It seems everyone is concerned about money because the two questions I am asked the most are "How much money does it take to fulltime?" and "How much should I pay for a motorhome?" I have addressed the first question several times and will attempt to answer the last question. Not all dealers work the same way and my explanation may not be exactly right, but it is close.

No one wants to pay too much for a motorhome and most people think a dealer's cost and invoice are one and the same - wrong. Many dealers are setting their own dealer's cost. A person in the back room does the figures and gives the "dealer's cost" to the sales manager (and possibly to sales people), but usually the sales staff won't know the invoice or even how the dealer's cost was determined. They only know the bottom line price for selling a motorhome.

It is derived something like this. A motorhome with a base MSRP (Manufacturers Suggested Retail Price or sticker price) of $200,000 will have an invoice of about 68% or $136,000. The back room person figures the "dealer's cost" by adding prep work ($500), fuel/LP ($150), administrative fees ($500), interest and insurance ($1,500), walk-thru charge ($250), sales commission ($2,000), dealer profit ($4,000) and other expenses ($500). These charges of $9,400 added to the invoice of $136,000 gives a total of $145,400 that is called "dealer's cost." This gives the dealer's cost as about 73% of MSRP.

In the above example the sales staff will only have one figure and that is $145,400. A sales person is told they can sell for that amount but their commission increases if they sell for more. You will be given a price of $160,000, then $155,000, then $150,000, etc., until you hold out for their bottom price of $145,400.

Of course customers don't know the bottom line and might accept one of the other amounts as a good deal, but informed customers can use the guideline above to get within $1,000 of the bottom line. Some manufacturers (Winnebago is one) have higher invoices so you can add about 3% ($6,000) to the invoice of the above example.

Most manufacturers give "kick-backs" on each unit sold or a lump sum once a year. The kick-backs can run from $500 to $2,000 on most motorhomes and even up to $10,000 on luxury motorhomes. The kick-backs are usually sent to the dealer who can pocket the profit but it is usually shared with the sales staff. A few manufacturers split the kick-back and send part to the dealer and part directly to the salesman.

These kick-backs or incentives change often. If a manufacturer has excessive inventory they will give larger kick-backs or incentives. If a manufacturer is running at capacity and units are selling at a brisk rate they will decrease their kick-backs or incentives. But the bottom line is RV dealers can not sell motorhomes at invoice or slightly above invoice or they will go bankrupt.

OK, now you know about buying a new motorhome but you have a trade in and that really muddies the water. You drove a hard bargain and bought the above motorhome for $145,400, but after one year you decide you want a bigger and better motorhome with more features. Your one year old motorhome will have a trade in value of $116,320 or 80% of the amount you paid for it. That is terrible but think about the poor slob who paid $155,000 for the same motorhome you bought and his is worth the same $116,320 at trade in. How can that be?

Before I get into how trade in is figured let me talk about options on motorhomes. Lets say when you bought your motorhome you had the dealer replace the standard fabric sofa with a leather swivel recliner, had them install a large inverter and put a protective bra on the front. Later you replaced the standard lighting with fluorescent lights, installed a beautiful computer desk, added two solar panels on the roof and installed a Fantastic Vent. At trade in you will learn the $4,000 additions do not increase trade in value one dollar in most cases.

Distraught, you decide to keep your motorhome a few more years and when it is five years old a shinny new motorhome catches your eye and the trade bug hits you again. So lets do more figuring.

There are guides for used motorhomes such as NADA and Kelly's Blue Book. There are versions for the public and versions for dealers and the values are different between consumers books and dealers books. Consumers books of course have a higher value and are used by banks and financial institutions as a reference for approving loans. A motorhome with an actual value of $80,000 will be listed with a value of $100,000 so consumers can obtain higher loans. About 95% of motorhome buyers finance and 80% of them are upside down. (Owe more than their motorhome is worth.) The inflated book values help them obtain financing.

Most dealers use the dealers version of the NADA guide. Your motorhome from the example we are using will have a "high retail" of about $85,000 and a "low retail" of about $70,000. Dealers give 80% of the low retail as a trade in value. That means your motorhome has a trade in value of $56,000. The dealer will sit your motorhome on his used lot with a price of $90,000 and will take $75,000 for it on a hard deal.

Why only $56,000 for your motorhome? The dealer spends an average of $1,000 on a trade in cleaning it and repairing items. They pay interest and insurance on their inventory, pay for advertising, pay a sales commission, pay administrative fees and hope to make a profit. If the used motorhome does not sell in a year or so they will sell it to a wholesaler for slightly below the $56,000 they gave for it, taking a loss.

If a trade in is clean and a popular model the trade in value will be higher than the 80% of low retail because the dealer thinks he can move it quickly. If the trade in is in poor condition the dealer will give less than the 80% low retail.

I guess buying a motorhome or trading is a science that can be studied and dissected to death. If you buy outright or trade and think you got a good deal, then be happy and enjoy your motorhome. There is no need to know how much profit the dealer made or how much commission the salesman got.

Any or all of the above may be incorrect, but it is what I have derived from years of research and talking to manufacturers, dealers and sales people. Now get out there and buy that new motorhome you have been itching to get.