Boat Ownership - Ca$h Deal - or - Loaned $$$

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This seems like an idle curiosity question rather than one seeking advice. Given that there are no interest-free loans for boats as often available for automobiles, the answer should be "depends on an individual's personal financial circumstances". Only logical reason to get a boat loan is if you can not afford to buy outright. Even assuming the tax deduction for high tax rate individuals, the net cost will exceed current pitifully low savings interest rates - not to mention better investment options. Using a home loan may benefit from a better loan rate than a straight boat loan but is capped by the IRS at $100K.
Plus, boats depreciate just like cars, but are not usually tradeable like cars, and the broker takes 10%, so it can easy to get "upside down" on the loan come time to sell.
 
Chrisjs said:
This seems like an idle curiosity question rather than one seeking advice. Given that there are no interest-free loans for boats as often available for automobiles, the answer should be "depends on an individual's personal financial circumstances". Only logical reason to get a boat loan is if you can not afford to buy outright. Even assuming the tax deduction for high tax rate individuals, the net cost will exceed current pitifully low savings interest rates - not to mention better investment options. Using a home loan may benefit from a better loan rate than a straight boat loan but is capped by the IRS at $100K.
Plus, boats depreciate just like cars, but are not usually tradeable like cars, and the broker takes 10%, so it can easy to get "upside down" on the loan come time to sell.
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I have not read this entire thread, but there are some cracks in your 'logical reasoning'.
For one many people have the cash but still get a loan. Maybe if one had "X" times the cash of the cost of a certain boat, the logical conclusion would be to buy the boat. So each boat buyer likely has a different definition of what "can afford" means to them in relation to their cash on hand.
Another assumption you make is that all boats depreciate. Sure most of the do. But a lot of boaters buy boats that are already depreciated and dont really depreciate much as long as basic maintenance is performed regularly.
Another thing to keep in mind is some buyers choose to take a loan so they can invest cash in stocks or real estate or whatever woul give them a higher rate of return on investment than the interest rate (cost) of a loan.
 
LIke I said "depends on the individual's personal circumstances" but taking a boat loan just to invest in the stock market IMO doubles down on the risk equation. Taking a boat loan because of buying a home and having, in effect, 2 mortgages is a matter of choice and risk tolerance. But everybody is different.
Also, would guess that any boat that is not depreciating is hard to insure adequately and just as hard to get a loan on.
 
Chrisjs said:
Also, would guess that any boat that is not depreciating is hard to insure adequately and just as hard to get a loan on.
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I would think a bank would rather give a loan on a non depreciating asset rather than one that depreciates quickly.
 
Chrisjs said:
LIke I said "depends on the individual's personal circumstances" but taking a boat loan just to invest in the stock market IMO doubles down on the risk equation. Taking a boat loan because of buying a home and having, in effect, 2 mortgages is a matter of choice and risk tolerance. But everybody is different.
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I have friends who have everything they own mortgaged to the hilt in order to invest in commercial real estate. The have been doing it for 20 years now successfully. I haven't done it because of the percieved risk involved. But fter witnessing their financial success, I'm starting to think I have missed the boat , so to speak.
 
bligh said:
I have not read this entire thread, but there are some cracks in your 'logical reasoning'.
For one many people have the cash but still get a loan. Maybe if one had "X" times the cash of the cost of a certain boat, the logical conclusion would be to buy the boat. So each boat buyer likely has a different definition of what "can afford" means to them in relation to their cash on hand.
Another assumption you make is that all boats depreciate. Sure most of the do. But a lot of boaters buy boats that are already depreciated and dont really depreciate much as long as basic maintenance is performed regularly.
Another thing to keep in mind is some buyers choose to take a loan so they can invest cash in stocks or real estate or whatever woul give them a higher rate of return on investment than the interest rate (cost) of a loan.
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Correct, bligh!

We currently own three boats as well as several autos and trucks/suv. Two SUV's are the ones that somewhat depreciate... cause... when we purchased they had not yet fully depreciated and are not of a year or model providing intrinsic value. Pretty much the rest of em are worth what we paid years ago [depreciasion not accounted for] or worth considerably more... such as; 1967 Buick Wildcat - Classic Luxury Muscle car and a really cool 1985 vintage Chevy Cheyenne 1T, 4WD, 4 spd, w/ HP 350 cid/325 hp engine and 4" lift.

Regarding the boats: Last two sold we made considerable additional $$$ money above purchase price; even after years of owning. Our Tolly is worth about the same [maybe a tad more] as our purchase price 10 years ago. Cute tow behind Crestliner 4-seater w/ 50 hp Johnson and galve trailer is worth over 2X. People love it! We've had it for 9 years. 1989 19' Blue Water brand, cuddy cabin ski boat is a whole different story... family death and all that. It's 100% profit when we eventually sell, sans some restore stuff. Haven't completed it yet. Probably will keep it for a while... fun in the sun. Maybe to tow behind our RV. And, Oh Yeah; almost forgot the RV, it's worth more than paid for!

As you can see - we purchase carefully and take care of out units. For me [once we decide to purchase]; cash on the barrelhead gets deals done very quickly - and, at "my" right price! Otherwise, I'm never afraid to walk away from any deal, or to go full-in - depending on circumstances.

:dance::dance:
 
Chrisjs said:
This seems like an idle curiosity question rather than one seeking advice. Given that there are no interest-free loans for boats as often available for automobiles, /QUOTE]

Let's be clear those are not interest free either. You can get them or cash incentives, so there's really interest being paid.
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Everything in life, especially in boating is a trade-off!! No such thing as a really free lunch!!
 
Capitaine R said:
I love dealing with our tenants, the stuff they do and say ...very entertaining.
I could write a book.
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Yep, my favorite text from a tenant (young lady) "Help Mr. Charles, my bathroom is broken". I replied "can you be a bit more specific, ie is there water on the floor?". She said no, when I push the toilet flush handle nothing happens. Easy fix.

When we start the LOOP next Oct I will turn my 17 properties over to a Property Manager for 7% of gross rents (already agreed). :thumb:
 
And yes we have temporarily financed about 60% of our boats purchase price. Horrors, we used our home equity line (house is paid off and this is about 10% of the appraised value). We will pay that off with the next two quarterly dividends from our family owned bank. :thumb:
 
I really love the “cash only” folks out there. I really love their discipline.

Myself, if it were not for financing I probably would not own anything of high value. That is not bad or good it is just a fact.

The idea of buying what I wanted TODAY, and enjoying it TODAY started in my 20’s, and had worked very well for us.

Now in my 50’s I have a yard full of previously financed stuff. I won’t go into explicit details, but a bunch of vehicles of varying shapes, sizes, capabilities. All previously financed, all now paid off.

The last one to pay off is my nice boat, which was yes financed, but that is coming to a end, as retirement is looming.

For me/us the concept of waiting till I saved the tens and in some cases hundreds of thousands of dollars up to buy something just was not going to happen.

frankly my attention span is not that long, and credit is easy to get.
 
I didn't get my first permanent full time job until I was 32, choosing to work short contract jobs and spend the rest of my time traveling, going to art schools, photography school, hiking/climbing trips, and going on long sea kayak expeditions.

Experience and memories were more important than stuff or things.

Because of this, and because my wife is a stay at home Mom, we had to be careful with our money. We bought the boat we could afford at the time, with cash. We also didn't even think about buying a boat until my wife's car accident ended our sea kayaking and we felt a deep need to get our young daughter out into the north coast wilderness we loved.

On your last day, with your last breaths, your memory bank will be far more important than your bank account or the things you bought in Life.

I could work until the age of 67 for a full pension, but I'm leaving at 60 with a reduced pension.

So, I guess I haven't changed much over the years, eh? :D
 
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The only thing more absurd than bragging what your boat is...... is how you paid for it.


Most people love their boat so it's only natural to brag how they figured out how to acquire it.


What works for some doesn't work for others.....

Who cares?....well who should.....

Either you know how to handle your finances or you don't..... the boat is only one part of ones overall financial life.
 
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psneeld said:
The only thing more absurd than bragging what your boat is...... is how you paid for it.

Most people love their boat so it's only natural to brag how they figured out how to acquire it.

What works for some doesn't work for others.....

Who cares?....well who should.....

Either you know how to handle your finances or you don't..... the boat is only one part of ones overall financial life.
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Well said.
 
Not so much bragging as sharing stories, me-thinks.
 
Of course folks brag about their boat. Not one person will say, ‘Buying this boat was a mistake.’
I tell folks, I pay for this boat by gun running, drug smuggle and sneaking women into the country. I do all this without leaving the dock. Of course no one believes me. Aren’t I lucky. LOL
 
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It has nothing to do with discipline

ksanders said:
I really love the “cash only” folks out there. I really love their discipline.

Myself, if it were not for financing I probably would not own anything of high value. That is not bad or good it is just a fact.

The idea of buying what I wanted TODAY, and enjoying it TODAY started in my 20’s, and had worked very well for us.

Now in my 50’s I have a yard full of previously financed stuff. I won’t go into explicit details, but a bunch of vehicles of varying shapes, sizes, capabilities. All previously financed, all now paid off.

The last one to pay off is my nice boat, which was yes financed, but that is coming to a end, as retirement is looming.

For me/us the concept of waiting till I saved the tens and in some cases hundreds of thousands of dollars up to buy something just was not going to happen.

frankly my attention span is not that long, and credit is easy to get.
Click to expand...


I could have easily paid cash for or current boat, bur that would have been silly. Since buying the boat, three years Shi. my stock portfolio is up nearly 50 percent. Had I taken money out of investments I would have had to pay minimally 15% your capital gains. And I would have foregone being fully invested. So now I am paying off the bost monthly for a cost of3.5%.

Call me stupid, but paying cash seems like a losing proposition. How many of you who pay cash keep your money in cash? Paying cash seems penny wise and pound foolish. Debt is a tool. Wise people use it to create more money.
 
FoxtrotCharlie said:
Yep, my favorite text from a tenant (young lady) "Help Mr. Charles, my bathroom is broken". I replied "can you be a bit more specific, ie is there water on the floor?". She said no, when I push the toilet flush handle nothing happens. Easy fix.

When we start the LOOP next Oct I will turn my 17 properties over to a Property Manager for 7% of gross rents (already agreed). :thumb:
Click to expand...


If tenants are calling you about bathrooms broken, you either have the wrong tenants or haven't trained them.
 
bligh said:
I have friends who have everything they own mortgaged to the hilt in order to invest in commercial real estate. The have been doing it for 20 years now successfully. I haven't done it because of the percieved risk involved. But fter witnessing their financial success, I'm starting to think I have missed the boat , so to speak.
Click to expand...


I could argue that's a crap shoot. Commercial property over the years has been feast or famine. If one is lucky, they do well, if not, they go broke.



Been there... not for me. But fortunately the business I sold created the commercial property lease so I was golden as long as he didn't fail. The other commercial properties I had were extremely high risk.


No, you didn't miss the boat.
 
Gordon J said:
I could have easily paid cash for or current boat, bur that would have been silly. Since buying the boat, three years Shi. my stock portfolio is up nearly 50 percent. Had I taken money out of investments I would have had to pay minimally 15% your capital gains. And I would have foregone being fully invested. So now I am paying off the bost monthly for a cost of3.5%.

Call me stupid, but paying cash seems like a losing proposition. How many of you who pay cash keep your money in cash? Paying cash seems penny wise and pound foolish. Debt is a tool. Wise people use it to create more money.
Click to expand...


I'll call you stupid.... but really don't mean it..... :). Need some humor occasionally.


Nothing totally wrong with consumer debt, but I could argue strongly against it for a number of reasons. First, being it's high risk, and most of us don't like risk even though we could take our dollars and get better returns elsewhere.


I could argue there's a reason to keep money in cash and that's for opportunity to make a quick deal and that's where a LOT of money is made.


Sure debt is a tool, but only when it offers you the risk you want and some benefit of a profit. Toys do not produce profit.



And there's a way around capital gains and other taxes.
 
BandB said:
Art should switch to your property manager. Just a little long distance management.
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Onsite ingoing and departing tenant inspections might be a tad expensive from here.
 
We always pay cash for what we can afford & own outright. Of course, this means we will probably never own that Nordhavn.
 
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Several years ago I spoke to the underwriting VP at BoatUS. I was surprised when he told me that 85% of their policyholders were financed. That was before the 2008 crash during which many boats got repossessed.
 
Technically a mortgage is a security instrument (document) for a loan on Real Property. The definition of Real Property goes back to English Common law and involves land usually with a building. And not all US states use a mortgage to secure a home loan. Many states (like AZ) use a Trust Deed. So there is no mortgage at all, even though many people still say they have a mortgage on their home. In reality they do not.

With that said, my first two boats had a long term boat loans. (Over 3 years) My current boat I got a loan because I was a bit short at the time of purchase. Paid it off in under 6 months. And under US tax laws the interest was deductible as a second home for vessel #2 & #3.

My next boat will be a live aboard trawler type of vessel and at this point I have enough cash to buy it with no loan. However my trigger point will be closer to retirement.
 
MurrayM said:
That's rough. Happy to pay my union dues :thumb:
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My union dues worked right up until the time the company threw our contract out and the bankruptcy court took it all away.

Found out the in the good ole US of A a contract ain’t worth the paper it’s written on.

The good new is we have a great boat and are enjoying life. It was a 70% loan.
 
Art said:
This is to find out how many boaters own their boat outright or have a mortgage to pay.

And... is the mortgage is above or below 50% of boat value.

I'm the first... Every boat we ever purchased is a 100% cash deal, i.e. bought and paid for. Wife and I are the same way with everything we own!

:D :popcorn::popcorn:
Click to expand...


I always pay cash for mine and not afraid to do some cosmetic work on the right find. Also, always go for the thorough sea trial. Try EVERYTHING out. Expect to lose money on the deal, but enjoy the ride as long as you can!!!

Personally, I never rent. No matter how tempting or inexpensive. Some do and that is ok for them, but not for me. No judgement.

However, I would never, ever rent one while I own one. I would also never borrow one from a friend, especially without permission!!

Wait, uh, was topic wives or boats?

?
 
The idea that it is disadvantageous that because the IRS standard deduction for a married couple is $24,000 obviating itemizing and lessening the "value" of a loan interest deduction is misplaced. Let me demonstrate with a simple question. What would you rather have, $20,000 of itemized deductions or a $24,000 standard deduction? Remember, too, that the tax benefit is only the marginal benefit of the amount in excess of the standard deduction so, under the old law (generally) one would need at least $12,000 or thereabouts of interest before getting any benefit. At a 5% interest rate on a ten-year note, to incur $12,000 average per year interest, one would need to borrow about $200,000. All this assumes no other itemized deductions.
 
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