Here's Johnny

Is 20 years to long a term on a boat purchase? Is it common to take out such a long note on a depreciating item? I can see 20 or 30 years on a house but is it smart on a boat?? The only reason I can see in doing this is to keep the payments low so your not stuck with a high payment every month........and then just try to pay off the principal in a few years. Am I right here or is it common practice to to pay it off in 20 years??

I am still in search of my next ride and am just doing my homework here............I would like to put at least 50% down then pay off the other 50% in 2-5 years......is it ok to take a 20yr term and then just bang it out........or am I better just taking a 5 year note on the second 50%??

t500hps

20 years seems crazy to me but a number of poeple do it. I put over 50% down, 10 year note, doubling the payments I should have it paid off in less than 5......same thing with the truck. Borrowed 35% of the price, 5 yr note, should be paid off in less than 3.

OldSchool

Smart? Ummm, no

....but it will enable you to get a nice boat for a lower monthly payment. Just don't try to sell it in less than 10 years.....without taking out a loan to break even!

t500hps

Agreed. A 20 yr note will get you into a boat you otherwise couldn't afford. But a 20 yr note will NEVER let you out of a boat you "couldn't afford"!!! Pay me now or pay me later, one way or another it's going to catch up with you.

crb76

My philosophy is don’t buy anything you can't pay cash for, even a house (some markets impossible). With that said, I take out a 20 year loan with 25% down on my boats. Why? Opportunity Cost! I get a minimum of 10% ROI on Cash, 50% on other investment assets. If I have to sell I have the cash to make up the difference between buy prices and pay off.

Von Bongo

There are too many variables, but in general if you are making the minimum down payment (because it's all you have) and financing for 20 years, you should expect to own the boat a long time or be prepared to borrow to pay it down when you sell.

Sometimes, like in a low rate market, borrowing on a fixed rate for 20 years may be a good move because as stated above you can earn more on your money down the road. IE, 3 years ago you could get 5.50 fixed for 20 years and today you can get 5.50 on a CD so the cost of carrying the loan, if you had the cash, is 0.

Also if you put a larger down payment so that your amortization of the loan for 20 years keeps up with the depreciation on the boat you at least stay even. (harder on a new boat, easier on a 3-5 year old boat).

And if it is a loan that the interest will be tax deductaable then your finance cost is reduced by your tax bracket.

So yes there are reasons to go 20 years, some better than others.

Rippem

not an issue if you buy it right.

and/or corral a low rate

I did both.

so the 20 doesn't bother me. my boat has been genuinely saleable, and still is, for 15 more than my closeout since the day I bought it and without rediculous up front. I put about 18% down on a new boat.

do lotsa homework, crunch lotsa numbers. use declining balance tables or a mortgage calculator to know in advance where you'll stand at every month of ownership. study the used market for X boat and get a good idea of how they hold value based on year and equipment. look to owe 10-20% below average prices at any age vs. historical sale prices/book value. You have to set yourself up to be able to sell it for a move it price and cover the loan if you have crisis. to he11 with the cash you put in or spent along the way. the only thing that matters is getting out from under the note.

if you can pull this off, there is no reason to shy away from a 20 year term.

Chriswithaboat

That is kinda how I buy things. If the interest is less than what I make on investments I use the banks money. If the interest is higher that what I am making I just use my money to pay for it.

Here's Johnny

All good information guys.......I do plan on putting down at the very least 50% of the purchase price.....then paying the rest off in 3 to 5 years..........I was just curious of the benefits if any in taking out a 20 year term instead of a 5 year term loan......if I buy right with 50% down I can't see myself ever being upside down.......right??

TexomaPowerboater

I used to say the same thing - pay cash for your toys. The sales guy said, Oh no, you finance your toys that way you don't have to pay for them.