STOUGHTON, Wis. -- Dealers across North America are scratching their heads today wondering what else can be done to prevent them from acquiring RV inventory, or selling units to consumers.
Several leading lending institutions announced policy changes this week that make it nearly impossible for dealers to sell RVs from certain manufacturers, dealers across the country told RV Industry News.
Effective yesterday, Bank of the West will no longer allow dealers to finance units under their VIB pre-approval program for any 2007 or new models produced by Alfa Leisure, Ameri-Camp, Big Foot, Country Coach, Extreme RV, Fleetwood, Monaco, National RV, NuWa, Pilgrim, Rexhall, Side Kick, Sun Valley, Teton Homes, Travel Supreme, Weekend Warrior and Western RV.
Loans can still be approved, however, dealers will be able to get a maximum advance of 80 percent of the dealer net invoice or 80 percent of wholesale book values including tax, title, licensing and backend products, according to information faxed to dealers from Bank of the West.
The bank makes it very clear that tax, title, licensing and back end products cannot be added to the maximum 80 percent advance. Another policy change prevents dealers from collecting a 0.25 percent discount on loans made at under 90 percent of the loan-to-value price.
Loans for 2006 and older used products will be accepted under current Bank of the West program guidelines.
"Contracts submitted for funding that do not follow the above policies will be returned to the dealer," the notice warns. If the dealership submits a contract for purchase through the VIB program for any RV in model year 2007 or newer -- including new or used products -- from any of the above manufacturers, Bank of the West says the dealership will be required to buy back the contract.
"All terms, advance and reserve guidelines may be restricted further at Bank of the West's discretion," the announcement notes.
Messages left for Bank of the West officials have not yet been returned.
Bank of America updates its terms, too
In a March 12 fax to dealers, Bank of America announced it will no longer finance any products made by Monaco Coach Corporation in model years 2002 to 2009.
Then, in a March 13 fax to dealers, Bank of America announced it will no longer finance any products made by Fleetwood.
"For non-Bank of America floorplan dealers, all makes and models manufactured by Fleetwood Enterprises will no longer qualify for retail financing," the notice read. "If your dealership sells a retail contract for the purchase of a Fleetwood Enterprises product to Bank of America after the date of this communication, the dealership will be required to buy back the retail contract."
The same holds true for units manufactured by Monaco Coach.
Bank of America also announced it will no longer allow retail financing for any products manufactured by these firms: Alfa Leisure, Ameri-Camp, Big Foot Industries, Challenger Powerboats, Country Coach, Extreme RV, Kingsley Coach, National RV, NuWa Industries, Pilgrim International, Pullman Coach, Rexhall, Side Kick RV, Stewart Park Homes, Sun Valley, Teton Motor Homes, Travel Supreme, Weekend Warrior and Western RV.
The bank noted that dealers who receive floorplan lending from Bank of America that qualifies for special retail support should expect revisions to that program to arrive soon.
US Bank forces buyers to acknowledge bankrupt manufacturers
Dealers who sell RVs built by manufacturers which have either gone of out business or filed bankruptcy must get buyers to sign a document stating they understand they may not get warranty service.
"Due to the current economic environment, several manufacturers have filed for bankruptcy protection or gone out of business," the notice states. "These closings or bankruptcies could have an impact on the manufacturer's ability to support its products in the future. For example, the manufacturer might not be able to honor its warranties.
"By signing below, you acknowledge having notice that the product you are purchasing was built by a manufacturer who has either gone out of business or filed bankruptcy protection. You also acknowledge and you understand that this may affect the manufacturer's support of the product," the notice states.
Dealer anger rises as frustration mounts
According to dealers, here is how the latest lending rules are impacting their ability to do business.
1. Fleetwood normally sells a motorhome to a dealer for an invoice price of $100,000 on a unit with an MSRP of $120,000.
2. But, in order to move its excess inventory, Fleetwood offers the dealer a 10 percent discount so he can acquire the unit for $90,000.
3. Under the banks' new terms, the dealer can only lend to the consumer 80 percent of the $90,000 – or $72,000.
4. In order for the consumer to get financing through some banks, the dealer must:
a. Require the buyer to put $48,000 down on the motorhome – or 40 percent – in order to sell it at MSRP.
b. Significantly lower the motorhome’s price to $97,000 in order for the buyer to make a 25 percent down payment.
c. Risk losing the customer by requiring him to leave the dealership to secure his own financing at a local bank.
The latest round of loan rule modifications leave dealers in a position where they cannot acquire new inventory, because of limitations on floorplan lending. And now they can't sell the RVs to consumers because bank rules make it difficult to secure financing. Dealers willing to discuss the situation with RV Industry News agreed to do so, but only if they could remain anonymous. They fear banks would retaliate and cut off what few remaining lending resources are available today.
"The banks today are financing RV dealers right out of business," said one New England dealer. "Requiring us to force consumers to sign a statement acknowledging that a manufacturer has gone out of business or is in bankruptcy is like pouring salt on a wound."
He said consumers who are already apprehensive about making a major purchase may pause and reconsider the deal thinking the banks are warning them against buying the units.
"It gives customers an uneasy feeling which is completely unnecessary," said a dealer from the West Coast who includes a one-year dealership-financed warranty for every unit manufactured by a company that has gone out of business. "Not only that, but their lending rules don't allow consumers to add an extended warranty to the purchase price of the unit. Adding such a warranty would eliminate the risk for lenders."
A Midwest dealer noted that bankrupt airlines weren't required to force customers to sign disclosures before buying tickets for flights that may not occur. In fact, he noted, the government bent over backward to help airlines retain customers. The whole idea of banks eliminating or restricting funding for motorhomes and travel trailers manufactured by other companies lacks logic, he said.
"Where are lenders being harmed in this?" he asked. "Manufacturers are nothing more than assemblers. They piece together a bunch of parts and components constructed by other companies. The fact that Fleetwood is in bankruptcy does not for one minute eliminate the ability for RV owners to get their refrigerators fixed. Motorhome chassis are warranted by their builders for three years or 36,000 miles. Each one of the components inside an RV is individually warranted by the company that made them."
He specifically mentioned a friend of his who bought a motorhome made by National RV shortly after the company went out of business. He drove it for two years without a problem until he bumped into something and needed compartment doors replaced. But, he simply found out where National RV ordered their compartment doors and contacted that company directly.
"Yes, manufacturers make it easy for dealers to perform warranty service, submit one claim to the OEM and get reimbursement," he added. "But even if the manufacturer went out of business it would not have a big impact on supporting the product beyond a little extra paperwork for dealers to submit claims to multiple companies."
One dealer noted that some trailer manufacturers are building units in facilities that are smaller than the service shop at his dealership, which made him wonder why banks find it more important that the OEM's doors remain open.
Used units are now easier to finance than new
Thanks to the new lending rules, if a dealer takes a current model year Fleetwood in on a trade, the invoiced amount for a new unit is less than the NADA wholesale value of used units. "I just find it incredible that banks are willing to finance more on a used Bounder than they are on a brand new one," said the Midwest dealer.
The West Coast dealer said he is dealing with the same issue with Bank of America. "In the past, we could get financing on a 2009 Prowler with 10 percent down and terms out to 120 days. But, Bank of America says they aren't going to do it that way any more," he explained. "But, if I came to them with a 2008 Prowler, they would finance it right away under those same terms simply because the unit is used.
"The banks are penalizing people who want to buy new units instead of used," he added. "I don't see how that helps anyone in the industry to move their inventory. It's just a knee-jerk reaction by banks that haven't taken the time to think things through. The banks are treating new units as used units, even though they have fully intact warranties."
Different standards for different dealers
Another dealer expressed frustration over Bank of America's decision to apply different retail lending standards to dealers who don't get floorplan lending through the bank.
"For some reason, Bank of America will not finance units from any manufacturers that have gone out of business, unless Bank of America is the dealership's floorplan lender," the dealer explained. "I have partnered with GE Commercial for years. Then GE Money pulled out of the RV industry which forced us to scramble to find a bank willing to make consumer loans. So, we turned to Bank of America, and now they won't lend anything on retail loans because we aren't one of their wholesale dealers.
"I can't switch to Bank of America because they won't take on any of my older units. I like GE and they have been very good to me. But when they took away GE Money, they ended my chance to finance products," he added. "So I am stuck with GE's floorplan, but no GE Money to help move the units to customers. When I do have a customer who wants to buy a new unit from a bankrupt manufacturer, I can't get them financed through Bank of America because my floorplan loan is through GE. What am I supposed to do?"
He noted that his company has sent Bank of America nearly $15 million in loans in the past 24 months, and he feels like the bank it turning its bank on his business.
"It's the perfect storm," the New England dealer noted. "First I got hammered by high fuel prices and couldn't sell any units. Then I couldn't sell units because the economy tanked. Then I couldn't get floorplan financing because my inventory is too old. Now I can't get retail financing because my inventory is with a different bank."
The New England dealer stressed that the time for talk has ended, and action is needed immediately. "RVDA, RVIA, Route 66 and REDEX have to get together and find a way to get banks to loosen up their credit rules," he explained. "It's the only way to get inventory off the lots of RV dealers so they can order more units from manufacturers so they can go back to work. If we can't resolve the credit issue, more dealers will close up this spring, more banks will have to take back inventory and their losses will mount, too."
"I wish banks had better understanding of dealer and OEM operations, just as I am sure they wish we had better understanding of what banks are up against,” said the Midwest dealer.