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I also don't get the die hard "cash for a boat" guys. Every situation is different.
I am also in a small business which banks DO NOT loan to...And my company owns its inventory outright.
I am 33, my wife 34...my cars are paid for, I own rental property on the side which I have positive equity in, I refinanced my homestead and could flip burgers or dig ditches and pay for .....and I am making more in the market than the interest on the boat loan. I also bought my boat brand new at fire sale pricing when the market was at its worst in September of last year.
I also own plenty of assets I could sell for cash if I needed the money....So whats wrong with it? I am not so stupid as to think that my boat is not going to depreciate but I am also gonna have it paid for long before the loan is due.
Instead of sinking a bunch of cash into the boat, I bought a bunch of Toyota stock instead....If I dump it today I have made money
Having said all that...I know the guy who has a brand new diesel, $800/month...House in the burbs, $2500/month....New boat, $1000/month...etc etc etc. he only goes fishing when he can gather some friends to help out with Beer Bait and Gas...SAD that he is so burried.
In closing, if all other things are in check, a boat loan is not wrong.
I could sell my boat for what I owe today...its been offered to me.
I don't think there is anything wrong with financing a boat, as long as you stay within your means. I am in the process of buying a new boat, which I will finance. I took out a 10 year loan and the payments will be about $400/month. My truck is paid for, my Ducati is paid for, and my wife's 09 Pathfinder is paid for.
I see nothing wrong with financing this boat, and I don't think $400/ month will kill me. When I first buy the new boat, the depreciation would put me a little underwater, even with 10% down. Although anything can happen to anyone at any time, I still feel this is relatively low risk.
Now if I still owed money on my old boat and I was rolling that debt forward into a 30 year boat loan, then yes I would feel that I was living beyond my means. I treat it like a car payment, and we don't like to have more than one car payment at a time, so no new cars until this boat is paid off.
Had I paid cash for the boat, that would have left my reserves a little lower than I would feel comfortable with. I feel that this would actually be riskier. Let's say I paid cash, and after the boat, slip sales tax, prep, rigging, etc I put out 50k. Now my savings accounts have been decimated. Then let's say I lose my job and still have a mortgage payment. I would go through my remaining savings rather quickly. But at least my boat is paid for, that I cannot even enjoy at this point.
If I financed the boat and have the same loss of income, that 50k still in the bank will take care of both my boat payment and my mortgage for over a year.
Why would I NOT finance it? My point is that sometimes financing makes sense, as long as you live within your means.
Exactly right. There is more financial risk if you have less rainy day funds. If you go into a negative cash flow situation due to income reduction after you buy the boat, and you have depleted savings, you will lose the boat a lot faster than if you financed the boat and have those funds available to tide you over.
Now if you couldn;t afford the boat as part of your overall financial picture, then that is a different story. But that is not a financing question - it is a purchase question.
I financed my first three boats and made money, including interest paid. The problem isnt so much financing but making emotionally driven purchases.
Depreciating assets....like my homes????
My boat is the best material asset I own right now!
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At the time I purchased the boat I didn't have the almost 150k cash to drop down on it hence I went with the 30k and figured I square up on the balance when I sold it. I don't mind the payments and am by no means strapped for cash. My only out of pocket monthly expenses are boat and 2 cars and I do own property. I'm just one of those people who'd actually prefer not handing out all the dough and having over a coupls of years of reserve funds..including boat payments..to survive in the event things went south.
Bought new. Liked the idea of six year engine warranty. Also I know exactly how the boat is cared for from day one. Going on year number three on a ten year loan. Pay an extra sixty a month to knock a little time off the loan. Yes if I went used I could have gotten more boat for the same money or the same boat for a lot less money but I get piece of mind knowing the boat is and was properly cared for. The memories the kids will have and the enjoyment I get being on the water far outweigh the loan payments.
Being in debt sucks but once the drag starts screamin' all is forgoten !!!!
Pay cash or finance it. If you can pay cash more power to you. If you have to finance make sure you have your nest egg stashed away for the rainy day. Most importantly, whatever way you buy, enjoy it every chance you get and who cares what others have to say about how you pay for it.
I financed my first three boats and made money, including interest paid. The problem isnt so much financing but making emotionally driven purchases.
Depreciating assets....like my homes????
My boat is the best material asset I own right now!
"I financed my first three boats and made money, including interest paid."
I paid 2k less for my new boat than it booked for as used. I put a little down and financed the rest. I need my cash for other things right now. For the first 2 years I should be able to sell at payoff. After that, equity should build.
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Got no prob with boat loans, but I don't have any. If yer upside down, but hadn't planned to sell the boat, then no issue. If the opposite is true, well, then yer screwed...
1) If you have the money to pay cash - Because over the long term, you make more on the savings/investment that you retain than the interest that you pay out over the life of the loan. You are always financially better off if you can borrow at a rate lower than your investment return
2) If you don;t have the money to pay cash - Because we were not put on this earth to just work for 45 years, put the kids through college, shuffle off to a retirement home, and check out without enjoying what the world has to offer in the way of joy and passion in life.
Well said
When I was boat shopping a few years ago, the broker that was showing a convertible I was looking at told me a story about personal friends of his. Both educators, worked, scrimped and saved their entire lives to save enough to retire and enjoy their dream of buying a sailboat and cruising off into the Caribbean sunset. Sadly, one of them developed cancer before that dream could ever be realized.
Somehow I knew this topic would degrade into the "cash vs. finance" argument that seems to happen here once a month...To each their own.
Within reason, I think it's fine...but financing anything for a term longer than the asset can hold it's value (with no plan to pay off early) is just crazy. Ten year loans on cars, and twenty year loans on boats would seem to fit that bill.
Pay cash or finance it. If you can pay cash more power to you. If you have to finance make sure you have your nest egg stashed away for the rainy day. Most importantly, whatever way you buy, enjoy it every chance you get and who cares what others have to say about how you pay for it.
I don't care how you spend your money?
Why do you care how I spend mine?
__________________
That is crap.
Which idiot told you that CO2 only makes up 0.039% of the atmosphere?
Why would you ever finance a depreciating asset? Because if I can get financing at a lower interest rate than what I can make by investing it, then it makes sense.
I normally don't buy new, but the wife got a new car last spring. Instead of paying cash, we paid about 30+ percent down and took the rest and invested it believing that we could do better than the 4.5% interest we were paying. Last spring was a great time to invest, and instead of having a paid off car we have a paid off car and money in the bank.
I'm not bashing the cash for toys people, if that's how you want to go then great. And I personally will put down enough money that I will never have negative equity on a loan. But sometimes financing makes sense and there are no clear cut rules when it comes to buying a boat.
Are you telling me that real estate hasn't been depreciating of late? Even land has lost value in many areas and markets. So basically, there is nothing that you can point out that does not depreciate and by your logic we should pay cash for everything.
__________________ 2008 Pioneer Cape Island 18/Yamaha 115 2S
1999 Custom Craft 14/Mercury 25 2S
Plastic Navy: Hobie Revo 13, Heritage Redfish 10, Emotion Mojo 12, Field and Stream SOT 12
Yes you can. There is absolutely no law that says you have to use home eq. $$$ for home improvements.
"Sorry, not true.
Here is a quote I found: Deducting Mortgage Interest
Taxpayers can claim a deduction on interest paid on a loan secured by their first or second home." -Quote, Lit Up
Gentleman, we are talking about a home equity loan (Lit Up) not a mortgage. And home equity loan interest is ONLY tax deductable when used to pay for home improvement expenses. You can take out a home equity loan for whatever you want, but you ONLY get a tax break for use to improve your home. Can you fudge it, like many other tax breaks, well. . .that is up to you.
I have been investing $500 bucks per month in an interesting bearing account for the past 4 years to save up for a new boat. I call it my "boat fund". Somehow it just got renamed to the "wife wants a new bathroom fund". I am still trying to figure how the #$%& that happend!
Either way, I'm glad I paid cash for my boat 4 years ago. It was hard to part with the money I saved for the boat, but I am now very glad I did. I find it comforting that I do not owe the bank any $$$$ and that I do not have to think about making payments.
"Sorry, not true.
Here is a quote I found: Deducting Mortgage Interest
Taxpayers can claim a deduction on interest paid on a loan secured by their first or second home." -Quote, Lit Up
Gentleman, we are talking about a home equity loan (Lit Up) not a mortgage. And home equity loan interest is ONLY tax deductable when used to pay for home improvement expenses. You can take out a home equity loan for whatever you want, but you ONLY get a tax break for use to improve your home. Can you fudge it, like many other tax breaks, well. . .that is up to you.
Wrong - see the article below, which summarizes it nicely - the section on Home equity debt. It describes Home equity debt as "any loan whose purpose is not to acquire, to construct, or substantially to improve a qualified home", then stipulates the maximum amount of Home equity debt that can be deducted....which means that it is by its nature tax deductible.
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