Working or retired, who doesn't dream of traveling more? When I early retired, we aspired to travel several months out of the year. So we bought a small RV. RVs are flexible and comfortable. You travel on your own schedule, overnighting any place that interests you. You sleep in your own bed and eat your own food. It's like being at home while being on vacation.
I assumed that owning a small RV would save us money. And it does. But if you're thinking about renting an RV this summer? Well, you might want to reconsider. Here's why.
Let's crunch the number on three modes of road-trip travel: (1) driving your own car and staying in hotels; (2) owning a small RV; or (3) renting a small RV. (I focus on small RVs here—those less than about 25 feet in length—because they are most cost effective. These modern small RVs are economical and comfortable for a couple or small family.)
For each option, we’ll compute the cost per mile of owning the vehicle. To this, we’ll add the cost of driving the vehicle, based on its fuel consumption and the current national average cost of gasoline, about $2.70 per gallon as this is written. That will give us an overall cost per mile of operating the vehicle.
Next, we’ll figure the daily expense for traveling, based on average hotel and camping rates. For food costs, we’ll compare the expense of dining out for hotel travel with preparing meals in an RV. I’ll use national averages when possible, plus my own experience and estimates.
What we'll discover is that the essential trade-off of RV ownership is that it saves you on daily costs at the expense of mileage costs. An RV is more expensive to own and drive, but saves you each day on lodging and meals. Your personal breakeven point will depend on your lifestyle and travel plans. Let's dig into the numbers.
Staying in Hotels
On a traditional driving vacation you use your own car, stay in hotels, and dine out. Assume a used vehicle purchased for $20,000 with 20,000 miles, an expected lifetime of 150,000 miles, a salvage value of $2,000, and annual maintenance costs of $900 over 15 years. That comes to a capital cost of $0.24/mile. Assuming 30 mpg gives fuel costs of $0.09/mile, for a total operating cost of $0.33/mile.
Using the national average hotel room rate of $121 per night and assuming that dining out costs $60 per day, we arrive at a daily cost of $181 for a traditional vacation. (These costs could be far higher in choice vacation spots.)
Owning Your Own Small RV
Next let's look at the cost of owning a small RV. Assume a used rig purchased for $80,000 with 20,000 miles, an expected lifetime of 150,000 miles, a salvage value of $4,000, and annual maintenance costs of $1,700 over 15 years. That comes to a capital cost of $0.78/mile. Assuming 15 mpg gives fuel costs of $0.18/mile, for a total operating cost of $0.96/mile.
Using an average campground rate of $25 per night and groceries of $30 per day for preparing meals in your RV, we arrive at a daily cost of $55 for vacationing in your own RV.
Renting a Small RV
Finally, let's consider renting a small RV. There is no ownership cost. The total operating cost is $0.18/mile based on fuel consumption. (This assumes you stay under the typical 100 miles per day average allowance for a rental RV, otherwise there would be an additional mileage charge.)
Based on my survey of RV rental prices at three regional dealers and one national chain, the average rental rate for a small RV is about $205 a day. Adding to that a campground rate of $25 per night, plus meal costs of $30 per day, we arrive at a daily cost of $260 for vacationing in a small rental RV.
Bottom Line
Now that we have per-mile operating costs plus daily living costs for each mode of travel, we can calculate the total cost for two representative vacations: a 500-mile trip over 7 days, and a 2,000-mile trip over 21 days.
Owning a small RV is the clear winner for both trips, with costs of $865 and $3,077, respectively. The traditional vacation is next at $1,433 and $4,466. And the rented RV is most expensive, at $1,910 and $5,820.
Owning a small RV lets you travel for only 60%-70% of the traditional car-plus-hotel cost. That means half again as much vacation time, if you're living on a fixed income in retirement! The exact savings will depend on the nature of your travel. Low-mileage, long-duration trips are the most cost effective in an RV. The breakeven point is about 200 miles a day. If you drive less than that on average, an RV beats the traditional car/hotel vacation.
So owning a small RV is the cheapest mode of extended travel. But try before you buy. This is when a RV rental can make sense. Once you’re certain RV living is for you, shop used RVs. We bought our 3-year old rig for about half price, and it has held its value well. Finally, never take on debt to finance vacation or travel costs. The last thing you need on returning home is more bills to pay!
Darrow Kirkpatrick is a software engineer and author who lived frugally, invested successfully, and retired in 2011 at age 50. He writes regularly about saving, investing and retiring on his blog CanIRetireYet.com.
Jodi Furman, 46, says negotiating over a car purchase or lease is best done over the phone or through email.
Jodi Furman
Jodi Furman is married to a man who loves expensive cars. "Pretty cars, fast cars," said Furman, 46.
She has bought 12 cars in about 20 years, and she's picked up a wealth of knowledge and tips. "I had to find a way to keep him happy but also keep my wallet fat," said Furman, a personal finance blogger in Minneapolis.
It's critical to understand what a monthly payment means and how to negotiate for the best deals, she says.
"Ultimately, cars are a commodity," Furman said.
The fact is, whatever car you want, you will likely be able to find vehicles that are decent equivalents. It's not as if a dealer has some special one-of-a-kind offer.
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"If you have the time, you can save a lot of money and it's worth the time investment," she said.
A four-hour round-trip to a distant dealer is worth it if she's able to shave $1,000 off the price of a car, Furman says.
Build a relationship with a trusted mechanic. "You don't want to save $500 only to spend $500 because the engine blew," Furman said. Having your mechanic look at a car you're considering can save time, money and aggravation.
The right answer to "How much do you want to pay?" is "As little as possible!" Furman says.
These tips can help you save money when visiting the dealer.
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Even if you're not a born haggler, you need to learn to negotiate when you buy a car. That means doing homework on prices and financing.
You'll save the most by paying cash for the car, but if you need to finance, Furman recommends going to your bank first for the best loan rates. Also, check out websites such as Bankrate or Lending Tree for a comparison of interest rates in your area.
Don't negotiate in person, Furman says.
"For almost every vehicle, I've done all negotiations over the phone or by email," she said. "They often get a lot more flexible." Furman's MO is to take a car for a test drive and grab the seller's card before leaving.
Just as when you go to a restaurant and get more bread or better service because you were polite, it's the same with car sales.
Matt Jones
director of industry education at TrueCar
"It throws them off their game," Furman said. "I can respond after researching." She does not want to demonize car dealers, but most buyers are at an extreme disadvantage: "They know all the answers, and you barely know the questions," she said.
This also gives you more time plan a strategy. If a dealer is are not able to come down on the price, consider asking for other services, Furman says, such as free oil changes for the next year or two, new tires or upgraded car mats.
Despite what you may have heard about showing how tough a negotiator you are, you can get what you want while being pleasant and non-confrontational. "People who sell cars are people," said Matt Jones, director of industry education at TrueCar. "Just as when you go to a restaurant and get more bread or better service because you were polite, it's the same with car sales," he said.
Keep it light and professional, and you could get a break on price or some extra perks. "A dealer is more likely to know how to save a consumer money because they do this all day, all week, and they have [been doing it] for years," Jones said. Don't go in with the attitude that it's all about trickery. Sellers want to provide service and flexibility.
Ask which vehicles you could get a good deal on, Jones says. "Regardless of how much research we do, we are part-time when it comes to buying cars," he said. Sellers, on the other hand, are full-time sellers.
You can't know every single incentive on every piece of inventory and what motivations the dealer has.
"Maybe there's a contest or it's the end of the month," Furman said. "They have reason to want to move things."
Whitney Morrison, 33, paid less than a month's car expenses to offload her car lease.
Source: Whitney Morrison
When both members of a household work from home, it may be possible to get by on one car.
Whitney Morrison, 33, a certified financial planner and personal finance blogger in Austin, found herself in this situation — with one wrinkle. Her car was leased, and the cost to get out of the agreement would have been stiff.
"I Googled online lease takeovers and found SwapALease," Morrison said. She checked the firm out on the Better Business Bureau site and found it to be a legitimate business. The site provides a marketplace for sellers and buyers to find each other.
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SwapALease offers tiered pricing based on how much visibility a lease receives. Customers pay extra for photos, banner ad rotation and placement in a special auto section, among other features.
Morrison chose the least expensive $300 option for a basic search listing and was able to transfer her lease in about three weeks.
Morrison's lease payment had been $325. With insurance, her monthly total was $490, so a onetime $300 fee was a win.
Scrutinize the terms. "I didn't realize I could negotiate mileage," Morrison said.
She exceeded the mileage limit on her first lease and was told she'd have to pay $3,000 — or enter a new lease and avoid the charge. She agreed without realizing they'd pack that charge onto the value of the car in her new lease. This meant a $25,000 car was now valued at $28,000 — which she says did not match the Blue Book value.
Luckily, she negotiated for more miles in the second lease. When she wanted to get out of the lease, the extra miles made it more attractive to potential buyers.
Proceed with caution. "No matter how much you know, they know more," she said.
Peter Cade
Search for the top vehicle features you want — not a specific auto brand.
Furman starts with the things she wants most in a car, such as "no older than X years" and specific number of miles. Then she puts in items from a second-place wish list, such as sun roof, heated steering wheel and seating.
It's easy enough to start out saying you want an all-wheel drive SUV, but don't get stuck on a Ford Explorer. "You might find in the secondary market that a luxury car in the after-market is cheaper than you'd think," she said. "A Lexus SUV may fall in price more than a Ford Explorer because there's a model change."
Doing that search without looking at vehicle brands and models will get you to the car that has what you want.
Make sure the car you want is actually worth owning, Furman says. Use Consumer Reports and look at Edmunds. Your homework is to research how expensive or inexpensive the vehicle will be to maintain.
"What's the point if it doesn't start every morning?" she asked.
Maskot
A free app, Gas Buddy, shows you gas prices at local stations. "I don't think you should drive 30 miles out of your way" just to get the absolute lowest price, Furman says, but the app can definitely save you some money. "You can plan in advance what stations to use," she said.
Furman likes credit cards that let her earn points for buying gas or give cash back. A Costco Visa card gives 4% back on gas purchases from specific retailers for the first year, up to $7,000, and 1% afterwards. The Blue Cash Preferred Amex gives 3% back on all gas stations as well as parking, tolls and other transit expenses.