20 year boat loan

[ssobol]

Re: 20 year boat loan

If you don't intend on having the boat for the full term of the loan, perhaps you're going to upgrade in a few years, or stop boating after the kids are gone, you may only be concerned about the monthly rate. You're renting the boat from the bank, so a lower payment per month is better. As long as you aren't upside down when you upgrade or get rid of the boat, this could make financial sense in some cases.

Another thing to consider is that some boats qualify as second homes. So the higher costs of a longer loan will be offset somewhat by the tax deductions, especially at the beginning. If you pay cash up front you can't leverage that.

However, I think most people just try to figure out how to get a monthly payment they can afford for the boat/car/whatever that they want. They don't look at the longer term costs.

 

[jkust]

Re: 20 year boat loan

However, I think most people just try to figure out how to get a monthly payment they can afford for the boat/car/whatever that they want. They don't look at the longer term costs.

If that's true, it's unfortunate. Most people means greater than 50% of the buying population.

 

[UncleWillie]

Re: 20 year boat loan

If that's true, it's unfortunate. Most people means greater than 50% of the buying population.

And Unfortunately, it is true!

The most common big ticket item people buy is an automobile.
Look at the car ads in the paper; the primary selling feature is the monthly payments.

 

[jkust]

Re: 20 year boat loan

And Unfortunately, it is true!

The most common big ticket item people buy is an automobile.
Look at the car ads in the paper; the primary selling feature is the monthly payments.

As mentioned, I pay cash for everything except houses. When we bought one of our former SUV's three SUV's ago, 4 years back and said we would pay cash they were taken back and it didn't play well into their process. They gave us the paperwork, keys and never asked us for any money. I had to tell them they should probably charge us for the truck then wrote the check.

 

[dingbat]

Re: 20 year boat loan

I never have, nor ever will, pay cash for a major purchase.

Once you hand over the cash you loose all control of the transaction. A loan leaves things negotiable.

 

[bruceb58]

Re: 20 year boat loan

Once you hand over the cash you loose all control of the transaction. A loan leaves things negotiable.

I am curious what you mean by that. Are you talking about down the road renegotiating the terms of the loan?

 

[jkust]

Re: 20 year boat loan

I am curious what you mean by that. Are you talking about down the road renegotiating the terms of the loan?

This one's got me wondering too. If it is what I'm thinking it may mean then it assumes the cash paying person isn't capable of negotiation effectively as the credit utilizer uses the loan as a negotiation tool not available to the cash user. I'd disagree if that is the what was meant.

 

[UncleWillie]

Re: 20 year boat loan

I never have, nor ever will, pay cash for a major purchase.

Once you hand over the cash you loose all control of the transaction. A loan leaves things negotiable.

I think the logic is that if you decide it is no longer worth making the payments;
You can just stop paying and let them repossess the Car/Boat/House that is now trashed.

 

[bruceb58]

Re: 20 year boat loan

I think the logic is that if you decide it is no longer worth making the payments;
You can just stop paying and let them repossess the Car/Boat/House that is now trashed.

I guess I have enough ethics that I would never do that.

 

[QC]

Re: 20 year boat loan

I don't think that is precisely what dingbat had in mind. Please let him respond.

 

[dingbat]

Re: 20 year boat loan

I am curious what you mean by that. Are you talking about down the road renegotiating the terms of the loan?

It's two fold, risk management and cash flow.

The seller bears no risk in a cash transaction. The risk falls solely on the buyer, which is unacceptable. Anytime I can involve a 3[SUP]rd[/SUP] party consumer protection scheme, i.e. PayPal, consumer protection clauses in loans and credit cards, to mitigate risk, I am going to take advantage of it.


A bird in hand is worth two in the bush. The cash sitting in my bank account is accessible at anytime. I am not stuck trying to liquidate at a fire sale for pennies on the dollar. If worse come to worse, I can renegotiate the terms of the loan to get me over the hump.

 

[jkust]

Re: 20 year boat loan

A bird in hand is worth two in the bush. The cash sitting in my bank account is accessible at anytime. [/FONT][/COLOR] I am not stuck trying to liquidate at a fire sale for pennies on the dollar. If worse come to worse, I can renegotiate the terms of the loan to get me over the hump.

Sure but I still have cash. If I only had the amount of cash equivalent to the major purchase I was considering, I wouldn't buy it. Take your logic but now inject that you alway have cash in the bank. I like to keep at least $250k handy. There is no chance I'd default on the only thing I have a loan on being the house since I owe less than 250k on it. I rarely make major purchases but having a little cash in the bank allow me to sleep better.

 

[bruceb58]

Re: 20 year boat loan

It's two fold, risk management and cash flow.

The seller bears no risk in a cash transaction. The risk falls solely on the buyer, which is unacceptable. Anytime I can involve a 3[SUP]rd[/SUP] party consumer protection scheme, i.e. PayPal, consumer protection clauses in loans and credit cards, to mitigate risk, I am going to take advantage of it.


A bird in hand is worth two in the bush. The cash sitting in my bank account is accessible at anytime. I am not stuck trying to liquidate at a fire sale for pennies on the dollar. If worse come to worse, I can renegotiate the terms of the loan to get me over the hump.

When I am buying something with a credit card, I am not really buying it with long term credit since I am paying it back at the end of the month. Am I assuming you don't pay your credit cards in full at the end of the month? If you are, then I agree with your statement for short term that doesn't have any credit cost associated with it, that makes sense to buy things that way.

 

[frantically relaxing]

Re: 20 year boat loan

Completely agree with dingbat. It would be nice, but not everyone has 10's of thousands of dollars just laying around to buy stuff with. Life if short, and I'll be damned if I'm going to my grave not enjoying the nicer things in life just because I didn't want to take out a loan for it!

FWIW-- I took a loan out to buy the boats in my signature-- All are paid for except the Chaparral.

Cash is cash, whether you pay it now in one big chunk or spread it out...

 

[phonfish]

Re: 20 year boat loan

In order to purchase the boat I wanted, I took out a 20 year loan. I had the cash in my 401k, but I would have lost a large sum of my primary savings. For $100k loan, I would have had to take out $120k to pay the taxes+the loan. Loan is 5%, I was making 8% on my investments in the 401k.
Now, I have been retired for 2 years and still have no problems with the loan or affording the boat. Yes, I am top heavy on the loan at this time, but I expected it. Since this is my second boat, I knew upfront what the cost would be.
I have enjoyed my 06 Hydra Sport 2500VX, but I would like to be on the water more.
When you visit the boat shows this year, ask the dealers how many boats (lets say 25'+) will be purchased with cash.
What I did is not what most of the posters here have done or would do,but in order to get into a big new boat, maybe you can do without or go rob a bank.

 

[bruceb58]

Re: 20 year boat loan

For $100k loan, I would have had to take out $120k to pay the taxes+the loan.

Actually would have cost you more than that depending on how old you are and what tax bracket you are in. 10% penalty plus taxes which are not counted as capital gains. Depending on your tax bracket, could have been $150K.

Taking money out of a 401K for a purchase like that would be the dumbest thing of all.

 

[bruceb58]

Re: 20 year boat loan

Life if short, and I'll be damned if I'm going to my grave not enjoying the nicer things in life just because I didn't want to take out a loan for it!

Unfortunately, most people that end up in bankruptcy also had that policy early on.

You can either afford the lifestyle or you can't. Getting a longer loan to try to afford the lifestyle you can't afford will eventually come back and bite you in the end.

 

[jkust]

Re: 20 year boat loan

Unfortunately, most people that end up in bankruptcy also had that policy early on.

You can either afford the lifestyle or you can't. Getting a longer loan to try to afford the lifestyle you can't afford will eventually come back and bite you in the end.

I have to agree with bruceb here. I'd rather live below my means and sleep well than live above and have to stay a step ahead.

 

[agallant80]

Re: 20 year boat loan

I did not read through all of the replies on this thread but thank you everyone who chimed in. We all have our own way of doing finances. I thought the 20 was crazy just wanted to see what the deal was.

 

[bruceb58]

Re: 20 year boat loan

Check out this article on someone refinancing a home loan:
First person: I cut my monthly bills by $925 with a home refinance - Yahoo! Homes

Yeah she cut her monthly bill $900 but she also went to a 40 year loan. Amazing Yahoo list this as financial advice.

Can't fix stupid.