April 30, 2017
I’ve been meaning to get this blog going for a few months, and was finally spurred into action by an article I read the other day, which made me rather mad.
In this article, a motorhome dealer suggested that a family of four buying a motorhome was a sound financial strategy, as it would save money on family holidays. This annoyed me enough to get my finger out, and hammer at a poor, unsuspecting keyboard with it. If you’re not already financially free (or even if you are), PLEASE don’t kid yourself: unless you can use it for months each year, or use it to live in, a motorhome is going to do its utmost best to render you poor.
Back to that article. The author wrote it, I’m sure, based on what they thought to be clear logic. Sadly many people would read it without question and feel it gave them the thumbs-up to buy a motorhome, as it would save them cash. ARGGGGHHHHH! It won’t save you money, it will burn your cash, so much of it, it’s seriously unfunny. And here’s why…
The Motorhome Dealer’s Case
The article (“How Motorhomes Make Holiday Savings”) made their case for buying a motorhome using the following points (I’m not linking to the article as I’ve no interest in harassing the dealer, just the poor logic and financial thinking in this particular piece of writing):
- An average two week peak season family holiday costs £4700 before spending money, from an independant survey (and they reference the website of a money lender as having done this ‘research’)
- Over ten years this family would therefore spend over £50,000 (including inflation), before costs for eating out
- The article goes on to say you’re likely to be having a few weekends away, including expensive eating out and snacks (plus some highly dubious speculation about foreign exchange rates post Brexit) could cost you £100,000 over ten years
They then go on to make the case for buying a motorhome, using these key points:
- A reasonable middle-ground cost of a motorhome to be £40,000, which will depreciate to £20,000 after ten years
- The £4700 package holiday cost should be reduced to around £1000 per year by using the motorhome
- By using the motorhome to store and prepare your own food, eating costs will add to the ‘saving’
- Towards the end they revise down the £100,000 package holiday costs to “£60,000 to £70,000”
- And then boom – it all makes sense – that £40,000 for the motorhome has been saved up by avoided costs on holidays, plus you’ve an asset worth £20,000
With this logic, it’s a no brainer to shell out £40,000 of your hard earned cash. Rush down to your nearest dealer and sign on the dotted line folks. Hmmm. But what’s that I can see in my peripheral vision as I grasp the biro of doom? Oh yes, it’s reality.
The Reality – What that Motorhome will REALLY Cost You
OK, let’s put emotion to one side for the moment, using our old trusty impartial friend: the spreadsheet. I’m ignoring some of the outrageous suggestions above, like the fact Brexit might increase overseas costs by 10% to 20% is just fool’s talk – Euro to Pound rates could go either way or not change at all. I’m also assuming the buyer would have £40,000 in cash, as no-one in their right mind would take out a loan to buy a motorhome. If the buyer used finance, the dealer’s case gets even more torpedoed.
Here are the flaw’s in the dealer’s logic:
- They don’t include any running costs for the motorhome – MOT, servicing, insurance, breakdown cover, storage, consumables, repairs, the costs to buy all the stuff that goes in it. I’ll hazard a very rough and ready guess at about £1500 a year for these.
- They don’t consider the fact you could have placed that £40,000 in an INVESTMENT instead of a DEPRECIATING ASSET. If you could get a 7% return on £40,000, you’d be pulling in £2800 a year with that money. No, the banks won’t give you this, but it’s not an unreasonable long term return on the FTSE 100, or S&P 500. I’ll go into this another time.
Taking these assumptions and firing up the spreadsheet, I’m reckoning at the end of ten years the motorhome will have cost you £75,000 just to own it. Add in the article’s estimated £1000 a year for food and the like, and your holiday costs with the motorhome are up to over £85,000.
The Telegraph here suggests various two weeks peak season holidays for a family of four can be had for between £1000 and £2000. I’ve no kids, so I have no idea how accurate this is, but by my reckoning, with inflation running at 3%, you’d need to be getting through over £7000 a year on package holidays and breaks to make that £40,000 motorhome worthwhile.
So, What Are Your Options?
Let’s assume you really wanted to be taking your family on motorhome breaks, but don’t much fancy shelling out tens of thousands of your hard-earned more than you have to. What could you do?
Option 1: Buy a motorhome, just don’t spend £40,000 on a something which you’ll use for a few weeks a year. This is BONKERS. Autotrader.co.uk currently lists 248 four, five and six berth motorhomes for between £16,000 and £20,000. At £16,000, the ten year cost to own the motorhome comes down to £40,000, which equates to about £3500 a year of package holidays.
Option 2: Rent a motorhome. I know, most everyone thinks renting stuff is bad, as you don’t own the asset. They’re wrong. In 60 seconds I’ve just got a quote for a 2 week mid July six berth motorhome rent in the UK for £1,722. Over ten years with 3% inflation those two weeks a year would come to about £20,000. Which would leave you rather a lot of cash for other breaks compared with the £75,000 dealer option, or even if you’d bought a motorhome for half the price they suggest.
Option 3: Take your soft, floppy emotional hat off, and pop on your ‘Financial Freedom’ hard hat. Use your family car, and take holidays across the UK and Europe in gites, tents, B&Bs. Invest the money you would have seen incinerated by that motorhome, and feel the incredible joy at seeing money ROLL IN to your family fun fund, rather than wondering why on earth you feel so skint.
What I’m trying to get across with this article:
- Don’t let ANYONE (me included) dictate what’s a good way for you to spend your money. Do your own thinking. Spreadsheets are great for big spend decision like this, they strip away the emotion and show you the nasty-looking bare bones of the thing.
- Make no assumptions about RENTING. Sometimes it makes financial sense, other times it doesn’t. Do the sums, and work it out for your particular situation.
- This isn’t just about motorhomes. It’s about ANY BIG SPENDS you shell out for, on things which cost you money rather than earning you money. Boats are another good example, as are motorbikes, and even houses. In most circumstances these AREN’T INVESTMENTS. They are selfish swines, they take, take, take, and never give back.
If this post has you curious, keep reading (sign up here – you’ll get a maximum of one email a week). In the coming months I’ll pop up posts every now and again to describe how come I have the time and energy to be writing this stuff. I’m 44 and I don’t have a job you see, I don’t need one, as even with some very basic investment knowledge and lifestyle changes, my wife and I have enough money coming our way through investments that work has become optional. I’d like to help you do the same, and in return to learn more from you about the journey to, and into, financial freedom.
P.S. I love motorhomes. I’ve travelled across 35 countries in them, slept in 798 different places from the Arctic to the Sahara, and had a pretty incredible three years (and counting) of freedom – see ourtour.co.uk. I can highly recommend them as a way to travel, but for a family of four who can only use them for 2 or 3 weeks of the year and a few weekends – they’re a financial disaster.
- Phil DickensApril 29, 2017 at 2:02 pmPermalink
And if you factored in our Motorhome with its running costs similar to that of an airbus A380 it strengthens your point even more! Good article!!!
- DebApril 29, 2017 at 3:53 pmPermalink
Well this is a lovely new shiny blog! You inspired me to get serious about making our money work for us and started me off on an adventure round Internetland reading Pete Matthews Meaningful Money blog, watching How to Own the World videos on You Tube and researching the 7IM Investment, Fidelity, Hargreaves and Lansdown and Vanguard investment sites. We had always assumed investing what something other people did, not us but what we’ve learned has inspired us to take some big decisions and actions to create passive income streams to reduce our dependence on employment even though we both enjoy our jobs – at the moment! Our thinking has changed and opened up a whole new set of options. We just need to decide what we want. Its exciting, like your new blog which I hope inspires more people to look beyond the 9-5 and create the lives they want. All the best!
- Dave CounsellApril 29, 2017 at 5:27 pm
We use ours for 6 weeks a year, lots of weekends and to offset hotel costs when visiting family and friends. Bottom line is that its not really there for us to save money but compares favourably to other types of holiday.
No way i can retire much earlier than 55 anyway due to children.
- MeganApril 30, 2017 at 8:48 amPermalink
I am with you on your point with spreadsheet and tracking expenditure. After a long time following your blog I’ve decided to stick with my “campervan” with a porta potty! I doubt I’ll ever full-time anyway and I know that I can deal with the reduced space. It doesn’t stop us using Aires in combination with Campsites when we are on our travels in Europe. Plus side I can transport me and 5 other legally and I can use this my daily transport. Also keeping the vehicle on my drive.
- JaneMay 1, 2017 at 5:16 pmPermalink
All our camper vans and motorhomes we have had over the years have always been a financial drain. I dread to think what we’ve spent over the years on servicing, repairs, mot, gadgets, tyres, insurance, tax, depreciation etc etc for something that sits, stationary, outside the house for a considerable amount of the year. We could never have justified it as ‘saving’ us money in the long run. Nope definately not. The only way we can justify it is the freedom it gives and that we love that type of holiday. Looking forward to reading more on your new blog. You guys were instrumental in giving us a kick up the backside to change our habits and educate ourselves financially. We view life completely diferently now!
- Alan – Going NomadMay 23, 2017 at 11:31 pmPermalink
With a story like that presenting a false financial analysis running in the mainstream press, it seems that all the previous time share salesmen have now been re-employed in motorhome dealerships 🙂
- DavidMay 24, 2017 at 11:25 amPermalink
I would say fit a tow bar to your car and buy a caravan instead. With caravanning being so ‘uncool’ and lots of baby boomer generation selling up or upgrading, very decent second hand caravans can be a acquired for about £1,000 at the moment, and that usually includes all the add-ons as well. To state the obvious, if you’ve only paid £1,000 that’s the most you can lose in depreciation, and you don’t need to bother with insurance, just the occasional servicing to make sure it’s safe. Even in peak season you’ll rarely pay more than £20 to £25 a night and often a lot less. Compare that to the cost of accommodation for a family of 4 during school holidays (not to mention plane tickets) and you very quickly break even. For a family it’s also much more practical to go to one place and then stay there for a week or longer, rather than travelling to lots of different places every day or two. So that’s another reason why caravans win out over campers.