The evaporation of home equity and the tightness of credit markets in California have meant there’s less money for spending on recreational vehicles, according to a report in the Press-Enterprise, Riverside.
How RV dealers and manufacturers respond to this reality will determine who survives and who doesn’t, several industry sources said.
The slumps in home equity and available credit will most likely affect buyers in their 30s and 40s, said Kevin Sechrest of Bob’s RV Sales in Hemet, Calif.
Sechrest said his store’s core client base has always been retirees, who are more likely to finance their RV by means other than a home equity loan, which earlier this decade was a popular way for homeowners to finance “toy” purchases.
“We’re a small mom-and-pop dealership,” he said. “Our demographic is a little older, and a lot of our deals are cash deals.”
Sechrest said the dealership saw gains when “everybody was spending like drunken sailors,” but avoided unsupportable growth by keeping overhead low and maintaining strong ties with area buyers.
Mac Bryan, vice president of administration for the Recreation Vehicle Industry Association (RVIA), said that the lost value has played havoc on the industry, which he said is heavily reliant on discretionary spending.
Manufacturers and dealers, Bryan said, have responded by looking for first-time buyers, making more people aware of the lifestyle, and by identifying current owners in a position to move up.
He said particularly troubling to the industry is that Southern California – a hotbed for RV sales – has been one of the areas hardest hit by declining home values.
Steve Richardson, owner of Richardson RV, which has four Riverside County locations, said that while many who might have been potential customers now have negative equity in their homes, there are other groups of buyers who can be pursued.
According to the Press-Enterprise, one strategy for pulling in some of those buyers is talking about how relatively inexpensive RV ownership is.
“For what (families) have to have to pay go to Hawaii or overseas, you could literally buy a new trailer,” Richardson said.
Richardson RV in particular, he said, can soften any blow from reduced sales of one type of product by taking advantage of a shift to another. While a shopper might move out of the motorhome segment, he could still, for example, be interested in a fifth-wheel or travel trailer.
Roger Humeston, chief financial officer at Moreno Valley-based towable builder MVP RV, also said the shift of attention to smaller segments represents an opportunity. MVP came on the scene in July, when Thor Industries Inc. sold its Moreno Valley operation to local management.
Humeston said his company’s toy hauler lines, which are the favorites of the “20- to 40-something” demographic most likely to use home equity on an RV purchase, have been hurt.
He said the travel trailer lines, while not as robust as a few years ago, are picking up some customers.
He said as early as this fall, MVP could set a new standard by rolling out a new lightweight toy hauler that would be an option to owners of more fuel-efficient tow vehicles.
Survival is a matter of catching customers’ eyes, he said.
“You cannot survive if don’t have something unique to offer dealers right now,” Humeston said.