New Interstates and total cost-of-ownership

[85MH325]

Originally Posted by Hittenstiehl

I was beginning to think like PatLee also and thought maybe I just didn't really understand what the depth of your question was. Your further explanation may have put it into a different light and might get you different answers now.
...

It seems you might be asking about the actual real life tangible things they do in their financial portfolio to make such a big purchases with such big depreciation. Yes that's what you said initially but maybe we didn't read it that way.
...

I would have an equal curiosity question for you. As you said you're nine years into retirement and not yet medicare-eligible (65) then you have retired quite young. I have never been able to fully comprehend the financial tenacity and savings that it takes to be able to do that.

Yes, that's exactly what I'm asking: What financial considerations do you take into account when buying an asset that depreciates with the speed and in (what seems to me to be) huge annual amounts these do to mitigate that loss? And how do you deal with that kind of loss to your net worth AFTER you acquire it?

Thanks for your thoughtful reply.

And as to your question... I don't think I retired young, particularly... I was 55. I was able to do it because my line of work was physically demanding and it's not wise (nor safe) for folks to stay on much past that. The retirement plan is adequate (not perhaps as much as I'd like, but adequate) and we had other commercial real estate investments that produce income that we've acquired over the past 25 years. My wife is a professional and has no intention of retiring, so her income provides additional stability and medical benefits. I manage and maintain our small residential rental real estate holdings.

When my wife DOES retire at whatever age she chooses, we'll have full Medicare and SS supplementing our pensions and other retirement incomes. We won't be wealthy beyond the dreams of avarice, but we'll be secure.

It takes some planning, but it's not rocket science. You just have to have a plan. And then try to NOT lose $60K to depreciation in three years.

[Alex AVI]

Originally Posted by Hittenstiehl

I was beginning to think like PatLee also and thought maybe I just didn't really understand what the depth of your question was.

I would have an equal curiosity question for you. As you said you're nine years into retirement and not yet medicare-eligible (65) then you have retired quite young. I have never been able to fully comprehend the financial tenacity and savings that it takes to be able to do that.

85MH325 - I too was beginning to think exactly like PATLEE but was just not courageous enough to say so, only because you seem to be very sincere about explaining your main question of "How do we deal with the loss". Then HITTENSTIEHL mentioned your retirement profile and I thought, holy cow, we are almost in the same boat. So maybe I can expound more from my experience, give some more personal info and see if it at least helps you understand. So here goes:

I started working full time 40hrs/week as soon as I entered college. I paid my way through college because my folks could not afford it. I used my full time job's college assistance program which paid for all my courses related to my current job. The ones they did not pay for, I paid for from the money I saved. Then I worked a part-time (16hrs/wkend) desk job (switchboard operator) during the weekends so that I could get paid to sit down and read my college textbooks and do homework. Kill 2 birds with 1 stone and get paid. Then while my buddies took summer vacation, I took accelerated courses every summer. I finished my entire Electronics/Computer Science Engineering Bachelor's 4-yr. degree in exactly 3 yrs. I lived dirt-poor, under my parents roof, had no social life.

Because I decided to dedicate 3 years (365x24) entirely to studies and nothing else, I am now earning a full time engineering job 1 yr. ahead of my classmates who are just starting the senior year. Then I got married pretty early soon after. My wife is a medical professional. Both our jobs required many, many hours beyond 40hrs/wk. She would get called on emergency cases, I would get called when aerospace computers went down. Imagine this routine happening for 20yrs straight. We had a live-in nanny for our 2 daugthers. We made a TON of money to afford it. My company HP moved me around the entire US multiple times because I was top 1% in the engineering payscale. My wife had jobs waiting for her at the next city we were moved to without even seeing her for an interview. As soon as I found out a move to a different city was approved, I would call hospitals on her behalf while she was doing surgery and secure her a job on the spot (like a head hunter).

So, you can see, we were living the good life but only in terms of generating wealth and preserving it for our retirement. While my wife's sisters and my sisters were living it up with fancy cars, European vacations, designer clothes. etc. etc, my wife, 2 daughters, and I were content on cheap family vacations to the HP facilities that cost little to none to book. And we drove the company car using company gas. BUT here's where this long story ties back to your question - this was my planning stage for how to handle the loss you were talking about. While everyone else was taking those losses early on in their lives when they could least afford it, we were socking away a lot, taking advantage of company matching in retirement, 401k, deferred profit sharing, etc. Every paycheck had 25% put away to maximize company matching funds.

During those early years, we did not follow the "work hard, play hard" model. We worked hard, played safe. Investments were always a balanced portfolio, contrary to most investors and advisers would say. I did not believe in being too aggressive and greedy which came with higher risk. If someone said but you could earn 10%, I would counter with but I am happy with my 7.5% and sleep better at night.

With the above strategy, we got more comfortable living within our means. And we were still living better and better than before and having more & more discretionary income. We kept upgrading to better homes. In fact, we only bought 1 existing home. Everything after that, we built from scratch. We were so comfortable living poor (better description is living cheap), that a 30yr mortgage did not make sense, 10-15 yrs became our benchmark. If the next house we built could not be paid off with a 15 yr. mortgage, then scale down the price to where it could be.

The above strategy then allowed us to be able to send our 2 daughters to 4 yr. college with ZERO student loans. That was our lifetime gifts to them. I told them ahead of time, you may or may not have a big inheritance when we die but you will not have to pay off a big student loan. And at the very least, you will have a $1M home fully paid off to split between the 2 of you once both their mom & I are gone.

If you have read this far and are upset above how long this is taking, this is to prove that one does not decide on "How to handle the loss" after the fact. You decide how to handle the loss by PLANNING AHEAD OF TIME for the loss. We have worked hard, lived safe all these years. Now that the kids have their own homes & families, it is time for us to PLAY HARD. That was the Master Plan.

Like you, I also planned to retire before 60. But our accelerated living cheap model allowed me to retire 1 month before my 50th birthday, when HP offered to buy me out with an EER (Enhanced Early Retirement). The package allowed by the IRS for them to transfer another lump-sum payout of the 6-figure variety directly into my 401K tax-free. The package also provided for medical insurance. I could have rejected the offer, worked 15 more yrs. and earned more in the process. But one has to factor the 1 time benefits of such an offer and decide which is a more stable option to take. I took the EER because of the medical insurance and the non-taxable cash lump sum dumped into my 401k. I am only 61 but have already enjoyed my retirement & grandkidss into my 12th year WHILE I AM HEALTHY and able to do so. I already PRE-PLANNED & PRE-PAID the losses you are so concerned about in terms of lifestyle sacrifices and expenditure sacrifices from my 18th birthday to my 50th. Now I am spending some of it without worrying too much about things like depreciation. Am I spending like a drunk sailor? To some it may look like it but to me it is not.

I am still living within my means and only spending what I can afford. I have already paid for the depreciation well before I bought my rv. The planning is done. For us retirement is not about planning anymore, it is about enjoying and doing. If you still planning how/what to do at this stage in your life, you doin' it half-ass backwards. Things should be in cruise control, with minor tweaking here & there, and even have pre-planned for big major catastrophy like (heaven forbid) death of significant other or major medical issues, LTC (Long Term Care).

[Hittenstiehl]

Very good responses from both of you thank you so much for sharing.

[Foiled Again]

Originally Posted by 85MH325

You guys are all missing the point of my original post. Yes, I recognize that all of us expect some expense in owning RVs, I understand there's going to some depreciation, and I understand what drives the market, and why folks want new.

What I'm asking is how anyone can afford a $50,000-60,000 loss to depreciation over two or even three years on a new <roughly> $190k coach?

I was talking to a service manager (former salesman) at an RV dealer where I had some service done, and he told me that they're selling every van they can get with TWENTY year mortgages. For an Airstream, even at a reasonable interest rate, that'd be $1200/mo for twenty years. I haven't calculated the break-even point where you can sell the van without being upside-down and fund a negative-equity position... but I'm interested in hearing how folks plan for that kind of loss.

Do you just have to have the cash to lose? How do folks manage that?

A lot of people make over 100,000 a year... and have no clue what they spend. Quite a few make "wierd" life choices, like using 1 or 2 Consumer Cellular phones and basic cable instead of having 5 AT&T cell phones, unlimited internet premium cable and 3 streaming services. They don't buy a new Television every year and don't have one in every bathroom and bedroom either. The home bath may even still have tile in Mamie Pink (Mamie Eisenhower) and not feel compelled to redo it even if it is dated.

I see a lot of trailers and motorhomea in storage or rotting away in back yards. I wonder how many owners have lost interest versus can barely afford the payments, and have not a cent left over to put the thing on the road.

A SPRINTER platform RV can be a daily driver in a pinch, and in silicon valley, spending one or two nights a week in the company parking lot may be better than a two way 200 mile commute every single day.

I do wonder how many get repossessed or voluntarily returned to the dealer on consignment.

[Boxster1971]

Originally Posted by Alex AVI

… If you have read this far and are upset above how long this is taking, this is to prove that one does not decide on "How to handle the loss" after the fact. You decide how to handle the loss by PLANNING AHEAD OF TIME for the loss. We have worked hard, lived safe all these years. Now that the kids have their own homes & families, it is time for us to PLAY HARD. That was the Master Plan. …

ALEX - thank you sincerely for sharing this life story. I have purposely avoided commenting on this thread because I thought the premise of OP's question was somewhat silly for a mature adult with financial security.

But your response "hit the nail on the head". PLANNING is how one deals with the depreciation loss of buying a new RV. Anything less could result in your financial ruin - especially for those who buy these expensive RV's on long term loans.

[85MH325]

Originally Posted by Alex AVI

85MH325 - I too was beginning to think exactly like PATLEE but was just not courageous enough to say so, only because you seem to be very sincere about explaining your main question of "How do we deal with the loss". Then HITTENSTIEHL mentioned your retirement profile and I thought, holy cow, we are almost in the same boat. So maybe I can expound more from my experience, give some more personal info and see if it at least helps you understand.

Thanks for the personal vignette. I agree with you completely. I was neither the extravagant vacation person nor as committed to wealth as you... I'm somewhere in the middle I guess. My chosen career was never a high-income potential. It had other less tangible, but equally satisfying rewards. It was dangerous. Many of my former co-workers haven't lived to make it to retirement age to play hard, or were disabled on the job along the way, so I tried to make a balance between being as fiscally responsible as I could while still making memories with my wife and kids on trips when we could. I'd hoped I'd make it to retirement. I was fortunate to make it and still be in good enough physical condition to enjoy retirement.

So, it's apparent that it's necessary to have a significant nest egg at your disposal to be able to absorb the costs of ownership of a new Interstate coach.

Since it appears that some of you think I'm some kind of troll or worse yet, I'll provide a short bio. I was one of the original moderation staff here back in '04-'06 after I joined. Andy started Airstreamforums.com in '02 and I lurked until I joined in '03. Andy had a '62 Bambi, and I had a '61 Ohio Bambi at the time. I had Airstreams continuously for twenty years until 2006. Check my signature for those. My first Airstream was a '70 Safari Special single axle that I bought for $2000 in 1987 and lived in for a year (a story unto itself.) Over the years, I've bought Airstreams to use, and bought them to flip for cash along with fiberglass trailers like Scamp and Burro along the way as supplemental income.

I chose a career in public safety when I got out of the Navy. The pay was never great, but we got by. I got my degree through the GI bill while working full time. At one point, in 1998 working for a small agency, had my wife not been working, I'd have qualified for full welfare benefits while working full-time as a cop. My kids will NOT inherit a $1M house, although we did get them through college.

As I said, we've done all right for ourselves financially in the past twenty-five or so years... but there have been challenges along the way, and it's apparent that our income has never been in the same league as that of many of you.

I was appalled when new Airstream trailers topped $50k, and I'm in absolute disbelief that an Interstate can have a list of over $200k.

So, I suspect my perspective may be a little different about the value of money lost to depreciation, particularly when the amount is hovering around the $50k mark over say, three years.

I do appreciate all the varied thoughts that we've seen posted. Thank you all.

[Boxster1971]

85MH325 - thanks for sharing your details and your service in law enforcement. I also served a full career in the Navy and 18 years in Aerospace Industry. I'm about a decade older than you and Alex. I just had to work longer to build my nest egg for a secure retirement.

Based on your experience you know the value in buying a used RV. That is an important point of this discussion. If one does not have the resources to buy a new RV and live with the impact of the depreciation - they should buy used, live within their means and be happy.

Safe travels,

[weirdstuff]

Oh, now I see what you're asking.....

Like many on here have now replied, basically

"You decide how to handle the loss by PLANNING AHEAD OF TIME for the loss."

I think of it like this too....if I've planned ahead (i.e., saved up a lot of money) to travel around the world for 3 years, and I know that trip will cost about $50,000, then I know that I will have 3 years of adventures, and at the end of it I will have $50,000 less than when I started. BUT...if I WANT to travel around the world for 2 years at a cost of $50,000 and haven't saved up the money to pay for it, then I'm not going to do it and I will have no adventures, but will still have money in the bank.

[Titus]

85MH325
As they say 'it's all relative'. In your case you notice the cost to your assets when maintaining an Interstate lifestyle, and would like to somehow manage the massive depreciation that accompanies a new Interstate. Others of the forum do not have that same issue. Yes, they would prefer to not have eat the depreciation, but the depreciation has no significant impact on their total assets. But up the ante a bit, and others of us would be in the same place as you. If I loved to fly and wanted to buy a new plane I would have to think long and hard about how to manage it, as that purchase, and depreciation, would make a big dent in my assets.

[sarge12212]

Isn't that just the way of the world?
Some people have more money than you and are comfortable spending it because 50 or 60k is less of a percentage of their total income than yours. And that's ok.
You have more income than I do, so you are probably more comfortable spending more disposable income, as a percentage of your total income, than I am.
And that is ok.
As it has been said, income is relative BTW, if I had a Lamborghini, I would drive it. It was costing your friend more than an old Army surplus car's 15¢ a mile for it to sit parked in the garage.

[BJCallahan]

It’s a depreciating asset not an investment

[JohnSn]

I have a much different take on the financials. But its for the trailers, not the rvs.

I am a recent retiree and I love to travel but dont care much for hotels and luggage and air travel. So, rving is natural. I have an airstream trailer for many reasons but I justify the choice as its free.

Free??!! You ask. Nope. Not the interstates. Yes, the trailers. And this is part of the reason we’re in a trailer.

First, in 25 years when i’m too old for this, I predict I’ll sell it for what I paid for it. Part of that is based on the fact that I got a killer deal when I bought it.

Second, zero down 4% financing means the money left in the stock market makes more in a year than the payments.

Third, I will have a trailer. If not an Airstream, something else. That something else wouldnt last 20 years. Maybe 7. So,I’d have to buy 4 of them to get through my retirement goals. With inflation, that could be a lot of real dollars.

Thats my financial justification. It has a slight hint of Pollyanna thinking...

[85MH325]

Originally Posted by JohnSn

I have a much different take on the financials. But its for the trailers, not the rvs.

I am a recent retiree and I love to travel but dont care much for hotels and luggage and air travel. So, rving is natural. I have an airstream trailer for many reasons but I justify the choice as its free.

Free??!! You ask. Nope. Not the interstates. Yes, the trailers. And this is part of the reason we’re in a trailer.

First, in 25 years when i’m too old for this, I predict I’ll sell it for what I paid for it. Part of that is based on the fact that I got a killer deal when I bought it.

Second, zero down 4% financing means the money left in the stock market makes more in a year than the payments.

Third, I will have a trailer. If not an Airstream, something else. That something else wouldnt last 20 years. Maybe 7. So,I’d have to buy 4 of them to get through my retirement goals. With inflation, that could be a lot of real dollars.

Thats my financial justification. It has a slight hint of Pollyanna thinking...

Actually, I'm with you on the trailers. I've never lost money on the sale of an Airstream trailer, and I've actually made a signficant amount buying them right, using them for some period of time, and selling them usually at a profit. And you're right... that's trailers. Interstates are a wholly different deal; they depreciate, and depreciate a LOT.

[Vabound]

What am willing and able to pay for the experience of RV’g? That is how I think about the cost of ownership in an RV. Calculating depreciation is a means to determining cost - purchase price vs selling price - but it does not answer the question of what I’m able and willing to spend for the experience. What value does it add to my life? Many intangibles for sure. As well as the question of what am I trading off for this purchase? That is, what won’t I be able to do financially if I do this?
If I can answer those questions, and can put a number on that, I will know how much depreciation is reasonable.
I hope these thoughts are helpful.