Need advice: seller-financed classic boat purchase
 

Searched a lot, but couldn't find what I need so here goes...

I'm looking at a rare, early 90's power boat. One of my dream boats. The negotiated price is $25k cash.

The owner is a cool, gear-head and he's OK financing the boat, but I need to make an offer that works. I am trading up houses in the next 6-12 months, so I need my limited cash-ish for the down.

Would $250 per month for for 10 years be fair (nothing down)? That's about $3k per year, or $30k. Would like to include early payoff terms, but like the flexibility to go as long as I want. I have 800 credit score, NO debt, NO credit card bills, NO car loans, and I pull in a mid-level Marketing exec salary.

Whatever we do come up with... does he keep the title and I keep the boat and the contract to force him to convey when payment in full made? Do we use a third party to "hold" title? I'd imagine I'll need to keep insurance on boat to limit his / my liability?

What else do I need to think about here? Advice from the knowlegeable, experienced, previously-burned is welcome.

Thanks much!
Dave911

I'll doubt he'll go 10 yrs with you but never hurts to ask I guess. I would also think he'll want 20% down but again...

With zero down, probably 60 months at 500/mo which is 7.5% return for him (5057.) if you carry it out the full term. I would think he would also prefer an early payoff if you can do that to save some interest expense.

Your credit/debt background sounds excellent, have an attorney draw up a solid contract.

I know it sounds a little nuts, but my 4th boat was an 18' Sutphen that I proudly owned for 22 years. I could picture keeping this boat until they bury me in it...:drink:

20% down is only $5k. That could be done. Maybe that is more fair. Thx

I agree.

20k at 7.5% for 48 mo is 483.

60mo is 400.

Once again, I respect your credit/debt background. Nice work. Seems so many others are buried to the tilt.

Although I've never owner financed a sale of one of our toys I almost did once, but the buyer couldn't even come up with the down payment.
He told me his Dad was financing him his down payment and I stopped the deal.
Here's what my attorney (real estate/contractual law) came up with.
10 to 20% down (my choice was 20), title transfer, seller is 1st lien holder(moves liability away from me in the event of a suit), buyer pays 10% apr on his choice of payments up to 84 months, and buyer keeps a comprehensive insurance policy with me as a certificate holder (insurance company will contact me if he defaults) and they have a agreed value policy. He was then going to work up a simple interest amortization schedule payed on the timeline of payments.

I hope this helps.

See ya,
Kelly

I would think he's going to want a minimum of $5k down just so he isn't giving you a quasi warranty in the process (if you break something major in the first year, you could just hand him the keys back to his busted boat). That said, everything else seems reasonable.

Excellent feedback! Title transfer / 1st lien holder makes good sense...Interesting thought about the seller requiring $5k down to avoid being a "quasi" warranty. I feel armed with the right info. OSO rules!

Whatever you do, don't tell him your Dad is financing your down payment, LOL!!!
It scared the hell out of me.

See ya,
Kelly

What is the likelyhood a bank would see my debt to the seller IF we keep the title in his name? I would think very unlikely...
What is the likelyhood a bank would see my debt to the seller IF the title is now in my name and he puts a lien against the boat? I would think much more likely...
I need to make the offer tonight!
Thanks, Dave

The bank won't know about the debt or the transfer either way, unless you tell them (which you're supposed to do, but that's on you). Neither method will put a mark on your credit report.

Unless he's a recorded and reporting lender/creditor the bank will not see your note recorded with the big 3 credit service company's.
This goes for both scenarios.
The lien is recorded with your state when you make an application for a title transfer. You'll receive a non-transferable title that must be signed off and released by the lien holder.
This is their security of the asset financed in the promissory note in the event of default.

One thing I'd suggest is that you ask for a simple interest schedule instead of a compound interest schedule. It'll assist you a little if you go to pay off early on the unpaid principle. A little bit more money will apply to principle to early payments.
If you think your going to take the entire time to pay it off it'll wash the same.

See ya,
Kelly

A non-amortized interest schedule (or "simple" interest schedule) also makes it easier to calculate payoff amounts and what not too.

If you want to be slick about this, don't mention it to him, but get him to sign off on a sheet that calculates interest in a simple manner and just say something generic like "the boat will be repaid in the following manner:" Bringing up the subject may give him cause to want an amortized payment structure, where you pay most of the interest upfront in the first couple of years.

Good luck. I hope the seller is an idiot and this deal works out for you.

I wouldn't bet the ranch on it.
You don't just let anyone roll out with your toy at this sale price without having your ducks in a row and your ass protected for the duration of the promissory note.
Simple interest notes are not out of the norm for negotiating in the right circumstances which are typically short term loans.
I do completely agree with the member that said "don't go 10 years on a used boat loan."

Good luck with your purchase.

See ya,
Kelly

It won't be on your credit report either way and that is what banks look at.

I highly doubt that anyone is going to self finance for more than a few years and doubt even more that anyone would do it without a a sizeable down payment like 25-50%.

I guess we'll see. I can afford $5k down, and $500 a month, but my CFO (wife) is not gonna be thrilled. I'll have to remind her about the enclosed head, hot water heater, etc...:drink::drink:

seller finance
 

I am a tad confused you have a great credit score with what you say is no debt and you can't afford to take out a 25K loan?

If I was having to do this for a boat I would be a little concerned.

If you do get the guy to carry paper I would do something like 25K with a 20 percent down over maybe 8 years with a baloon in 5 for payoff.

This gets you the boat keeps it off the credit report and makes the seller happy because he gets his money in 5 years.

But now days you can not buy a crappy car for 25K so why would the bank be so concerned if you have one payment on a boat with a 20K balance?

I buy and sell big ticket stuff all the time and have great credit also the bank (credit union) does not even blink with me.

X2

I don't understand this whole thread. In your original post you say the negotiated price is $25k cash. Sounds like you already made a deal and now you want to change it. Why would seller trust you now? You don't want to put anything down?The seller would have to be a fool. A buyer could tear that boat up in one weekend, strip it, move out of state etc. (See the thread on what Dominic put the King's through on the OL).
Your wife would be upset over 5k down? How's she gonna feel if you blow a motor or drive?
You should probably reconsider this and see what your cash position is after the home purchase.

Appreciate the advice. Being very honest, my better half is very frugal, which has kept our finances in good shape. With a tribe of little kids, and one income, the only way I'm getting a boat now, is if the stars line up and the seller finances over a longer period..which will keep payments in what I consider "discretionary" level. $250 is not a problem. $500 will require some lengthy "my dream of boating with the family" discussions. Anything over that, and my own internal CFO will balk. Also, just because a bank will lend you money, that doesn't necessarily mean you can / should afford it. Just look where our great country is today because of loose lending standards and lack of foresight. It makes much more financial sense for me to get a great seller financed deal, then to give the banks their government backed loan shark level interest payments. Wow. I'm ranting. Anyway, I'm sure all meant well. My glass is always full, not half full, and certainly never half empty. Cheers d911

How'd it turn out for you?

No luck yet. I'd pay the $25k if the terms were right, but he wants a premium for carrying. Can't blame him, but I think he'll soften over the next couple weeks. I'll update when / if deal goes through. D911

Premium? You mean higher interest rate? Can you disclose the terms?