Boat loans – how long?

[Jim_in_Delaware]

I am hoping to buy a new (or gently used) boat next year, after we move into our new home. I never like to be underwater on any loans on a depreciating asset, so when I buy my new boat, I likely will put 15% down and finance the rest.

I’m wondering how many years folks typically get a boat loan?

Does anyone think “X” number of years is too long? If so, why?

Jim

 

[HangOutdoors]

That is a loaded question. It really needs to be based on your personal situation and what feels right for you.

Some will never do more than short term loans and indicate that is the only way. Others will do 15 yr - 20 yr loans. Some will indicate always have the cash and finance more and others will say they will never finance anything.

As far as a depreciating asset? You are correct they are, except for last year and right now because of the weird market. No way to tell what the future holds.

Figure out your own cash flow, monthly payment, how long you plan on keeping the boat, will you be making extra payments, etc.

It all depends on what you buy as well. A New Boat, A Used Boat, did you pay a lot of additional fees, did you get it for under MSRP, did you get a good deal, etc. etc.

It is not a one shot deal. You could put less down, buy more boat and refinance and put more down to reduce the loan, etc. Get a better interest rate down the road. You are most likely not going take equity out of the boat on a refinance, which is tough.

 

[fatboyroy]

Depends on your situation, some people finance for 20 years cause they make more investing their money. If that's not your case, put as much down payment as you can and as short as a loan you can with a monthly that you can comfortably pay.

 

[Elliott]

If you are asking questions and want to be safer, treat it like a car. Although longer periods are available, 5 years is the typical car loan term. At least using a 5 year term should give you comfort that you can handle the payment in your budget, and you will probably be upside down for a relatively short or no period of time (depending on down payment).

As the others have pointed out, it all depends on you and your situation. FWIW, Yamaha is offering 2.99% financing for 6 years.

 

[Jim_in_Delaware]

Thanks for the quick replies.

I not trying to focus on whether to finance or not and hope we really don't get into that type of discussion.

Is there a point in boat ownership when too many years makes the amount owed on the boat more than it might be worth? I'm thinking about a point in time where there might be a lower overall value of the point and a higher chance that it might require some serious money for maintenance.

Jim

 

[BigAbe75]

I know with usbank, they treat a boat as a recreational vehicle and once you go past a couple of years there is no change in interest rates if you go farther. I was told that it was the same rate for 12,15, and even 20 years.

 

[Bluewater272]

In most cases, a 15 year loan will have you underwater for damn near the entire term. Its a rare boat that reaches zero value prior to the term of the loan. How much you're comfortable being underwater is a personal decision. Last/This and probably next year are anomalies in that if you secured a boat and didnt overpay, its probably worth as much or more than you paid, but that shouldn't (IMO) be seriously taken into consideration.

There's simply no standard depreciation curve for a boat. Outside of current market, an SX190 will depreciate faster relative to its initial value than an AR190/5, for example.

Make a good deal, put money down, and finance over a reasonable amount of time. There are few situations where a 15 year loan makes sense for a toy costing $40-90K. I took one for flexibility, but with the knowledge that it'd be paid off in less than 5 (and ended up paying for it over 3). There are pros/cons to every situation - I probably paid more in interest than if I had just taken a larger payment 3 year loan, but I liked having the flexibility. I could have put all the extra into the market and kept the loan for 15 years and made more money, but that leaves the boat itself relatively illiquid should I need to make a change. It's all about your entire situation and your risk tolerance. Example: If you take a 15 year loan and invest instead of pay out of pocket, if the market tanks and you lose your job and need to dump the boat - will you be able to come out of pocket for the difference between value and payoff? I'm OK carrying house debt, vehicles though, I'm seeking to pay off as quickly as possible.

 

[HangOutdoors]

In most cases, a 15 year loan will have you underwater for damn near the entire term

Not exactly. All depends on the LTV at any given time. Hence the down payment and current value at any point in time. Also the price point you purchased the boat at.

Now your statement is accurate if you purchase the asset above market or put nothing down or if the market slides for the asset, then you can say "In Most Cases" otherwise it is scenario driven not just the fact that it is a 15yr note. the note length is irrelevant without the other variables taken into consideration.

For instance I am on a 15yr and owe in the mid 30's on a boat that I purchased for 42k OTD at a time when the MSRP was 47k and 49k OTD. Will most likely upgrade next year or the year after, depending on price and availability and will, at the very least be able to sell it for what I owe on it or possibly more.

 

[Beachbummer]

The longer the term, the most interest you pay. You need to be aware of your costs. On average you pay half your interest rate * the amount of the loan * # of years loan is outstanding. The other problem is that you pay more interest at the beginning of the loan, as your loan balance outstanding is higher than towards the end of the loan.

Determine how comfortable you feel, and what you value from the boat.

Your costs on holding the boat are Depreciation + Interest. This may or MAY NOT be included in your loan payment. Depending on your term you may be upside down and be unable to exit the deal without putting more money in. Keep in mind Fuel, Storage, Maintenance and Repairs as other costs. (Read feedback from others dealing with warranty repairs so you can place a value on that if you are considering a new boat)

I personally am not a big supporter of long term loans for a boat. If you can keep it 5 or less, that will be beneficial to reduce your interest expense over the life of the loan.

 

[HangOutdoors]

@Beachbummer Totally Agree.

But I also look at it as a vacation expense as well. The thousands and 10's of thousands I have paid for vacations, weekend getaways, etc. that were marginal at best now gets paid, or absorbed by the boat for at least half of them. Weekends on the water where I burn a few hundred dollars a month in payment and a couple hundred in gas is far cheaper than renting a 6 bedroom hotel room or house somewhere to go walk around. Much more enjoyment out of the boat and what it opens us for us.

So really I have redirected funds that I was pissing away in one direction and saving a great deal to own a boat and spend the money on it. Regardless of the note length. Cash In, Cash Out, Expenses and Enjoyment. The boat is saving me a great deal of money right now, more than I thought possible as far as enjoyment.

 

[Bluewater272]

Not exactly. All depends on the LTV at any given time. Hence the down payment and current value at any point in time. Also the price point you purchased the boat at.

Duh, but you know full well that the 'average' buyer isn't putting down more than they have to at signing.

 

[obrien19]

Really all that matters is what makes you the most comfortable. I wish I had enough cash to buy my toys out right, but I don't. Maybe if I saved cash for several years I could. My belief is I'd much rather enjoy luxuries while I'm young, instead of leaving a pile of cash for family to fight over after I'm gone. Look at the rising cost of new cars, I remember when 5 years was the maximum, then it was 6 and now 7. I think that is crazy for a car but at the same time, I did a 15 year loan on my boat. Whatever you do, make sure you buy your "second boat" first. Because the larger boat itch is real! LOL

 

[HangOutdoors]

Duh, but you know full well that the 'average' buyer isn't putting down more than they have to at signing.

You are absolutely correct. And they are buying at MSRP +++, which is going to be painful.

 

[JetBoatingUpstateNY]

If staying above water on your loan is a priority, like it is for me, I think 10 years is the sweet spot. You can still find them for around 4-5% interest at a lot of credit unions. If you put 15% down you should stay above water if you get a good deal.

 

[biffdotorg]

Now your statement is accurate if you purchase the asset above market or put nothing down or if the market slides for the asset, then you can say "In Most Cases" otherwise it is scenario driven not just the fact that it is a 15yr note. the note length is irrelevant without the other variables taken into consideration.

Like 90% of the used boat sales over the past 18 months. There are gonna be a lot of pissed off owners next year if they decide to sell their lightly used boat when it has depreciated at a very abnormal amount. It's going to be very interesting to see. And with some financial institutions already anticipating this bubble burst, you can see them stopping any more lending for these inflated products. They have to be profitable with safe investments as well.

 

[HangOutdoors]

@biffdotorg Shhhhhh How do you think I am going to get a 25' FSH, gently used by someone who is bailing without a parachute

 

[biffdotorg]

@biffdotorg Shhhhhh How do you think I am going to get a 25' FSH, gently used by someone who is bailing without a parachute

I keep telling my wife that, and she keeps telling me, we have all the boat we need, and our next will be a tritoon. I said, when a tritoon gets a swimplatform, I am in. And Bennington, said. "HOLD MY BEER BIFF"

 

[biffdotorg]

I followed this Bennington home a couple weeks ago. For those that know Benningtons, this is a QX, with tower and I/O engine and swim platform! OMG, papa like! Putting out 350-400hp, this sucker probably moves!

 

[Adrian @ JB Solutions]

View attachment 157824View attachment 157825

There is a lot better looking models of Pontoons with swim platforms coming...

 

[Beachbummer]

@Beachbummer Totally Agree.

But I also look at it as a vacation expense as well. The thousands and 10's of thousands I have paid for vacations, weekend getaways, etc. that were marginal at best now gets paid, or absorbed by the boat for at least half of them. Weekends on the water where I burn a few hundred dollars a month in payment and a couple hundred in gas is far cheaper than renting a 6 bedroom hotel room or house somewhere to go walk around. Much more enjoyment out of the boat and what it opens us for us.

So really I have redirected funds that I was pissing away in one direction and saving a great deal to own a boat and spend the money on it. Regardless of the note length. Cash In, Cash Out, Expenses and Enjoyment. The boat is saving me a great deal of money right now, more than I thought possible as far as enjoyment.

Don't get me wrong, If you use the boat and enjoy it, it's a great way to spend your time and money. If your prior hobby was burning $100 bills a boat might even save you some money