financing a new boat

[yourkiddin]

Is it normal to finance a boat for 10 or 12 years? I was very supprised when i done the math.Paying close to double if you go that long. I know you can pay more but is the average boater out there that has a new boat paying these low monthly payments for this long of a period?

 

[rndn]

Re: financing a new boat

My brother took out a boat loan for 15 years, he's my brother, but what and idiot.

 

[rndn]

Re: financing a new boat

By the way, Welcome to the forum!!
Please don't tell my brother I called him and idiot.

 

[octane]

Re: financing a new boat

I just bought a new Doral, and I was surprised as well.. the guy was quoting me 190$ per month... over 15years! I told him to put it on 48 months, and he looked at me with a strange look... I guess since boat age better than cars, people are more comfortable putting them on a longer finance period.

 

[eastern27]

Re: financing a new boat

Is it normal to finance a boat for 10 or 12 years? I was very supprised when i done the math.Paying close to double if you go that long. I know you can pay more but is the average boater out there that has a new boat paying these low monthly payments for this long of a period?

My 1st, 4 yrs. , 2nd, 5 yrs. 3rd, 7 yrs. to keep the payments managable till I sold #2. All except #3 are paid for, and I just re-did the loan on it, from 8% to 5.25% and shortened the term by 2 years. Short term rates are good now, < 7 years. When I sell #2 I'll redo the loan again for 4.75% for 2 yrs.

 

[Imback31]

Re: financing a new boat

Put my new Doral on 15 years at 6%, low payments during the season then when bonus time comes around I pay down the boat at 10k a shot. I'll have her done in 18 months by why pay a higher payment between? (I do know people who put it on 15 years and don't pay down the principle, these are guys that just can't afford something they want)

 

[Shawn_floats]

Re: financing a new boat

15 years.. wow. That's a long time.
Pay nearly double what it's worth over that time.

I don't think I'd need a boat that bad if that was the case.

 

[Walpole]

Re: financing a new boat

If you are going to take a loan out over a longer period (10 to 15 years) of time and plan on paying it off early just make sure there are no prepayment penalities.

They always try to sell you the "monthly payment" being so low but you are correct to look at the total payment over the term of the loan. Typically the shorter the loan period the better the interest rate.

One other point if interest is if the boat has a "head" I am pretty sure the interest is tax deductable. You will only get this deduction if you itemize on your federal return.

 

[BamaAlum97]

Re: financing a new boat

I think it is common for banks to offer longer terms because it lowers the payments down to the point where more people can afford to buy the boat. A lot of people either do not know or care about the extra interest they are paying.

My boat is actually financed for 10 years because that was the term with the lowest interest for me...but I also make an extra payment each month that is principal only and no interest, so I will actually be paid off in half of the loan term.

 

[ebry710]

Re: financing a new boat

Most people when they take out a loan look at monthly payments. They ask themselves can I afford this on my budget. Time and interest paid out the life of the loan isn't an issue.

If you borrow $12000 with no interest it brakes down to:

1 year you pay $1000/month
5 years you pay $200/month
15 years you pay $67/month

Which sounds better?

 

[tashasdaddy]

Re: financing a new boat

ever heard of "up side down" you can't sell it. you owe more than it is worth.

Example $25,000.00 boat

Down payment $5,000.00

15 years at 6%


Year Interest Principal Balance Depreciation Estimated Value.
2008 $887.48 $631.47 $19,368.53 $5,000.00 20% $20,000.00
2009 $1,137.98 $887.28 $18,481.25 $2,000.00 10% $18,000.00
2010 $1,083.25 $942.01 $17,539.25 $1,800.00 10% $16,200.00
2011 $1,025.15 $1,000.11 $16,539.14 $1,620.00 10% $14,580.00
2012 $963.46 $1,061.79 $15,477.35 $1,458.88 10% $13,122.00
2013 $897.98 $1,127.28 $14,350.07
2014 $828.45 $1,196.81 $13,153.26
2015 $754.63 $1,270.63 $11,882.63
2016 $676.26 $1,349.00 $10,533.64
2017 $593.06 $1,432.20 $9,101.44
2018 $504.72 $1,520.53 $7,580.91
2019 $410.94 $1,614.32 $5,966.59
2020 $311.37 $1,713.88 $4,252.71
2021 $205.66 $1,819.59 $2,433.11
2022 $93.44 $1,931.82 $501.29
2023 $5.02 $501.29 $0.00


this is what is called UPSIDE DOWN, works the same with cars and houses.

 

[vess]

Re: financing a new boat

Excellent point TD- great to see it all spelled out like that.
Why not buy a boat you can afford, like a used one? Even if you had to borrow money to do that you would be far better off than being upside down in 2 years when you can't afford t any longer due to illness or job loss. That is why the mortgage industry is a mess now, requiring government intervention. Everyone talks about the big, bad banks that made poor loans to buyers, but the buyer is just as responsible, buying more than really could/should be affordable.

 

[bomar76]

Re: financing a new boat

Never finance toys.
Period.

 

[WanabeBoater]

Re: financing a new boat

I'll have to disagree with real estate depreciation...depending on where you live...appreciation is almost certain.

 

[pet575]

Re: financing a new boat

I don't see anything wrong with a 15 year note, so long as you're going to pay it off sooner. Some folks want to keep their monthly payment as low as possible until they can earmark more of their income to paying down the principle. So long as they are disciplined enough to follow through with it, and nothing catastrophic happens before then, then it is a strategy that can work out well. Obviously, this doesn't work for someone prone to two-foot-itis or people who "require" a newer model every other year.

 

[erikgreen]

Re: financing a new boat

Never finance toys.
Period.

Ditto. If you can't afford to pay cash, you can't afford it.

I financed my house because I had to, but I'm rebuilding junker boats because I want a boat

Erik

 

[BamaAlum97]

Re: financing a new boat

I don't see anything wrong with a 15 year note, so long as you're going to pay it off sooner. Some folks want to keep their monthly payment as low as possible until they can earmark more of their income to paying down the principle. So long as they are disciplined enough to follow through with it, and nothing catastrophic happens before then, then it is a strategy that can work out well. Obviously, this doesn't work for someone prone to two-foot-itis or people who "require" a newer model every other year.

Agreed...anytime I borrow money, I shop around for the lowest interest rate...then I pay as much extra into it every month. That extra payment goes to principle only...

 

[Bigprairie1]

Re: financing a new boat

It certainly doesn't take a rocket scientist to see the financial pitfalls of buying a new boat on credit. Its pretty obvious the smart money would be buying in the slightly used category with the first ('new boat smell') buyer taking the big depreciation vs. payment hit. I love it. There are no shortage of 1-3 or 5 year old boats out there with next to no hours on them with their owners trying to sell them off. Its absolutely great news for buyers targeting good used boats and over the next year...its just going to get better with the people out there currently living on credit who will be forced to sell their stuff off to get their financial balance back.
If you can really afford the boat...pay half cash and finance the difference. Remember in 1 month your boat will be a used boat as far as the rest of the world...and the salesman who sold it to you is concerned. For the heck of it, ask what it would get on a trade in in September with...say 80 hours on it? Then make sure the difference between what you are about to pay and that quoted amount is worth it.
Bomar is not way off when he says don't buy toys on credit.
Interesting stuff.
BP

 

[tmh]

Re: financing a new boat

Noooooooo!!!!!!!!!!!!! Stop with that old-fashioned "don't buy on credit" crap! You Great Depression-raised worry warts don't know how my generation lives! IF I want a boat on credit that's MY business. You aren't the poster's financial adviser! Go role up your saved pennies or something.

Where else are us "buy slightly used" folks going to find a flooded buyer's market of nice boats cheap! PLEASE buy on credit....15,20 years, whatever. Especially you northern folks! nothing like a nice boat payment in January for a great lakes boater to get that boat up for sale cheap!

"2004 Boat for sale, hardly used - turns out my wife hates boating; Below Blue book, just take over my payments.......or best offer"

Beautiful.

 

[amynbill]

Re: financing a new boat

We did the 15 year thing, knowing it could get paid off at any time. The one benefit is that if for a couple of months you choose to pay the minimum you can.

If there is no prepayment penalty (the ONLY loan you should get for any duration), going for the longer term for less a month makes a lot of sense as you can pay it off anytime you like anyway. No one is forcing you to pay it in 15 years. We plan on having the loan gone in just a few years.

So the notion that just because someone takes a longer term loan doesnt understand finances or is dumb is bunk.