go back up so I'd just as soon lick my wounds and move on.

I'd be interested in any thoughts on this and specifically on what the correct value is for a coach of my vintage.

Thanks.

AJ

[dale farley]

AJ, I am sure you are aware that your coach is only worth what someone is willing/able to pay for it. In this market, I would think you only have a few options if you are looking for a "quick" sale.

You can continue to lower the price until someone considers it a deal they can't refuse. This can be rather costly if you are in too much of a hurry to sell.

You may also tell your dealer to ask for serious "Best Reasonable Offers" and see what appears to be a threshold that prospective purchasers are willing to pay.

Your third option is to wait and hope that someone comes along and just "has to have" this particular coach and is willing to pay your price. Of course, this is the most unlikely option. Good luck in getting a relatively quick sale.

[JIM CHALOUPKA]

AJ, I seem to remember that a Tommy Spirito, sorry I'm not certain of the exact name or spelling, has in the past through a connection with JPJ, helped to arrange/provide financing, when other sources failed.

Maybe someone else will remember exactly, and provide further information. I found it, or just eureka, it's Gulf Coast Financing. He was a sponsor, and bought breakfast for everyone at Branson, but I don't see him listed now??????????

An idea for you to make the deal, is for you to offer up a source (help to negotiate) for the financing, since you say you have prospective buyers at your asking price.

JIM

[Jon Wehrenberg]

If I was a lender I wouldn't consider lending money on ANY Prevost if the borrower wanted long term financing without a serious down payment.

Consider some facts. A newer Prevost is likely depreciating faster than the loan is being amortized. So as a lender my security is diminishing. Then as a lender I also have to consider some related issues. If the bus is my only security and the borrower has not made a substantial down payment, what stops the borrower from walking away from it after it has been trashed. Also, how many lenders know the difference between a plastic palace and a Prevost?

As the Prevost ages, if a borrower is unable to handle a 5 or 7 year loan on a relatively low value coach, how can that borrower handle routine maintenance and costs, mush less a surprise major engine or transmission repair?

I think lenders in the past have been greedy risk takers. They never looked ahead to when the economy would suffer a little or values would drop as quickly. I think they saw a 20 year loan as a never ending cash stream. Now that fuel has gone up, and coach values have gone down they probably can't find buyers for the coaches they already had to repossess so they are wondering why they want to finance more of these at such ridiculous terms.

How many owners would lend their own money for 20 years on a depreciating asset? How many would lend the same amount on a home of the same value as the bus?

I don't think we have seen this market for coaches bottom out just yet. I suspect that what represents a great deal today is nowhere near as good as the deals we will see next month or even a year from now. Until lenders get back into the market and until the owners who are financially strapped get rid of their coach and its associated payments, buyers with cash can just sit back and wait. And those of us who are going to continue to have coaches are going to see our coach values continue to drop until folks can again find financing.

What most people don't realize is that fine older coaches like AJ's are a superb value. But if they can't get financing, or they don't yet want to part with cash, it is going to take a continued lowering of the price until a buyer that can put a deal together shows up.

There is a reason why some converters keep the asking prices jacked up. They are allowing for the buyer that wants to trade in his Minnie Winnie to show up on paper as having made a substantial down payment, and thus can justify a loan.

Hold a second mortgage on the buyer's house AJ and do the financing privately. Your market demographics are not the older buyers who can pay cash, but the young family attracted to the bunks. A family that has not yet accumulated a pile of cash.

[Ray Davis]

I just financed through Spirito and he mentioned to me to stay newer than 1997.

Ray

[rfoster]

Congratuolations on your new coach Ray. I just noticed the signature line. With all that has been going on in my case, did I miss the post? If not We All Want to See PICs.

You and Ms Davis will be smiling like Micki and I. Ain"t it great!

[Ray Davis]

hi roger!

I posted a few weeks ago that we had placed an offer on a new coach. We made it official just yesterday at Marathon FL. We will leave the coah at Marathon for approx 5 weeks having final PDI finished, tires replaced and batteries replaced. We plan on picking it up mid Oct and heading north from FL to NY to watch our son in a waterpolo tournament.

I hope to maybe see some of my East Coast POG friends on the trip north.

[rmboies]

I hope to maybe see some of my East Coast POG friends on the trip north.[/QUOTE]


Ray and Kathy, we couldn't be happier for you and that is a smart looking coach....Remember, we can be on your way north from Florida so please let us know when you are coming through, ok? Looking forward to seeing your new ride first hand!

[wrongagain]

AJ,
Did you bring the coach home, "new england" or did you leave it out where you were using it.
I ask because when I was looking, and probably you also, there is nothing in the new england area to even look at.
Are you missing a marketing opportunity by not having it in an area where you will be the only guy selling one.
I know from my way thinking there is something to being able to buy close to home.
As far as the financing dilemma, when I was first looking there was a lot of concern over the ages of coaches I was willing to shell out for, so I decided to just write the check and have it over with.
But,...
"Newcoast financial services",
would have done it for me on a ten year loan, maybe they still will work with you and your potential buyers.

[mikedee]

I have sold many items on contract with a balloon in 3-5 years. You can normally get at least fair value, and interest at a point or two over lenders. Just try to get a decent down, say 20% and make sure the insurance policy names you as the loss payee.

I learned the business from my father, great banker just did not have a bank. At one time he had 88 houses, cars of all kind, boats, and motorcycle's on contract.

We never knew what we were going to find at home. It was great we got to use what ever he took back. Best two item's I remember were a Donzi power boat, and a cool Hobe blow boat