TheBeve

Lets Talk Financing

51 posts in this topic

Pulling the trigger on  a 21h2o and just don't have a bag of cash kickin around to pay for it. 

Any benefits to going long term on the loan we plan on throwing extra at it ?

Any benefits to have a larger payment and go shorter ? 

What have others done we plan on financing most of the note.

We have never had a boat loan and I understand they differ a bit from car lonas.

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Don't do it...boats are expensive. If you can't afford the initial price tag, find a different hobby or buy a used boat. I can't afford a new boat at this point in my life (and that is perfectly okay, most of us have used boats) but that doesn't mean I can't have a nice boat. For example, I paid 10k for my 24' boat and with 5k in upgrades and maintenance, it is now worth close to 20k. In boat terms, this is dirt cheap. Now for the expensive part: gas is about 1200-1500 a year, insurance is another 600, maintenance and repairs is at least 500, storage is about 3000/year, and there are always other unanticipated expenses. Financing a boat is not a financially astute. Boats devalue like crazy, EXCEPT on the used market where selling a boat for more than you paid is very common! Not to mention the H20 is an entry level boat, where you could easily get a much nicer slightly used boat for less money. I would be looking at a 21-22' SSI.

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the differences are simply the total amount paid at the end of the terms.  if you finance longer, you probably will have a slightly higher interest rate x the months of the loan times your payment will have you paying more.  However, if you are disciplined enough to overpay you can effectively pay just a little more for the security of if times get rough and you need a month or two of a lower min payment.

if you can afford a lower term at a lower rate you pay less but your payment will be higher and that is your minimum payment.  it really comes down to how tight the payments for you will be.  you also need to fully understand that boats are alot like cars, in a few years the resale value will probably be lower than what you owe, assuming little to no money down.  paying off early is always a good plan and any of the loans should allow early payoff without penalties 

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Same as a car loan, but often longer terms available. Everybody is different, finance the way it works best for your budget.

You will out grow that boat in 2-3 years, consider that while setting up financing. Less you owe, less likely you will be in over your head

when you sell/trade it.

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If you finance, always put enough down to make sure you're ahead of the depreciation.  We put 40% down on the boat we have now, so if we were to sell and pay off the loan anytime in the next 10 years, I know we'll be walking away with cash after the loan is paid.  

My parents bout at Silverton 38 Convertible brand new at a boat show in 2005 (2004 left over).  They financed and when they sold, they were already upside down and had to write a check to pay off the rest of the loan.  Don't get upside down...you'll regret it someday.

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nothing wrong with financing.  But like the others have said, be careful with getting upside down unless you're confident you'll have the boat for long term.  Time goes faster with a boat since its a shorter season.  I'm coming up on 10 yrs with my boat already.  I financed it and paid it off.  Still haven't outgrown it.

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Nothing wrong with financing. rates have been so low lately on certain things, ive financed and kept  money in investments making more money.  The key is what works for you in terms of monthly payment.  Also shop interest rate.  I have gone long term before, at times yes it has allowed me to have probably more than should, lol.  But how ive worked things out Ill take out a long term loan, pay the min for a year two, once I get other things settled come back and pay it off in half or less of the time.  Long term also gives you the flexability to make extra payments when you can, and when you cant, you don't have to.  One word of caution of taking out long term, and you see it all the time.  Guy takes out a 60k note on a new boat, great my payment is 400 a month.  forgets that boat takes 25% hit the first year, and 10% a year after that.  two years down the line, he needs to sell Nada says its worth 40-42, market says mor elike 38-40 and he owed 46.  See it all the time.  Word the wise put enough down or enough extra per month to stay out front.

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42 minutes ago, drewm3i said:

Don't do it...boats are expensive. If you can't afford the initial price tag, find a different hobby or buy a used boat. I can't afford a new boat at this point in my life (and that is perfectly okay, most of us have used boats) but that doesn't mean I can't have a nice boat. For example, I paid 10k for my 24' boat and with 5k in upgrades and maintenance, it is now worth close to 20k. In boat terms, this is dirt cheap. Now for the expensive part: gas is about 1200-1500 a year, insurance is another 600, maintenance and repairs is at least 500, storage is about 3000/year, and there are always other unanticipated expenses. Financing a boat is not a financially astute. Boats devalue like crazy, EXCEPT on the used market where selling a boat for more than you paid is very common! Not to mention the H20 is an entry level boat, where you could easily get a much nicer slightly used boat for less money. I would be looking at a 21-22' SSI.

Very good points.  I think in general a used boat is smarter purchase than new, due to depreciation, and the fact boats are toys you don't like them and want out or want to upgrade etc, makes sense to spend less on them. Ive bought all used.

But I disagree on making money on used being very common, ive owned 3, made 500 on one, lost on two, I think if you took a poll theres very few people that make money.  Even in your own example, you had 15 into it, its worth almost 20, which means if you were sell today you would get 16-18 on.  figure all expenses of ownership, theres no money making.

As far as loans depends on the situation.  I bought a 265 two years ago, had a kid didn't use it and figured it needed two go.  I had a loan on it.  For two years worth of use the note cost me 2k, that's it, I didn't have 20k plus of my own money tied up into the boat.  But in general financially it makes more sense to own things, in general.  Problem is these days with the cost of big ticket items even used, it might make more sense to finance it. 

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1 hour ago, TheBeve said:

Any benefits to have a larger payment and go shorter ? 

 

Yeah its paid off faster and your debt to income ratio doesn't suffer as long. Plus when you're ready to trade it in at a later date it will be paid off or closer to payoff. Less haggling over trade in or sale price.

Jake

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For a first boat, I would strongly suggest looking at used.Make sure you and the family are going to use and enjoy it. Many families buy new only to find out that they don't like or don't have the time to devote to it. If your attached to a 15 yr note with little down payment, you'll be way upside down. Plus you will be able to buy a larger nicer boat for less money. 

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As with anything, nothing wrong with financing a boat if it makes financial sense. If you really cant afford it and need  a loan with a monthly payment low enough in order to fit your budget, then, maybe, you need to re-evaluate and get something more affordable. If you're looking at a loan because it makes financial sense - why not?

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If you decide to finance the boat purchase, I suggest using a home equity line of credit, if you have one.  Then the loan interest would be tax deductable.  Nice choice on the boat model.

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Does the h2o have a head and cooking area? If not, it can not be written off as a second home. You have to be able to eat,sleep and poop in it to qualify.

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Depending on your circumstances, having a boat loan may not be that bad. It assumes you can manage it financially. Of course, the  longer the loan term,  the more you will pay in interest, and the more potential to be upside down. Also consider your insurance policy. An "agreed value" policy may be a better choice when financing. 

brick

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Tax deduct-ability IRS section 163 (h)(2)

As a licensed financial professional all I can tell you is what makes sense for one situation doesn't make sense for all.

 

 

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49 minutes ago, jeffk said:

Tax deduct-ability IRS section 163 (h)(2)

As a licensed financial professional all I can tell you is what makes sense for one situation doesn't make sense for all.

 

 

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+1

brick

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Affording the boat is not a problem. Looking at the price of used boats being a chaparral or not they seem to be priced high. I would want something 2012 and up and less then 50 hours. Finding it may be in the best interest to go new and get a five year warranty on new vs nothing on used. I was just trying to get a feel for what others have done. The beauty is our boating season is eight to nine months with very little water temp fluctuation so usage isn't a problem.

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If you wait a month, the used boat market will come back down...also comparing a 2012 SSI for instance to a 2016 H20 is apples to oranges. The H20 is entry level (average to below average quality), while the SSI is above average quality. They may look similar, but not where it counts (hull layup, transom, stringers, bulkheads, gel coat, vinyl quality, hardware, etc.) That's why many of us recommend a used SSI over a new H20. Not that the H20 is a bad boat, its just not designed like a high end boat (which may be fine for you).

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If you finance you can go the longest term, then you can just put extra on it to shorten the loan when you have the extra cash. 

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HELOC's are only deductible to the limit of the original equity when you purchased the home.  If you borrow more than that equity, it is not tax deductible.   Of course the boat under circumstances mentioned above can be deductible if they qualify as a second home. 

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Don't finance too long.  You will want a bigger boat and then u will be upside down.  I'd wait for the boat shows in the spring to buy.  

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12 hours ago, Baum's aweigh said:

HELOC's are only deductible to the limit of the original equity when you purchased the home.  If you borrow more than that equity, it is not tax deductible.   Of course the boat under circumstances mentioned above can be deductible if they qualify as a second home. 

Never understood taking out a HELOC to buy a depreciating asset like a boat, snowmobile, or car.  sure the interest rate can be lower, but your borrowing against something that is either holding steady or appreciating in value, only to take it down.  Plus your adding to a note that probably your largest liability. 

 

Wife was a loan officer at bank, and she was amazed what people got helocs for,  she said there were some that took out helocs had it all planned out to consolidate etc, and actually came out ahead.

 

With car loans still in the 2-3s, toy loans in the 4-6 range, makes no sense to get a heloc.

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I would also encourage you to look at used.  It's a bit more difficult to find that perfect boat in the used market, but they are out there. 

Earlier this year, my friend and I both bought boats. I bought a 2008 boat with just over 100 hours. It was in great condition, especially after the amazing detail job my dealer did. Virtually everyone who has been aboard is amazed when I tell them it's 8 years old. Most people think it's brand new.  My dealer sold it as a "certified used boat", which included a one year "new boat warranty" and a two year mechanical warranty. That took away the fear I had buying used.

In contrast, my friend purchased a brand new boat. Same brand, same size, some basic features (albeit with a smaller engine) than my used boat.  He paid almost twice what I paid for mine.  Yes, he has a five year warranty, but other than that, are boats look about the same, run about the same, and provide each of our families the same experience.  According to NADA, his boat has lost about $8k in value, my boat has lost about $2k in value. 

 

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