If you love the idea of investing in a static caravan in the UK but are worried about the upfront costs, you’ll be pleased to know that there are many finance options available. With the right plan, you will be able to pay it off in affordable monthly instalments, so there is no need to put your holiday plans on hold.
Choosing to finance a holiday homes is very popular with an estimated 80 per cent of all buyers opting for finance to purchase their holiday home. It may also offer some tax advantages over buying outright to some customers.
But as with any financial arrangement, it is essential that you do your homework before you commit. Seek independent advice and find a caravan loan that you can comfortably afford.
In this complete guide to static caravan finance, we’ll cover everything you need to know and provide you with top tips on where to find a bespoke financial package that meets your needs.
How Are You Going To Pay For Your Caravan?
Unless you have savings or access to a cash lump sum, you will likely need to raise finance to cover the cost of your holiday home. There are many ways do to this, as we’ll cover below, but first, we need to discuss your credit rating.
Do You Have Good Credit Rating?
As with any finance arrangement your credit rating will affect whether you are accepted and the level of interest.
Deposits
Most Park Approved finance lenders will ask for a minimum deposit starting at around 10 -15%. It its always worth noting that putting down a larger deposit will reduce the overall interest you will pay and reduce your monthly payments and or the term of your loan.
Interest
Using the option of finance will add the cost of interest to your purchase so be sure you understand this and how it effects your total costs.
Here are ways in which you can raise funding for a holiday home:
Holiday Park Approved Finance Lenders
If you decide to buy your static caravan directly from the holiday park, they will be able to assist you with a finance plan to meet your needs. Most caravan parks have established relationships with specialist lenders, including banks and financial institutions, who offer competitive rates for this type of purchase. The advantage of these lenders is that they are specialists who understand the holiday home product.
Holiday Parks offering finance are regulated by the Financial Conduct Authority (FCA), so you can be confident that your investment is in safe hands. Decisions are usually made fast, and you could get your loan approved in less than an hour. Your holiday park representative will help you crunch the numbers and find the perfect plan for your family.
Unsecured Loan From Your Building Society or Bank
Another way to raise finance for static caravans is to take out an unsecured loan with your local bank or building society. If you have a good credit rating and an outstanding mortgage with them, they are likely to look favourably on your application although; interest rates tend to be higher on unsecured loans, so this is something to consider.
Secured Loan or Re-Mortgage
If you own a property and have equity available, you could consider re-mortgaging your home or taking out a secured loan. You’ll get a better rate than you would with an unsecured loan, and more lenders are likely to consider your application, but of course, this type of finance does come with risks, so consider your options wisely. In addition to your existing bank or building society, use online comparison sites to find the best finance plan for your holiday home purchase.
Sharing The Cost With Family & Friends
More and more people are buying static caravans and holiday homes with friends or family members to help spread the cost. It is the perfect option for larger families who holiday together, share a support bubble, and even siblings with their own young families. With multiple buyers, you can pay off a larger deposit and significantly reduce your monthly instalments.
These arrangements offer great benefits and many people go into them with the very best intentions. It is our experience that such arrangements can be complex especially if there is a disagreement or one of the parties wishes to sell maybe due to a change in circumstance.
Our advice is to have a legal document drawn up that outlines what would happen in this eventuality.
Static Caravan Prices & Deposits
Static caravan prices range from £10,000 for a pre-used model up to £500,000 and beyond for a brand-new luxury holiday home, so before you start looking at finance, you need to establish how much you can comfortably afford. People typically spend between £20,000 and £40,000 on a static caravan, so we’ll base our calculations below on a £30,000 purchase.
When buying a static caravan or holiday lodge, you will be required to pay a deposit of at least 10% of the total purchase price, although terms vary from lender to lender. Here is an example of a finance plan offered by Black Horse, who specialise in caravan finance:
TOTAL CARAVAN PRICE: £30,000
TOTAL DEPOSIT: £3,000
TOTAL FINANCE: £27,000
APR (AVERAGE): 8.9%
84 MONTHY INSTALLMENTS: £428.36
COST OF CREDIT: £8,982.24
TOTAL AMOUNT PAYABLE: £35,982.24
Monthly Instalments – What You Can Expect To Pay
As you can see from the example above, with a caravan loan of £27,000, you’ll have an average monthly instalment of around £428.00 over seven years. The interest can be seen in in the cost of credit section.
This amount is in addition to your annual sites fees, utility bills, rates, and insurance (which you may pay monthly or yearly), so don’t forget to factor in these costs when planning finance arrangements.
While you may be able to recoup some of your monthly outgoings by subletting your static caravan when you are not using it, rental income is never guaranteed, so do not rely on it when budgeting for a holiday home.
A caravan holiday home is a long-term lifestyle investment, so consider this when deciding how to finance it, and only sign a loan agreement if you are 100% happy that you can meet your monthly obligations.
How Often Will You Be Able To Use It?
How often will you be able to use your static caravan? Weekly? Monthly? Twice per year? To capitalise on your investment, you should be able to use it as often as possible, with some owners suggesting that you should use it at least ten times per year to make it a viable holiday option. Of course, you don’t have to use it yourself; you can give it to friends and family, or even rent it out to cover some of your annual fees. But the whole concept of this type of holiday home is that you use it regularly for weekend breaks, family holidays, or even as your out-of-office office.
Most UK caravan parks are open 8 – 10 months per year, although some operate all year-round which extends your available time, and whilst you cannot live in a static caravan permanently as your primary residence, you can visit it as often as time allows and take extended holidays such as during the summer school holidays. Choosing the right location is essential. If you can access your static caravan in just 1 or 2 hours, you are far more likely to use it than if it is at the other end of the country, so consider this when browsing holiday parks.
Will You Be Able To Share It With Family & Friends Or Rent It Out?
One of the benefits of owning a static caravan is that you can share it with family, friends, loved ones, or even work colleagues when you are not using it. It allows smaller families and support-bubbles to holiday together, couples to escape with their friends and endless opportunities for last-minute breaks. Much of your essentials will already be at the caravan so packing should be a breeze.
If you have a large family and friends’ network, a caravan holiday home could be a perfect investment. If not, you should consider the option of renting it out when you are not using it, either independently or via your holiday park’s rental scheme, to ensure maximum financial returns to offset your running costs.
Many parks will manage the rental processes in return for a commission on the rental charges or you can choose to do this yourself. From our experience managing bookings, key handovers and cleaning can be intensive so consider these options carefully based on your own circumstance.
Also remember subletting reduces your own time using the caravan and can lead to increased wear and tear.
Is It Affordable?
Perhaps the biggest consideration of all is affordability. Most of us love the idea of buying a caravan or holiday home in the UK, but they come at a price, and if you cannot commit to the ongoing running costs, it might not be the right choice for you. When budgeting for a static caravan, you should consider:
• Initial Sales Price: This can be anywhere from £10,000 to £500,000 plus depending on the size and location of your caravan. This can be paid in full from savings or alternatively many owners choose to pay a deposit and then finance the purchase cost paying a monthly payment.
• Annual Site Fees: These range from £2,000 to £10,000 per year, with averages around £3,000 to £5,000. Some parks offer the option to pay side fees via a monthly payment. This payment covers the fee to use the pitch, maintenance and free use of parks facilities for your family and guests.
• Gas & Electricity: Most holiday parks work on meter systems, so you’ll only pay for what you use, but if you intend to stay in your static caravan in winter or over the Christmas and New Year period, you will inevitably have higher heating costs. You will also have to factor in a annual boiler service.
• Rates, Water & Drainage: Influenced by the size, facilities, and location of the holiday park, these fees range between £300 and £1,500 per year.
• Caravan Insurance: Just like your home, you’ll need to insure your static caravan against risks such as fire, theft, and flood damage; this is essential and required by all UK holiday parks. Fully comprehensive caravan insurance packages range from £125 to £475 per year.
• Cleaning: This is an optional service offered by most caravan parks and costs around £25 per clean.
• Winterisation: This is an annual service designed to keep your static caravan in perfect condition throughout winter when your holiday park may close. It includes draining down the water system and reconnecting, and other essential maintenance. Some insurance companies insist you do this, others don’t, so check your policy carefully. It costs around £70 per year.
Have You Weighed Up The Pros & Cons?
Static caravans are a luxury lifestyle investment that allows you to escape everyday life without the hassle of overseas travel. They are suitable for young families, older couples, and everyone in between, and they are ideal for those who love to get away at the weekends and take impromptu trips. But they are not for everyone.
Take time to consider the pros and cons and the advantages and disadvantages of buying a holiday home in the UK before you commit. If you can afford it, use it regularly, and see a future of holidays for you and your loved ones, caravan ownership will add value to your life. If not, explore all options available before committing, and only sign on the dotted line if you are sure that it is the right choice for you.