Legal but.... Bad for buyers.

[Bubba1235]

Buyers beware!

Talked with a friend of a friend today that has been in the market for a late model (05 or newer) 30 foot or greater cruiser. He found one (33' 07 Searay) that is in the process of being repossessed by the finance company. The finance company is the one making him a "deal". And what a deal...

The real problem is its an upside down loan meaning more is owed on it than the market value (by about $30K) of the boat. The "deal" being offered to him is to refinance the loan AFTER making up the last six months of payments the previous owner missed. ($1600 a month) To make it seem attractive they are re-writing the loan for 20 years instead of the original 10 years when it was sold. It makes the monthly payment much smaller but the total cost of the boat / loan is far too much in my opinion.

I of course told him do not walk, RUN AWAY from this "deal" because it only serves the finance company and not him. Let the finance company take it back, sit on it for awhile and then make them an offer based on todays market, not what it sold for two years ago.

I am certain what they are doing is "legal" but it is based on a buyer not understanding what has happened in the market and getting them to pay far more than the boat is really worth today. (Plus interest of course.) There outta be a law but how do you protect people from thier own ignorance of the market...

FYI: I am starting to see all sorts of "creative financing" types of "deals" from people, dealers, and finance companies trying to get around these upside down loans. As far as I am concerned, I would not touch any of them.

 

[CaptNCamille]

Re: Legal but.... Bad for buyers.

I agree. offer them the fair market value of the boat...better yet a little less than the FMV for a quick sale to get the boat off their hands. If they decline, let them sit with the boat. Once the storage charges start to rack up, and the boat starts to depreciate while sitting untended in some storage yard, they will then start to get real, and make a deal.
BTW, dont think they dont know that this is what they are facing. They are just trying to get as much as they can and mitigate their loss as much as possible. They aren't in the boat business and they don't want the boat. They just want as much as they can get for it.

 

[Bob_VT]

Re: Legal but.... Bad for buyers.

Wow that is a sweet deal for the PO who lost the boat and a trash deal for whomever falls for it.

 

[MudSkunk]

Re: Legal but.... Bad for buyers.

they are looking to foist off the same loan that got defaulted on someone else. they arent really selling the boat atm. they are trying to find a payer for the original loan.

boats and motor vehicles pay in cash. the only thing one should take a loan on is a home.

if you dont have cash for what you want buy a cheap beater for cash then make payments to a bank account under your name for the vehicle or boat you want till you have the money to buy it straight up. thats the only smart way to not get shanked by crooks. you dont need to hire a lawyer or accountant to go that route. i bought my truck like that ordered it brand new in 2002 for a 2003 model after driving a beater car for a number of year. just bought my new boat same way spent 7 years bank fishing till i had the money. just my opinion but i havent made a vehicle payment since 1986...

putting money away into an account as if you were making payments will show you how risky it is to overextend your credit. paying yourself instead of a finance company and just being smart and waiting allows you to be safe in case somehting happens and you cant make those payments... just my opinion take for what its worth.

 

[JoLin]

Re: Legal but.... Bad for buyers.

I am certain what they are doing is "legal" but it is based on a buyer not understanding what has happened in the market and getting them to pay far more than the boat is really worth today. (Plus interest of course.) There outta be a law but how do you protect people from thier own ignorance of the market...

You don't- and while I feel some (slight) sympathy for people whose boats and houses are being repossessed bacause they owe far more than the market value of the underlying 'asset', I have to ask why they made such a deal in the first place? How do you put yourself (it wasn't the salesman and it wasn't the loan officer - it was YOU) on the hook for tens of thousands or hundreds of thousands of dollars without understanding what you're getting into?

It's the simplest economic law there is, and a thousand new pieces of legislation won't change it- when you owe more for something than it's worth, you're gambling. Pure and simple.

 

[slasmith1]

Re: Legal but.... Bad for buyers.

boats and motor vehicles pay in cash. the only thing one should take a loan on is a home.

you said it. you never finance something that depreciates faster than you can pay it off. my personal motto is if I can't pay cash than I don't really need it.

 

[Bruser]

Re: Legal but.... Bad for buyers.

Sadly, some poor buyer is going to fall for it...

More prople buy things based on the "payment" price, not the cost of what they are buying..

 

[Bob_VT]

Re: Legal but.... Bad for buyers.

That is because people are buying with emotion and in their mind justify the "lower" payment without doing the long term thinking.

 

[tashasdaddy]

Re: Legal but.... Bad for buyers.

if the loan companies don't start taking responsibility for their mistakes, and stupid people don't paying attention to what they are doing, we will never recover.

this is a case of refinancing and upside down loan, into another upside down loan.

i got this in the mail the other day. easy to get money.. look at the APR 96%

yeah right i'm gonna jump right on that.

 

[JoLin]

Re: Legal but.... Bad for buyers.

Bubba, I'm going to agree to disagree with you.

When you say the finance company KNOWS what they're doing- well, of course they know. But, it isn't their money that's being slapped down on the table, is it? The buyer BETTER know that the total cost of the loan is far more than the boat is worth. I mean, who has the greater burden here- the person trying to get your money? Or you, who's spending it?? It's YOUR money! If you don't care enough to figure out how it's being spent, why should you expect anyone else to?

Now, what I am in favor of is full disclosure in plain English. Cut out the fine print. If your financial application lies or doesn't disclose all the terms of the agreement, I should have the right to void it.

Beyond that, I really don't want the government involved in my business dealings. A terrible deal for one person is an opportunity for someone else who educated him/herself to the risk.

Anyway, this conversation has gotten pretty far away from boating, so I'm stopping here. Agree or disagree, but have a great day!

 

[5150abf]

Re: Legal but.... Bad for buyers.

Sign me up but only if I can pay alot of unspecified fees and charges too!

What is your freind thinking, you gave him very good advice, RUN FORREST RUN.

 

[haulnazz15]

Re: Legal but.... Bad for buyers.

Well the issue isn't any different anytime you buy a boat or car or almost anything really. You buy a car knowing full well that you are paying on a vehicle that loses it's initial value the moment you drive off the lot. People who buy new boats will lose 20% or more in the first year. That's why I can't see ever buying a brand new boat unless I planned on keeping it for 15+ years. Buying a boat that is 2-3 years old has let the majority of the initial depreciation come off of it. So you aren't paying the "new boat penalty".

The loan company is actually being pretty unrealistic in trying to get someone to take over the loan "straight up". There is very little chance you will find an interested buyer for that, because they can go find a 33' searay by the dozens for sale at a much lower cost. I would offer them something at or a little below market value and see if they will just take their loss like anybody else. The boat isn't ever going to get it's value back.

 

[jkust]

Re: Legal but.... Bad for buyers.

Wow, there are actual like-minded fiscal conservatives replying to this. It sounds snobby but if you can't pay cash for it or have the cash reserves to back it up you shouldn't have it, IMO. My very humble beginnings taught me that. That goes for everything with a few exceptions. This generally means having less stuff or earning more money, or having less stuff while you work up to the point of earning more money. I am suprised more than a few thousand new cars and boats are sold each year and then only to the people fitting the above and then the subcategory of those who don't care about depreciation. I watched an old Cary Grant black and white movie last week and Cary was shameful in the movie because he had to actually borrow money. We need a little more of that.