By Marilyn Odendahl, Truth Staff
modendahl@etruth.com
LOUISVILLE, Ky. -- The tightness of the credit market can be measured by the speed of the fax machine at RV Connections.
Just a year ago, when the dealership in Panama City, Fla., submitted a loan application for a customer, the fax machine would whir and spit out the approval about a minute later, said Ray O'Keefe, general manager. But these days, even for "people extremely able to buy," lenders are not as quick with their responses.
The credit crunch is "certainly the No. 1 thing" that is hurting the recreational vehicle industry, O'Keefe said. "That is the hardest thing to overcome right now."
Credit was the main topic of conversation during the three-day 46th Annual National RV Trade Show. Customers must now have credit scores of 700 or higher to get financing, dealers and manufacturers say. Even then the buyer may be denied the loan or required to make a bigger down payment. The more stringent criterion to get a loan is impacting many industries, including auto and boating, along with RV.
"RV paper has been good," Randy Graber, president of Open Range RV Co., said of loans to consumers for recreational vehicles. "But we're all getting spanked because of what happened with mortgage lending. The mortgage crisis definitely is hurting us whether we were to blame or not."
Major financial institutions have been exiting the RV retail lending arena. In May, General Electric's consumer financing arm, GE Money, stopped offering loans to consumers for boats and RVs.
Dealers have been able to partly fill the hole created from the larger lenders dropping out of the retail market by turning to their local banks and credit unions. The smaller community lending institutions are not requiring high credit scores, said Richard Coon, president of the Recreation Vehicle Industry Association. These banks and credit unions are "operating kind of more normally because, perhaps, they know the people better than the bigger institutions."
Also filling the retail lending void is Thor Industries, parent company of such RV makers as Damon, Dutchmen, Mandalay and Keystone. The Thor display areas at the Louisville RV show incorporated prominent signs and brochures with the tag line "Got Credit?"
Thor has been in retail lending since 1994 with a variety of partners, but when the most recent partner, GE, pulled out, the company completely took over the financing operation. Scheduled to launch during the first quarter of 2009, the program will offer Thor dealers consumer financing on any new Thor RV or any used unit on the dealers' lots.
"It is a risk," said Peter Orthwein, vice chairman of Thor Industries, "but we feel it's a prudent risk. It's going to give our dealers a significant advantage. It will help our dealers sell RVs."
Still, consumers will have to adjust regardless of who is making the loan. The days of being able to purchase any product with a marginal credit score and no money down are gone, said Cloyce Hutton of Hutton's RV Center in Urbana, Iowa, and Annette Autry of Allsport RV Center in Fayetteville, N.C.
For the past five years, many RV dealers have been selling units without a down payment, Autry said. Previously, the average was an initial payment of at least 10 percent of the retail price.
Therefore, returning to down payments is a positive consequence. Consumers have always benefited by making down payments, Hutton said, as they will be less likely to end up owing more on their RV than it is worth.
While dealers are seeing their customers get squeezed by financing, they are struggling with tighter floorplan financing. RV dealers rely on this type of credit to purchase their inventory and, as the units are sold, the finance company is reimbursed.
GE Capital Solutions, another financial organization of General Electric, has curtailed wholesale lending to the RV industry but, spokesman Stephen White said, "We are open for business. We're still working with our customers."
White declined to speculate on what market conditions could make GE Capital decide to leave floorplan financing.
Tightening credit has hit the RV industry two ways. First, to qualify for floorplan financing, dealers must sell the units and turn over their inventory. Second, to move the RVs, most customers need some type of retail financing.
RV dealers and manufacturers are frustrated by the credit situation, but Autry said she is not angry since the lending institutions are raising the requirements on other industries as well.
"It's just a sign of the times," she said.