|
| |
Will Higher Fuel Prices
Dampen RV Sales?
|
Historically there has been little long
term correlation between fuel prices and RV retail sales (see
The Economy and RV Sales).
In fact, RV sales growth in the last 10 years has exceeded the growth in
fuel prices (Figure 1). There is a much higher correlation with other macroeconomic
factors such as GDP, Personal Consumption Expenditures, and interest
rates. Gas prices are are at the bottom of our six factors for
predicting RV growth. However, the rapid rise in fuel prices in the last
year will contribute to what we believe will be an overall decrease of
11% in RV retail sales from 2005's record levels.
|
|
|
|
Figure 1 - Retail RV Sales versus Fuel
Prices |
|
 |
|
Towables are the most price sensitive
segment of the market. The buyers tend to be younger and less affluent
than the buyers of large motorhomes. First and foremost in their
purchasing decision is the financing and resulting monthly payment.
Table 1 below is a simple model based on typical price points and usage
statistics. At $3.50 per gallon (it's at $2.86 as of May 2006), the cost
of fuel ranges from 31% of the total cost of ownership at the low end to
12% at the high end. At the low end, the cost of fuel is equal to about
50% of the monthly loan payment while at the high end it's about 15%.
That's clearly a significant amount at the low end. |
|
|
|
Table 1 -
Towable RV Cost of
Ownership Model |
|
MSRP |
$15,000 |
$25,000 |
$50,000 |
|
|
|
|
|
|
Dealer Discount |
20% |
20% |
20% |
|
Sales Tax |
8.0% |
8.0% |
8.0% |
|
Purchase Price |
$12,960 |
$21,600 |
$43,200 |
|
|
|
|
|
|
Down Payment % |
10% |
10% |
10% |
|
Down Payment |
$1,296 |
$2,160 |
$4,320 |
|
Financed Amount |
$11,664 |
$19,440 |
$38,880 |
|
Loan Period (Years) |
5
|
5
|
5
|
|
Annual Percentage Rate |
6.88% |
6.88% |
6.88% |
|
Monthly Payment |
$230 |
$384 |
$768 |
|
|
|
|
|
|
Usage Assumptions |
|
|
|
|
Annual Days Used |
24
|
24
|
24
|
|
Daily Miles Driven |
200
|
200
|
200
|
|
Annual Miles Driven |
4,840
|
4,840
|
4,840
|
|
|
|
|
|
|
Cost of Fuel Assumptions |
|
|
|
|
Fuel Cost (per gallon) |
$3.50 |
$3.50 |
$3.50 |
|
Mileage (mpg) |
12
|
12
|
12
|
|
Fuel Consumption (gallons/mile) |
0.08
|
0.08
|
0.08
|
|
|
|
|
|
|
Cost per Mile ($) |
|
|
|
|
Capital Cost |
$0.57
|
$0.95
|
$1.90
|
|
Fuel |
$0.29
|
$0.29
|
$0.29
|
|
License Fee |
$0.03
|
$0.04
|
$0.05
|
|
Insurance |
$0.04
|
$0.05
|
$0.07
|
|
Total Cost per Mile ($) |
$0.93
|
$1.34
|
$2.32
|
|
|
|
|
|
|
Annual Cost ($) |
|
|
|
|
Capital Cost |
$2,764
|
$4,606
|
$9,212
|
|
Fuel |
$1,412
|
$1,412
|
$1,412
|
|
License Fee |
$150 |
$200 |
$250 |
|
Insurance |
$200 |
$250 |
$350 |
|
Total Annual Cost ($) |
$4,525
|
$6,468
|
$11,224
|
|
|
|
|
|
|
Total Cost per Day Used ($) |
$187 |
$267 |
$464 |
|
|
|
|
|
|
Fixed and Variable Costs (per year) |
|
|
|
|
Fixed Costs (per year) |
|
|
|
|
Cost of Capital |
$2,764 |
$4,606 |
$9,212 |
|
License Fee |
$150 |
$200 |
$250 |
|
Insurance |
$200 |
$250 |
$350 |
|
Total Fixed Costs |
$3,114
|
$5,056
|
$9,812
|
|
Fixed as a % of Total Costs |
68.8% |
78.2% |
87.4% |
|
|
|
|
|
|
Variable Costs (per year) |
|
|
|
|
Fuel |
$1,412 |
$1,412 |
$1,412 |
|
Total Variable Costs |
$1,412
|
$1,412
|
$1,412
|
|
Variable a % of Total Costs |
31.2% |
21.8% |
12.6% |
|
|
|
|
Even the low end of the Class A motorhome
market is likely to suffer as fuel prices continue to climb. RV Investor
expanded on the model originally developed by Bob Gummersal, Chief
Technical Officer of RVers Online
to determine the contribution of each cost factor to the overall cost of
ownership. Not surprisingly, fuel prices are a significant cost
contributor at the low end. For example, Figure 3 shows that for a
$75,000 Class A motorhome, fuel prices represent about 20% of the cost
per mile for part-time enthusiasts or even fulltime RVers. However,
capital costs are the most significant cost factor particularly as you
go up in price. If you own an expensive RV, you're going to drive it no
matter what the price of fuel because it costs you much more to have it
sitting around. And, if you can afford a $750,000 motorhome, you
probably won't base your purchasing decision on the price at the pump
(Figure 7). |
|
|
|
Figure 2 - Motorhome Annual Operating Costs |
Figure 3 - $75,000 Motorhome Cost per Mile |
|
 |
 |
|
Figure 4 - $150,000 Motorhome Cost per Mile |
Figure 5 - $250,000 Motorhome Cost per Mile |
|
 |
 |
|
Figure 6 - $500,000 Motorhome Cost per Mile |
Figure 7 - $750,000 Motorhome Cost per Mile |
|
 |
 |
| |
|
Table 2 -
Motorized RV (Class A) Cost of
Ownership Model [Click
here to Download] |
|
MSRP |
$75,000 |
$150,000
|
$250,000
|
$500,000
|
$750,000
|
|
|
|
|
|
|
|
|
Dealer Discount |
20% |
20% |
20% |
20% |
20% |
|
Sales Tax |
8.0% |
8.0% |
8.0% |
8.0% |
8.0% |
|
Purchase Price |
$64,800 |
$129,600
|
$216,000
|
$432,000
|
$648,000
|
|
|
|
|
|
|
|
|
Down Payment % |
10% |
10% |
10% |
10% |
10% |
|
Down Payment |
$6,480 |
$12,960 |
$21,600 |
$43,200 |
$64,800 |
|
Financed Amount |
$58,320 |
$127,500 |
$194,400 |
$388,800 |
$583,200 |
|
Loan Period (Years) |
15
|
20
|
20
|
20
|
20
|
|
Annual Percentage Rate |
6.88% |
6.75% |
6.75% |
6.75% |
6.75% |
|
Monthly Payment |
$520 |
$969 |
$1,478 |
$2,956 |
$4,434 |
|
|
|
|
|
|
|
|
Years Owned |
7.8
|
7.8
|
7.8
|
7.8
|
7.8
|
|
|
|
|
|
|
|
|
Personal Income Tax Rate |
15% |
15% |
15% |
15% |
15% |
|
|
|
|
| |
