20 year boat loan

[CC245]

Re: 20 year boat loan

Lot's of good info in this thread, and as we can see to many variables to have a single rule. If you are buying a new boat or car from a dealer, it's a good idea to get a loan. This gives you better negotiating power at the time of purchase. Many dealers add points to the interest rate and will give you a better price with a loan than if they think you are paying cash. Then pay the loan off right away.

 

[dvtran]

Re: 20 year boat loan

You should see all the young guys in their mid 20's in the okanagan and Shuswap area and their wakeboard boats. We go to that area once a year and I get talking to a lot of guys who own them boats and 8 out of 10 are financed to the max. Most of them are working on the oil rigs/patch and pull in 120k and up a year. They could care less about monthly payments. And to them, the lower the payments are, the better it is. There are a ton of used wakeboard boats on the market in BC. Those $6-800 dollar payments start to hurt and make no sense when you only use the boat a dozen times a year. If you calculate the cost per use on boat like that? You are looking at thousand bucks per use. Factoring in fuel, food and brewskies.

I made sure that I financed 3 great toys to use year round on a max 5 year plan. By the time my boat is paid off (2016). She will be barely broken in.

But hey if you want to look good on the water and have a boatload of money to burn. Do as you please. Just make sure you call me before the bank takes your boat away.

 

[QC]

Re: 20 year boat loan

Yeah, I am glad to see that all scenarios are being considered. There's also the guy who will earn 20% by pumping that cash back into his business instead of directly into the boat he absolutely can afford. That potentially equals jobs. And speaking of jobs, I am sure that boat builders jump up and down when they see a good finance program that may result in building more boats and of course more boat builder jobs. This debate is never black and white. Heck even tax treatment could favor making low interest payments instead of paying cash. What if you had to sell investments to get the $100K and pay tax on it? Depending on your bracket that could mean pulling out $150K instead of $550/month.

 

[WaterDR]

Re: 20 year boat loan

Looks like only the smart financial folks are replying

Hey, we have all made a $ misstake. No one is perfect. We have all had that thing we bought once we wish we did not. It's a big club. Should be a forum devoted to that and there would be millions of members.

To be fair, just about any boat purchase is financially dumb. How you finance it, just might make it dumber but sometimes you have to look at the total picture.

The first boat I ever bought, I financed it....the entire thing....trailer, cover, taxes....everything. It was 2001 and I think I financed 15k. It was nice pontoon, but no caddy. I did not have a nickle to put down. But, I did have good credit and an income. So, why did I do it?

Well, two months earlier we burried our then youngest daughter after a 6 month cancer battle. She was 18 months old. Frankly, we needed a lift. No boat was going to change the past, but it did change our future. it was just what we needed and the best thing I could have done. 12 years later, we are still boating, have two great daughters, a sound marriage and zillions of memories. When I bought the boat, I knew I shouldn't have done it, but I also knew I shouldn't not do it. Sometimes you have to say screw it and throw a little caution to the wind.

That boat has since been replaced by two others....both pontoons. The first one was paid off early and another family is still enjoying it.

Anyway, best advice I can offer to a new boat owner:

1 - Put money down if you can....probably 50% (yeah, I know....I skipped that part)

2 - Get a payment you are comfortable with and provides no pain. That way, even if things get tight, you may still be able to keep the boat.

3 - Never care what others think

4 - Enjoy it.

 

[QC]

Re: 20 year boat loan

Amen Bro ^^^^^

 

[jkust]

Re: 20 year boat loan

trendsetter240,

True, its not a hard or fast rule. There are exceptions and your examples are good ones.

Agreed, sometimes we forget demographic differences. Owing anybody for anything for 20 years I suppose besides real estate would make it hard for me to sleep.

 

[airdvr1227]

Re: 20 year boat loan

I just love it when people come up with that excuse to go into debt.

In case you have not noticed the last few years of the world economy, credit was too easy to get and people went into too much debt. Now we are paying the piper. Its not only people but also countries.

Edit: Sorry, not going there. Take a reread of Rule #2. Thanks

 

[frantically relaxing]

Re: 20 year boat loan

Just because you have a 20 year boat loan doesn't mean you have to take 20 years to pay it off. More than once I've calculated what I want to pay and how many months/years it would take, then taken out a loan at the longest possible terms.

Why?

(A) Because I've found long term loans usually can be had at lower interest rates, and

(B) if for some reason down the road finances get tight, then I have a lower payment to fall back on--and if you're well ahead on the principal balance, you only need to make interest payments.

 

[UncleWillie]

Re: 20 year boat loan

...long term loans usually can be had at lower interest rates...

Long term loans usually have HIGHER interest rates; But LOWER Monthy Payments.

 

[greenbush future]

Re: 20 year boat loan

Not me, and never would for a luxury item. But that is just the way I am made.

Men and boys, I wont get a loan for a toy either, but to those that do, I'll be ready to buy it for less than 1/2 when you're done. To me I don't borrow on anything I wont use for the duration of the loan. Cars, houses, boats. They do seem quite common, but I just don't like paying interest on much of anything.

 

[greenbush future]

Re: 20 year boat loan

Just because you have a 20 year boat loan doesn't mean you have to take 20 years to pay it off. More than once I've calculated what I want to pay and how many months/years it would take, then taken out a loan at the longest possible terms.

Why?

(A) Because I've found long term loans usually can be had at lower interest rates, and

(B) if for some reason down the road finances get tight, then I have a lower payment to fall back on--and if you're well ahead on the principal balance, you only need to make interest payments.

It's been my experience that longer loans are actually higher on interest rates, not lower. so while I agree with your thought about the longest loan time, and flexibility to pay off early, it comes at a cost.

 

[tpenfield]

Re: 20 year boat loan

Some banks try to make their longer term loans look more attractive from an interest rate standpoint. . .

Despite all of the rationale about business use, alternate investments, etc. that has been discussed, IMHO, a 20 loan on a depreciating asset has " I cannot really afford this thing" written all over it. A 10 year loan would make better sense in most scenarios.

 

[bruceb58]

Re: 20 year boat loan

Just did a quick look at some 20 year boat loans. Seems that a bunch have pre-payment penalties and are in the mid to upper 4% range. That is a pretty expensive loan.

So if you actually got a 20 year loan at 4% your $100,000 boat will become a $144,000 boat. At 5 years old, the boat may have dropped in value to $50K(that is actually probably on the high side) and your principal that is left is $81.6K. Does this not sound good? If for some reason you have to sell the boat after 5 years, you have to come up with $31.6K to get out of it.

 

[airdvr1227]

Re: 20 year boat loan

And you've hit the nail on the head from the seller's perspective. The payment on a 10 year note might look huge to the potential buyer. The 20 year payment not so much.

 

[bruceb58]

Re: 20 year boat loan

And you've hit the nail on the head from the seller's perspective. The payment on a 10 year note might look huge to the potential buyer. The 20 year payment not so much.

Which is the standard pitch you would get from a salesman. Never hear what an item actually cost but what the monthly payment is.

 

[QC]

Re: 20 year boat loan

So if you actually got a 20 year loan at 4% your $100,000 boat will become a $144,000 boat.

I haven't got out a calculator, but let's say you have $10M in assets. Invested in stocks etc. and you've decided it's time to get a $100K boat. If you are in a 33% tax bracket (low for this guy) you have to "sell" $150K in assets to net $100K to buy that boat, that some idiot will charge you $144K to buy over 20 years. I understand you have to pay the $144K with after tax money, but still seems like a good deal to use the other guy's cash.

 

[bruceb58]

Re: 20 year boat loan

If you are in a 33% tax bracket (low for this guy) you have to "sell" $150K in assets to net $100K to buy that boat.

That would be true for the guy with $10M in assets although with capital gains tax being at a lower rate, it wouldn't be 33% anyway.

I have a feeling the OP doesn't have $10M in assets but that's just my guess. I am also guessing he wants a $100K boat and can afford a $600 something/month payment but nothing more.

 

[QC]

Re: 20 year boat loan

If there is one thing I am consistent about it is reacting to absolutes. NEVER borrow for a toy. NEVER borrow for longer than the life. NEVER borrow period.

with capital gains tax being at a lower rate, it wouldn't be 33% anyway.

What is the effective combined rate in CA including tax on Capital gains today? I don't know as I don't have $10M in assets either . . .

Some were saying that Phil Mickelson ended up at 62% and I can't add that up, but that was "income" not capital gain.

 

[bruceb58]

Re: 20 year boat loan

Depends on what your AGI is. You could have $10M in assets yet have a pretty low AGI. Capital gains tax for federal is still 15% until you get over the new limit. California, the rate depends on your income as their is no break like Federal. Highest was around 10 but then Prop 30 passed. California is one of the highest if not THE highest. I think its 25.5% combined for the max taxpayer.

 

[Frank Martin]

Re: 20 year boat loan

i would have to agree if you actually planned on taking the full 20 years to pay it off
we sighned up for a 30 year loan from amercan honda finance payed it off in 11 years
its nice the months you are short not to have to throw down the big payment