longer term financing

[tpenfield]

Re: longer term financing

Definitely a personal choice, and the opinions will run the gambit. My preference is to not do long term financing on a rapidly depreciating asset. Furthermore, I consider boats to be a luxury item, in that it is beyond the basic necessities. So, with that, I pay cash for my boats.

if I can not pay for them up front, then all I get is a row boat

 

[dan02gt]

Re: longer term financing

My wife and I financed ours for 12 years. Why? Because there was absolutely no advantage to financing it any less time. The interest rates were the same. Sure if you make the minimal payment you will pay more in interest, but we pay a lot more than the minimal payment. We also put a lot down so we wouldn't be upside down.

I ran a payment calculator and found that if I just pay $50 more per month it cuts the loan down by 4 years. My advice is do the 10 year and pay extra on it.

 

[lakegeorge]

Re: longer term financing

Sig is right about financing a boat, car or anything on extra long terms. The interest charges go up so fast after 48 months that payments can total to a ridiculous amount. It's just like when you go 30 years on a mortgage instead of paying a little higher payment and paying it off in 15 years.

I read of $70K bass boats being bought on 10 or 12 year notes. Unfortunately, the engines don't have that long a life span. And what do you do when you have to replace a Mercury 250 Pro XS after 8 years? You still owe twice what the boat's worth--and another engine's $16K-$17K. That's when you've dug yourself a hole and let the boat be repossessed, or you pay 4-5 years on the boat while looking at it under a tarp in the back yard because you cannot afford to repower it.

Toys are not something to finance longer than 60 months. If you cannot afford a boat on 60 months, you just cannot afford the boat in the first place.

Totally disagree, Our new Cadillac xts finance cost is 2.6% I can assure you that I make a lot more than 2.6% on my investments. The 2010 Buick Enclave that we traded in on the xts had 0% financing, that's right 0%. A person would be crazy not to finance as long as possible with these low rates.

 

[redneck joe]

Re: longer term financing

george that really depends on the persons situation. Zero percent, OK I'll give you that's a no brainier but anything above that needs a think thru. If one is looking to finance a $40k boat, but don't have $40k invested making more money then that needs a think.

 

[gm280]

Re: longer term financing

Debt free is an amazing feeling and if you want a boat, you could always put money back each month until you have a nest egg to purchase your dream in cash. Funny how many times your personal wants will change while saving for anything you thought you wanted and couldn't live without! JMHO!

 

[Natesms]

Re: longer term financing

We've financed 2 boats over the years. 1 - my dad it in 94, I think it was 12 years, payment was almost nothing $104 a month. He knew he'd keep it forever, had kids in college, but wanted to enjoy the boating lifestyle and the interest spent was worth it to him to not unload the cash. Boat is still in the family today.

I financed my 95 cruiser last year. I have/had the cash on hand to pay upfront. I have a partner on it though and he didn't have that kind of cash to pay up front. We put enough down and pay extra to stay well in front of the loan. Last season was a "test run" to see if we really wanted to do it. So we kept the cash on hand, paid the interest during a trial season and could get out of the boat on the positive side of the loan if we wanted to. I expect that we'll pay the loan off this season.

 

[bruceb58]

Re: longer term financing

If changing the term of a loan because the payment difference is $50 and that actually matters if you think you can afford a boat or not, then you probably can't afford a boat.

The loan on my boat is 0% since I don't have a loan on my boat.

The 0% car loans are there to suck new car buyers in that should have bought used. 2 years later when the car is worth 50% of its new value, the 0% loan didn't do you any favors if you just lost 25% average each year does it?

 

[Slip Away]

Re: longer term financing

Bottom line, if you plan on keeping the boat for 3-5 years, go long term. Anything less than that, you run the risk of being upside down on the pay off when you sell it.

 

[bruceb58]

Re: longer term financing

If you put 50K + miles a year on a car new is the only way to go. Sorry, you simply can not say that because something works in your situation that is what everyone should do.

Buy a 2 year old car that is still under warranty with 24k on it. The difference between the two cars is that you will have one with 124K and another with 100K but the car with the 124K one costing you half as much. If you are putting that many miles a year on a car, it actually makes even more sense to buy a used car. If you put 100K on a new car in 2 years, the depreciation is going to be WAY more than 50%.

Buy a used car and you will have way more money for $5 propane!

 

[bruceb58]

Re: longer term financing

Sorry, we'll just agree to disagree.

NP...someone has to keep that GM stock price up!

 

[spdracr39]

Re: longer term financing

It is a financial option that is viable to some situations and not for others. I didn't buy the boat to make money I bought mine to use. The longer note gave me flexibility to pay a lower required payment each month. I pay double usually but don't have to. There is no penalty for early payoff. If I am short on cash for the month I just don't double it. I know its costs a little more than a short term note but the flexibility is worth it to me.

 

[quad59]

Re: longer term financing

My sister financed one and they are happy with doing so. Their payments are around 300 a month. They pay the minimums during the season and double up when its in storage for the winter and is working for them. They decided they had X amount of dollars to dedicate towards boating and neither of them are mechanics. They bought new for a piece of mind and to not have down time during a short Ohio sesaon. I liked their approach personally. Decide how much $ you would have to dedicate towards boating per month, having 1200 for recreation is different than having 500. Make an honest educated deciscion.

 

[Natty Light]

Re: longer term financing

I financed my boat over 10 years. I'm in year 3.
The low payements are great. My boat was around 13000 total and I pay 130 bucks a month. I barely notice it go through each month.
I haven't regreted it at all.
I have a wife and three kids and we've made some great memories that we wouldn't have without financing.
You don't have to finance new. There are some solid used boats and it may make the resale hurt less.
I have a very successful career, but don't have a tons of cash ready to lump out on a boat. Suprised that so many folks on this thread do.
That's not the norm these days and to tell someone they shouldn't be in boating becuase they can't do that just sounds like grumpy old man bulls### to me.

No reason the average joe can't enjoy boating along side some of you grumpy old bastards sitting on your nest egg.

 

[redneck joe]

Re: longer term financing

If you put 50K + miles a year on a car new is the only way to go.

I would disagree and I believe you disagreed with yourself:

Sorry, you simply can not say that because something works in your situation that is what everyone should do.

 

[bruceb58]

Re: longer term financing

That's not the norm these days and to tell someone they shouldn't be in boating becuase they can't do that just sounds like grumpy old man bulls### to me.

You are totally correct! The norm is to live beyond your means and why my brother who runs auto auctions sees all the repossessed cars and boats run through his business.

 

[oldjeep]

Re: longer term financing

No reason the average joe can't enjoy boating along side some of you grumpy old bastards sitting on your nest egg.

Sometimes even with the nest egg, it makes no sense to use money that is earning 12% instead of money that costs under 5%

Borrowing money doesn't necessarily mean that you can't afford something.

 

[dingbat]

Re: longer term financing

When I bought the Accord (2011) 3 years ago, the difference between new and used (2009, 30-35K miles) was roughly $3,000 and 2 percentage points in interest.

When I do the math 50K miles later using NADA values, it comes down to $75 and 3 additional years of warranty in favor of the new car.

I'm looking around right now to replace my Civic and are finding pretty much the same scenario. Unless someone can pull a rabbit out of a hat, I don't see myself buying used this time around either.

 

[dan02gt]

Re: longer term financing

Sometimes even with the nest egg, it makes no sense to use money that is earning 12% instead of money that costs under 5%

Borrowing money doesn't necessarily mean that you can't afford something.

Yep, I agree 100%. My interest rate on my boat loan is 4.5%. My mutual funds did 28.8% last year and 15.49% over the last five years. The boat payment is so low we don't even miss the money and that's paying a lot extra on it every month.


Now if you have to see if you can work a boat payment into your budget you probably shouldn't be buying one.

 

[gm280]

Re: longer term financing

Maybe what a prospective buy really needs to do is get an amortization program/schedule and take the asking price of the boat and run it through the programs at the interest rate and the duration of the loan to see how much extra the interest is going to add to that price and simply make those totals the cost of the boat for clarity. So then the asking price will be the total of the initial boat price with all the interest attached to it for the real total. If that doesn't scare you off because of the real amount, then have at it... I hate throwing away money or handing to others for no good reason. And interest is exactly that! Ten years is a longggg time and I'd bet the boat will not have as much interest in using it as it was when first purchased. Kind of like a new vehicle, that newness smell and excitement wears of in about six months, but those monthly payments goes on and on and on and on...

 

[idonthaveaname]

Re: longer term financing

My 2 cents. My new truck is 0% financing. My new outboard is 0% financing. That said, especially if you are a millionaire, one never finances anything with an interest rate unless the return out performs the cost with the caveat of a 4% or less charge which is still essentially "free" money. I believe the average boat loan is probably closer to 8-12%. That said, YOLO so if you can afford it (and that is what you need to figure out) go ahead. In my case my retirement is fully funded and my current investments (not slated for retirement income) bring in an average of a 20% return. With that, I am not about to "cash in" for my OB (or boat) but rather chose to acquire a 0% loan (it took some work for that). How can one do this you ask? First, because of what I do financially, my credit score is almost 900. Second, I pay off my ONE credit card every month. Third, I carry "no debt" except my house and those 0% payments. Still in 5 years my truck will not be worth what I paid for it. Personally I say save your money and pay cash for a new boat if that is what you really need. Truth is you can buy a really nice boat that is a couple of years old and save a ton of money...just sayin.