MSRPs for new RVs are set astronomically high - far higher than what you should actually pay. Why? It’s so if you have a trade-in, the RV dealer can still work the deal.
Let me explain…
New RVs, just like cars, depreciate as soon as you drive them off the lot, except this is even more true with RVs.
So let’s say you bought your old RV for $50,000, and you’re ready to trade it in. When you originally bought that RV, you may have put 20% down. And since then, you’ve been making monthly payments.
Depending on the length of your loan, you could be paying as little as a couple hundred dollars a month on a $40,000 loan.
But with interest, this means you may have only paid off a few thousand dollars of that original loan.
Both cars and RVs depreciate, but RVs depreciate far faster. So that RV you bought two years ago might be worth $30,000 now. And if you paid a $10,000 down payment and have been paying the minimum payment on a 20-year loan (yes, they do 20-year loans on RVs!), you might just owe more than it’s worth.
So how can you trade in your old RV – that you’re “under water” on – for a new RV? Enter these astronomically high MSRPs.
Your local RV dealer really wants to sell you that new RV, but you can’t buy it unless you offload your current RV. But If you owe $35,000 and it’s only worth $30,000, the dealer can’t exactly take your trade-in at a loss. They need to make back that $5,000 somehow.
That’s where the MSRP comes into play. Essentially, it gives dealers another level to make the deal work for a lender.
With a high MSRP (that no one is expected to pay outright), the dealer can tack on what you owe on your trade-in to your whole purchase price.
Without a trade-in, you might be able to negotiate that $50,000 purchase price down to $37,000 - about 25% off MSRP which is considered industry-standard (conservatively). But with a trade-in that you still owe $5,000 more than it’s worth, your purchase price might land around $42,000.
Now let’s say the MSRP was listed at $37,000 but you still owe $5,000 more than your trade-in is worth. If you were to go to a lender with a total purchase price of $42,000 ($5,000 over MSRP), it would raise some eyebrows and you’d have trouble making the deal.