As the weather warms and individuals begin gearing up for summer, many are itching to spend as much time outdoors as possible. While for some that means lounging in the yard or going on weekend walks, for others it entails hitting the road or getting out on the water with a leisure vehicle of choice. For lenders, this seasonal shift presents a golden opportunity to diversify their loan portfolios and tap into the growing demand for recreational vehicle (RV) lending solutions.
By expanding their offerings to include financing options for a wide range of leisure vehicles, both on land and at sea, lenders can attract new merchants, drive more depositors, and strengthen relationships with existing clients. Boats, ATVs, golf carts, jet skis, and other recreational vehicles experience a surge in demand as outdoor enthusiasts gear up for summer adventures. For lenders eyeing entry into this segment, it’s crucial to understand the costs, customer segments, and benefits associated with each type of vehicle loan.
Navigating the diverse landscape of recreational vehicle lending
Unlike many other loan segments, RV lending encompasses a wide range of leisure vehicles across land and sea. This means that loan type and amount vary widely. And while there are shared similarities, there are also aspects unique to each type of vehicle loan. Let’s learn about the costs and benefits specific to some of the most popular RVs below:
1. Embracing larger loans with motorhomes
In recent years, the motorhome market in North America has experienced significant growth and evolution, presenting larger lending opportunities for banks and credit unions. As of 2021, the motorhome market was valued at nearly $34 billion, with projections indicating continued growth over the next 5-10 years. This trend was accelerated by the COVID-19 pandemic, which saw a rise in motorhome purchases as people sought safer alternatives to traditional travel and leisure pursuits. Motorhomes offer a perfect blend of mobility, flexibility, and comfort, making them an attractive choice for families, retirees, and adventure-seekers alike.
Despite a softening of the market compared to record highs in 2021, the motorhome industry shipped over 493,000 wholesale units in 2022. In addition to strong demand, motorhome loan amounts can also be quite sizable. In 2022, the average amount financed for new motorhome purchases was $60,102 and $60,305 for a used vehicle.
Historically dominated by retirees, the RV segment has been shifting towards a younger customer base, particularly millennials, driven by factors like remote work, flexible living arrangements, and a focus on outdoor experiences. The median age of new first-time RV buyers has significantly dropped in recent years to 32 years old, indicating the industry’s move towards a younger consumer. This presents an opportunity for lenders, as millennials and Gen-Z are some of the segments most likely to transition from borrowers to depositors.
2. Navigating diverse loan sizes with boats
The boating industry reached near-record sales of $56.7 billion in 2021. For lenders, there are many benefits to entering this segment outside of strong consumer interest. One of these is the wide range of loan amounts, as boat purchase prices can vary significantly depending on boat type. A new boat costs an average of $42,000, although that average can range anywhere from $15,000-$75,000, with new luxury models costing upwards of $100,000. At the more affordable end, the average price for a used model is $10,000.
Another benefit of this segment is its asset-backed collateral and its low loan delinquency rates. While boat loan delinquency performance increased in 2022 by 0.28%, it still vastly outperformed all other consumer installment loans, making it a low-risk segment for lenders. The demographic profile interested in this segment has a lot to do with its risk profile. The dominant age group of boat loan borrowers is 45–54 years old with a household income of $100K–$150K and credit scores of 700 and above. By entering this segment, lenders can cultivate relationships with financially responsible borrowers and work to convert these borrowers into loyal depositors.
3. Adapting to asset-backed all-terrain financing
Nothing screams fun like roughing muddy terrain in an open-air vehicle, which explains the growing interest in all-terrain vehicles and dirt bikes. The ATV market reached an estimated $4.9 billion in 2023 and is projected to continue growing. Meanwhile, the U.S. dirt bike market was valued at $4 billion in 2022 and is also expected to continue growing steadily.
Like all recreational vehicle segments, lenders who enter this segment benefit from asset-backed collateral. In comparison to motorhomes and boats, RVs tend to be more affordable and therefore appeal to younger more adventurous demographics like millennials and Gen Z who are just starting on their financial journeys.
Retail prices for new ATVs typically range between $6,000 and $16,000. At a lower price point are dirt bikes, which range from $1,000 to $3,000 for entry-level bikes to as much as $11,000 for large-engine or electric models.
4. Exploring green lending with golf cart lending
Springtime brings an influx of tee times, especially in the United States, which has the largest number of golf courses in North America at 15,332. The number of courses is a testament to the sport’s popularity as an American pastime. In 2022, about 40 million Americans played the game of golf, so it’s no surprise the U.S. Golf Cart market is expected to reach $998.7 million in 2023.
Dedication to the game isn’t the only thing driving growth in the golf cart market though. Rising purchasing power and escalating vehicle emission standards have also contributed to the rise in golf cart popularity.
These recreational vehicles are versatile, inexpensive, and useful. Commercial enterprises like hotels, apartment complexes, event venues, construction sites, athletic fields, amusement parks, and more have adopted them to quickly transport people and objects around large areas. They can also be rather affordable compared to other RV segments. Depending on the model and amenities, the average cost of a new golf cart can range from $5,000 to $15,000.
This segment also offers lenders the opportunity to engage in green lending, with the electric golf cart dominating the market in recent years. By offering loans for electric golf carts, lenders can take advantage of government incentives for green lending while appealing to a rapidly expanding environmentally conscious customer base.
5. Riding the wave of watercraft lending with jet skis
The jet ski, or personal watercraft market (PWC), is extremely profitable, especially when it comes to resale. Annual sales of new personal watercraft reach nearly 60,000 units, while each year U.S. dealers sell an additional 130,000 personal watercraft on the pre-owned market. In fact, sales of personal watercraft are estimated at US$ 2.72 billion in 2024.
And these numbers show no sign of slowing, with the market projected to increase from approximately $1.87 billion U.S. in 2022 to approximately $2.7 billion by 2028. This forecast underscores the industry’s resilience and potential for expansion in the coming years.
The late 2010s saw shifting market trends for PWCs. While traditionally strongest performing in the southern United States, since 2016, there has been a notably strong performance in northern markets. In fact, that year NMMA noted that Michigan represented the third largest PWC market in the country, accounting for 5.6 percent of all PWC sales, with other northeast markets showing strong growth numbers as well.
This segment offers low prices compared to traditional powerboats, making personal watercraft like jet skis a gateway product for recreational boating purchases and a gateway loan for recreational boating lending. Lenders who appeal to customers in this segment can form lasting relationships with the opportunity to finance subsequent purchases in the future.
Realize the full potential of RV lending with LoanStar
Whether offering large loans for motorhomes or small loans for powerboats, the diversity of the RV segment empowers lenders to tailor their strategy based on their short and long-term goals for risk, targeted customer, and product mix. Selecting a proper embedded lending solution is a perfect starting point to grow your RV lending strategy.
At LoanStar, our turnkey embedded lending solution helps lenders design and launch an RV lending program tailored to their institution’s operations and objectives, as well as the needs of their local community. Its benefits go beyond extended customer reach and diversification. Recreational vehicle lending also enables financial institutions to form strategic partnerships with merchants, bringing about new opportunities and growth.
Ready to learn more? Contact LoanStar today.
