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For a time, this industry lacked the familiar infrastructure, data, and tools you see in the automotive industry. Understandably, this lack of resources and information might have kept you, as well as other lenders, away from the recreational lending industry.

But now the RV, powersports, and marine markets have grown strong and profitable. And you have access to a library of information and tools ready to help you jump into recreational lending.

In fact, recent data shows that recreational lending has unique qualities you can capitalize on as a lender to close more deals with lower risks. Knowing more about recreational lending is a smart move if you want to expand into these new markets and gain new members to increase your profit potential.

An Established and Mature Market

Recreational dealerships have been around for a while, and as this industry continues to grow, you have an opportunity to take advantage of this maturing market. Over time, more and more historical and performance loan data is being published, making it easier for you to view profit potential.

For example, RV dealerships are projected to continue growing at astounding rates and show good longevity. Just in the last 20 years, the number of RV owners has increased over 62%, and 9.6 million households have expressed a desire to buy an RV in the next five years.

Furthermore, the powersports market size was valued at almost $40 billion in 2020 and is projected to reach over $52 billion by 2028. This data explains why companies like RV Retailer and Camping World are expanding their businesses and improving their operations and financing.

Over time, the recreational industry has grown and matured. With these studies and reports, you can see for yourself the potential profits lending in these markets holds for you. This is no longer a new industry, and many lenders have already operated their programs here successfully for years.

Being able to access a reliable network of recreational dealers gives you an edge when venturing into this well-established market.

A Reliable Customer Base

On average, a customer’s credit score for a good automotive loan is around 660 or higher. However, in order to qualify for an RV loan, customers need a credit score of at least 700.

Since RVs, powersports vehicles, and marine vehicles are all considered luxury items, you can set higher standards for your lending guidelines. Overall, a recreational customer tends to have better economic and financial status compared to the average automotive customer.

In fact, recent data on recreational customers shows that:

  • Nearly 60% of RV owners have an average income over $65K.
  • The medium income for households that purchase a powersports vehicles is over $100K.
  • Consumers with an average income over $100K accounted for 93% of boat loans in 2020.

The customers in these markets are more reliable, which lowers your overall risk as a lender. In fact, the reported loan delinquencies for marine and RV loans were 0.78% and 0.58% in Q2 2021. That’s more than 1% lower than the 2.09% indirect automotive loan delinquency reported in that time.

Since your members are in a better position to honor their loans, you can charge higher interest rates and gain higher yields. Plus, customers interested in purchasing a vehicle in this industry are more likely to only do so when they have a stable financial status, which eliminates subprime loans in this business.

A Less Competitive Market 

In the U.S., the number of automotive dealerships has ranged between 16,000 and 17,000 over the last several years. The number of motorcycle dealerships was only about 7,000, meaning dealers only have one to four competitors nearby.

This high concentration of automotive dealers means lenders have to face countless local and regional competitors compared to lenders in the powersports industry. Plus, recreational lenders don’t have to worry about competing with manufacturer captive finance companies like in the automotive industry.

To increase your competitive advantage even further, tap into an established network of recreational dealers using a web-based platform like AppOne. This tool lets your business automatically connect to customers at any dealership in network, giving you an edge over lenders not in network.

The recreational lending industry has matured into a strong and profitable market for lenders willing to capitalize on its unique qualities. By taking the time to learn more about this industry and how to utilize the best lending workflow tools available, you’ll be able to jump into this market with confidence and increase your profits.

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