Boat loan – what are you thinking?

[water rat]

So why is this such a dangerous thread? Aside from some political BASHING in the middle of page 1, I think this is interesting and valid topic.

I had a pretty decent job, but no boat in the visible future. Lost the job, started a business which is going very very well. Now I can swing a boat, I thought, but how much do I buy? Pay cash for a modest boat? Get a loan for something really nice? I could swing either. I'm sure people that come into a little bit of $ through inheritance, lottery, or other good luck come to the same quandry (hence, this is a good thread).

Someone made the very valid point earlier- who would want a big boat payment on top of fuel, maintenance, slip fees, etc? I opted for the modest boat ($22K) in cash.

I thought the earlier post about borrowing money to invest it was not sound thinking. A 10% market return is not guaranteed, you're lucky to get anything close these days. Imagine if you had borrowed to invest in the market six years ago only to end up with $40K in stocks and a $100,000 loan (and a boat loan!). I used margin for trading in the 1990s and got seriously burned. The market is so arbitrary these days- you can buy stock in a good, well-run company, and watch your stock get dragged down because some analyst sees another poorly run company in the same industry go down.

But I'm getting off-topic. I would vote that, unless you're living on it, you should be able to pay cash for at least 50% of the boat's value.

I was not suggesting in any way to borrow money to invest. I was stating that if you had 100k in your pocket, you are better off to invest the money in a well balanced portfolio of mutual funds for the long term than to pay cash for the boat. Building a portfolio of individual stocks on only 100k is far too volatile. Your building blocks should be mutual funds, then stocks. And yes, an average of 8 - 10% over the long term is a reasonable expectation for that time frame. If one is not getting that sort of return over a 10 year period, then the portfolio needs to be reviewed. Even with the bear market of 6 years ago, a well balanced portfolio shouldn't have been down more than 18 or 20% during the worst of the market, if it was well diversified and the portfolio still would have averaged a 10% return over the past 10 years! That means being down some years and being up more than 10% other years. Most folks who got burned were very heavily overweighted in tech stocks and other individual growth stocks.

I don't want to turn this into an investment thread, however, let it be said that proper diversification is key.

The overall point that I was making is that the time value of money works out in your favor to take out loan for your boat, vs. paying for the entire thing in cash. Of course, what your debt is, comfort level, etc helps to determine what you should finance.

 

[180 Sport]

An example:

If you took 100k and received a 10% return for 10 years, you would have $259,000 at the end of that time. This is a reasonable rate of return with a well balanced portfolio.

If you paid cash for the boat (100k), sold it in 10 years for 50k, you would walk away with 50k in your pocket.

If you invested the 100k, got a 10% return, but took the boat payments out of that money (100k at 6% is about $800/month) you would have about 83k of your money left after 10 years. If you sold the boat for 50k, you would owe approximately 67k on your loan. So you are gaining 17k. (83k left on your own money - 67k owed - 17k left). You come out ahead with someone elses money.

If you can write off the interest, and your effective interest rate is 4%, then your would owe 60k after 10 years on your boat loan and would come out ahead by 23k.

Of course, if you keep your boat for a different length of time, it changes the numbers. I just chose resale value at random. Any sort of numbers that you use will show that you are ahead by using the invest the money/pay the boat by a loan theory, as long as the interest rates are reasonable.

The gist is that it makes more sense to use someone elses money. That's why it would make sense to get a boat loan.

Water Rat,

You couldnt have said it better. I did pay cah for my 180 sport, but I am sure to have a loan next year when I move up to a 28 dancer. Maybe the OP is loaded and doesnt have to worry about the cash, but I would rather have the money available in an emergency, and also walk away with money when I get rid of it. For those two reasons the loan is worth it. Not only did he miss your point, but I am sure he may have offended many people here.

BTW- I noticed you had a Golden Retriever...we have a yellow lab that loves the water. Where do you usually boat? I know that is off topic, but this is post not going in a good direction anyway :wink:

 

[180 Sport]

Sorry for going off topic but has anyone noticed how much you can discover about a person just by looking at their avatar(picture) :wink: Anyway... my boat, my money, my business.

:thumbsup:


Oh, and Gary...please do post your opinion...I am sure we will all enjoy it!!

 

[Pirate]

Gary, I'd be interested in your response just for the entertainment value!

 

[Dave S]

Gary, I'd be interested in your response just for the entertainment value!

Please don't encourage him. :smt043 :wink:

 

[water rat]

180 sport -
We mostly go to Egmont Key and the dog beach at Ft Desoto (Mullet key). We go tubing off the beach by ft desoto. Fun stuff!

When it gets cool out, we cruise the ICW and just enjoy the scenery.

The dog loves the dog beach!

 

[comsnark]

I was not suggesting in any way to borrow money to invest. I was stating that if you had 100k in your pocket, you are better off to invest the money in a well balanced portfolio of mutual funds for the long term than to pay cash for the boat.

Probably true. Just remember that market returns are not gaurenteed. People talk about "6" or "8" or "10" percent market returns over the long haul. Your short term, however, could include times like the 1970's (1968-1982 -> 14 years!) where the dow was returning about -zero- and inflation went through the roof.

One needs to be vigilent; the "long term averages" includes entire eras where (1) average Joe's and Jane's like us didn't have stock. (2) Cell phones did not exist and (3) TV did not exist.

And while I did make a few political sounding comments on page 1, one can't ignore the simple fact that politics does affect ones financial planning.

 

[Pirate]

Come on, Gary. I'm feeling kind of "Jerry Springer". That "dime store financial advice" was getting close....

Tell us what you're really feeling.

 

[water rat]

I was not suggesting in any way to borrow money to invest. I was stating that if you had 100k in your pocket, you are better off to invest the money in a well balanced portfolio of mutual funds for the long term than to pay cash for the boat.

Probably true. Just remember that market returns are not gaurenteed. People talk about "6" or "8" or "10" percent market returns over the long haul. Your short term, however, could include times like the 1970's (1968-1982 -> 14 years!) where the dow was returning about -zero- and inflation went through the roof.

One needs to be vigilent; the "long term averages" includes entire eras where (1) average Joe's and Jane's like us didn't have stock. (2) Cell phones did not exist and (3) TV did not exist.

And while I did make a few political sounding comments on page 1, one can't ignore the simple fact that politics does affect ones financial planning.

Yes, the Dow was zero, but well balanced portfolios still did well when the market itself was flat! Diversification is key.

 

[Dave S]

70 percent of boat buyers finance their boats. :wow:

"Boat sales have fallen as declines in home prices and higher interest rates have caused prospective buyers to put off purchases. The question is whether the undeterred shoppers, some 70 percent of whom finance their boat purchases, will begin to face tougher standards when applying for loans.'


http://today.reuters.com/news/artic...Z_01_N09226711_RTRIDST_0_USA-BOATS-CREDIT.XML

 

[comsnark]

True. Diversification helps alot.

I had a real estate invesment fall into my lap in 2000 (where I keep my boat docked). During the bad times where I saw my mutual funds drop 40%, I saw the value of that property double.
Now, of course, I am seeing the property value stay flat (maybe drop 10-15%) while the mutual funds are pulling 16-20%.

What I caution friends against is "all the eggs in one basket", be it a company 401K or a house. House values fluctuate other equities. They usually go up. . .sometimes they can decline.

I think the Boat Financing will become tighter BECAUSE of the sub-prime mess. It is my *opinion* that too many lenders have become overly optimistic regarding increasing house equity; and got a bit too loose with financing homes.

Now that industry-types-who-should-know-better are starting to get burned, I think everyone will tighten up their lending standards. That will naturally make Boat (and car, and home) financing tougher.

** * * * *

Sigh

* * * * * *

I was unable to get to the boat this weekend. Does it show?

 

[Turtlesboat]

I just took out a loan to fix my defective jeep. it's got all sorts of cool things like these auto deploying arms and extending axels, wheel swapping... the whole nine. Cost me $138k.

 

[water rat]

Absolutely - lenders got loose and started offering some wacky loan arrangements that are only useful if your home value grows at a certain rate, the interest rates stay low and if you are in your home for 5 years or less. Too many people took the low payments those loans offered without really understanding what they were getting themselves into. Oops.

I do think some lenders will get tighter on money - it depends what sort of loan programs they offer, I think. The ones that stick to your basic 15 or 20 year fixed won't be in much jeopardy. The wacky term loan lenders will be in an interesting position in the future.
I think that obtaining a loan will depend more on your own credit history than the item that you are purchasing, when it comes down to brass tacks.

Only 6 more days to Saturday.... :grin:

 

[water rat]

I just took out a loan to fix my defective jeep. it's got all sorts of cool things like these auto deploying arms and extending axels, wheel swapping... the whole nine. Cost me $138k.

Excellent. You'll have to start up a Clubjeep.com website to share with others.

did you convert it to an amphicar while you were at it?

 

[teekster]

I just took out a loan to fix my defective jeep. it's got all sorts of cool things like these auto deploying arms and extending axels, wheel swapping... the whole nine. Cost me $138k.

Maybe you could find a way to combine the defective Jeep and your 280da into one glorious (but still defective) vehicle. You could finance the whole thing at 10%!

This thread is stupid.

 

[First Born]

Guys I am not closing this thread but I agree it in my opinion is a useless thread. How about we let this one die...

 

[wish2fish]

Guys I am not closing this thread but I agree it in my opinion is a useless thread. How about we let this one die...

amen! nothing but trouble here!

 

[180 Sport]

180 sport -
We mostly go to Egmont Key and the dog beach at Ft Desoto (Mullet key). We go tubing off the beach by ft desoto. Fun stuff!

When it gets cool out, we cruise the ICW and just enjoy the scenery.

The dog loves the dog beach!

We used to live in Feathersound so we would frequent Shell Island, Fort Desoto area, but we built a home in Riverview so now we mostly go out of apollo beach and hit beer can island in the bay. I was at egmont for aquapalooza and was disappointed that they do not allow dogs anymore. It wasnt easy trying to keep my lab in the boat so we headed over to shell after a couple of hours. I still trailer over there once and awhile. Maybe we will be able to meet up some day.