Boat Financing

[Aroldo Hernandez]

Why is it more a year to finance a boat than a car?

If I would buy a new car for $40,000.00, then I would pay it inn 7 years. I'm looking about $650 a payment. Final fiance total would be somewhere around $47,000.00



But if I buy a boat for the same price of $40,000.00 then it would get finance for 15 years. That would come out to around $90,000.00 total finaced.

If I finance a boat for 7 year's. I'm looking some where aroud $1200.00 a payment.



Help me understand this......

 

[Marty Klein]

Not an expert, but I drive by two credit unions and three banks on my way to and from work. A more detailed description of your two loans would help us advise you. Same amount financed, same time financed, same amount down payment, and same interest should result in the same payment.

 

[Berry Lindley]

Maybe there are 2 problems working here. Boats do depreciate faster than cars, and the volume is such that they are not a commodity, so the collateral/residual is probably more risky. You also may need to find a new bank, I can't see why the interest rate would be THAT much different. I personally do not finance either cars or boats. You do have to wait to do it this way though.

 

[Berry Lindley]

Here is a site where you can calculate payments etc based on principal, interest rates etc. This should help you figure this out.



http://ray.met.fsu.edu/~bret/amortize.html

 

[Larry Harp]

I read your message three times and I still don't understand it. If the principal is the same and the term is the same the only variable would be the interest rate. I would imagine that boat loans have a higher interest rate because it's a higher risk loan. A guy looses his job he's going to struggle to try to keep his car but may have no choice but to let the bass boat go back and then it's more of a problem for the lender than a car to turn.



I think you just need to compare the rate on both of the examples you gave us.

 

[mike mcmenamin]

Ace:

Even if you do find an institution to finance your boat, there will be hidden fees in the loan agreement(been there, done that). I looked into financing a boat a couple of years ago and found out some things that are not known by most people. First a boat is considered a luxury item. Second you have to get the boat fully insured(just like a car).

Third most institutions will make you get disability insurance to cover the loan payments.

Fourth, they may also make you get life insurance to cover the cost of the boat, and they get to keep it all if you die. In some states you may have to get default insurance. Not only do they get the insurance from the failure to make the payments, they get the boat back and you are still liable for the balance on the loan. Almost like buying a house. I would look for some place that would give you just a plain old loan,like a credit union or home equity loan.



Look around at different institutions.



Mike

 

[Bruce Freeman]

The LENGHT of the loan, streaching it out an extra 8 years adds to the interest charged.



BF

 

[Bill Hamilton]

Generally you can get a 72 month car loan for 5-8 percent. Haven't seen 84 month car loans but given the price of cars today, I imagine you may need the 7 years. You can lower the interest rate by reducing the term in 6 month increments. However, most boat loans are for 15 years (180 months) and average 12-18 percent in interest. As mentioned previously, a number of factors are considered with a boat loan. If you are really interested in reducing your monthly payment (via interest and make it tax deductible) take a second mortgage on your home or a home equity loan. In most cases, either, is tax deductible and your interest rates are lower.



I may be dating myself but the average price of a decent bass boat is MORE than what I paid for my first house ($32,300) and my house payments were $283 per month and included taxes and insurance. LOL

 

[Larry Harp]

I may be dating myself but the average price of a decent bass boat is MORE than what I paid for my first house ($32,300) and my house payments were $283 per month and included taxes and insurance. LO

HA!! Our first house was $17,500, payment $166. a month. My father-in-law said, " Are you sure you kids and afford a big ol' payment like that?":lol:



I don't believe a lender can legally require you to take out credit life & disability. If they did, I would defianiatly walk. Credit life it the most expensive type of life insurance there is. You could probably buy $1,000,000 worth of term for the same as $40,000 worth of credit life. Back when I sold cars we called it "adding on the Choke & Croak" and it paid huge commissions. Don't buy it.

 

[Jim Corson]

When i purchased my '04 NX882DC in August of '03, i put down i believe it was $5,000, from the sale of my prior boat. I can't remember, but i think with everything added on, it came to about $24K. My loan was for 12 yrs, payments are $243.00 a month. Its a long loan but i figure, i'll have my 882 for a long long time. Jim

 

[Mike Tosello]

If you own a home, Try getting a Home equity loan, Rates are cheaper and they dont care what you do with the money. Stay away from a 15yr loan on a boat....

 

[Herndonpro]

Usually on a boat loan the longer the time the lower the rate. It is usually the opposite for car loans. The boat I bought last year is a ten year loan, but it will be paid off this year, with no penalty for paying it off early, but that got me the best rate.



HP

 

[TrepMan]

As was said above, Homes (over long periods of time) appreciate in value, boats ALWAYS depreciate in value, the rates are higher as the risk to the bank is higher (we could have a huge discussion on the sub-prime collapse, but thats a different story...).



The best way to buy a boat is CASH, plain and simple. If you ever need to sell it, you get CASH, no being up-side-down in a loan... and so on. If you MUST take a loan, be VERY careful of a home equity loan, as millions of folks have found out in the last 2 years, if you can NOT pay your home loan, you loose your HOME. On a boat loan, the worst that happens if you default is they repo the boat, and down your credit limit. now if you are financialy secure, have a lot of equity in your home, KNOW you can survive on your savings for 12 months or longer if you loose your job and NOT miss a mortgage/home loan payment, then ... As long as the boat loan is a simple interest no-penalty for early payoff, take the longest loan period that gives you the best rate, and pay the boat off in 1 year.



Mat - I disagree on the staying a way from a 15 year boat loan, IF you are financialy sound and have backup/savings. I bought my tracker and really wanted a 2 year loan, as I had just changed jobs, and while I had the cash to buy the boat, wanted a buffer the first year in a new job, just in case. The best rate was on a 15 year simple interest/no penaly early pay off loan through tracker. Took the loan, figured out what the payments SHOULD be on a 2 year loan, paid it like it was a 2 year loan and ended up paying it off in 18 months. I could have gotten a much larger loan for a much larger boat, but didn't want the risk of needing to sell it if the job didn't work out and be in the hole.



So, its your choice - If you take the risk on a long term loan to get your payments to 'affordable', you MUST make the decision to not sell it till its paid off, pay it off early and so on... If you decide to pay it off on the longer term of the loan, then you are agreeing up front you will pay all the interest and wouldn't it be better to wait 2-3 years till you can pay cash, or buy a nice used boat like I did for my second boat for cash.



Trep

 

[Steve Hutson]

Let me say this up front, I haven't read every post on this so I may be saying something already covered. At my credit union, I get the same rate on all vehicles be they cars, trucks, motorcycles or boats also the same amount of years to pay off.

 

[TOMMY RICH]

Credit Union and have it deducted by-weekly...worked for me

 

[Alex Peterson]

I think Ace was taking the total financed on a 15 year...90,000 and dividing that by the 84 months in the seven year loan. That comes out to 1071. That the only way I can see he is coming up with a 1200/month payment on that loan. Obviously the total financed on a 7 year loan wouldn't be 90,000 though.

 

[Bill McElroy]

Deffinitely try the home equity route if you can,.......much cheaper interest rate,..and it's deductable.