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by Ron
A Look at Depreciation
I'm sorry that this article is a couple of days late. Sunday afternoon was our pizza/bridge party in the park and yesterday I couldn’t resist a long bike ride with our biking group. So now you know where my priorities are. 

Recently we have received several inquires and comments regarding depreciation of the full-timing RV. The subject deserves some attention and depreciation should definitely be considered as a cost. Let’s start with one basic fact. ALL RV’S DEPRECIATE.  The way we handle that depreciation may differ. 

A simple straight line calculation may work in your financial planning, but others may elect to use a system that recognizes a larger amount in the early years. The straight line method can designate the useful life as ten years. By estimating the value at the end of ten years and subtracting that amount from the cost, the balance is then divided by ten to get an annual depreciation cost. For example:  a $60,000 dollar RV may be worth $20,000 dollars in ten years and that leaves $40,000 dollars to be depleted at $4,000 a year. Some bean counters like the declining balance method whereby a ten year depreciation would work like this. The first year the depreciation factor would be 10%, the second would be 9% and so on. Under this method the first three years of depreciation would be 27% (probably not too far off). There are many other methods of depreciation, but the question remains, “What should we do about it?” 

From the above figures you can see that the part-time RVer has a bigger depreciation problem than the full-timer. For them it’s hard to justify the depreciation cost over a few weeks or months. Some full-timers account for depreciation and include it in their cost and budget calculations. They may even establish a depreciation fund to be used in eventual replacement. Many of us recognize that depreciation is a fact, but feel that savings or RV modification can solve the problem. We know of full-timers who have spent as much as $10,000 in renovating and upgrading the interior of the RV. They reason that this is an economical solution. Even in the case of motorhomes, one can take comfort that those big engines last a long time. Fifth-wheelers will have different plans that may include the replacement of the towing vehicle. They would probably use different depreciation base periods for the RV and the towing vehicle. 

The point of this article is to recognize depreciation, but don’t let it scare you. I bet that our RV will be on the road long after I am gone, but then I wouldn’t be around to collect the bet. 

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