Financing the Dreamboat

[JohnP]

Seems like good boat buys are all around, and their may be further weakness in prices.

I assume most lenders require an excellent credit score and 20% down, but how are the appraisals coming in?

Are banks really cautious on figuring a used boats true value?

Anyone had a deal fall thru on a low appraisal?

How many buyers are willing to commit to a long term loan on a depreciating asset?

Is cash still king?*

Okay Brokers - have your recent closings been smooth sailing or have the seas been pretty lumpy lately.

Bottom line is -What is your opinion of the health of the boating industry?

JohnP

 

[Woodsong]

John,
Lots of big questions here!

There are, indeed, amazing, AMAZING deals out there. Incredible actually IF you are flexible on make/model/etc. If you narrow it down to a particular boat or model, options get a little more limited.

Loan terms depend on credit worthiness, age of boat, size of loan, etc. But yes, generally speaking,you are going to be looking at 20% down. Some will do a little less, but 20% is a good rule of thumb. I actually had one buyer go through a credit union for military folks a few weeks ago and got a rate of about 3.75%! Most other lenders will be more than that. Most rates will be 4.99% to 6.5% depending on size of loan, etc. and some down payments can be as low as 10% or 15% but most are 20%.

regarding value...for me at least it has been a total non-issue. The boats that are selling are doing so at today's real world values which are a fraction of yesterday's values. Thus, they have the appearance of great deals but really- when everyone is buying at "50 cents on the dollar" guess what- that suddenly becomes the actual FMV. So...defining a great deal can be hard to calculate but if the price is low and buyer is comfortable, etc. then the deal closes.

Many marine lenders have gotten out of the market but those that are in are still loaning. I have only had one buyer in the last 18 months (out of several million in transaction volume each year for the last couple of years through this mess so I'm not the giant broker of 150' mega yachts but a pretty good volume for selling your typical 35-55 power boats) not be able to qualify for financing and he really couldn't have afforded a row boat so no surprise.

Cash is DEFINITELY king- no if, ands, or butts about that. Closings are going smooth b/c frankly, at this point in the economy, those that are actually buying boats are doing well, blessed to have survived this economy, and often times, they are actually doing better in this economy and they are able to capitalize on that situation and thus they buy a boat or get a bigger boat. Almost all of my transactions in the last 12 months are move up buyers taking advantage of the market.

Health of the industry....complicated question with a complicated answer. Long story short- lots of folks dropped out and folded. This opens other opportunities for folks that are in the game. Marine lending has stabilized. Prices starting to not freefall so terribly though still going doooowwwnnnnn. The repo market is still going and while some of that product is in bad shape, some of it is remarkably in very good shape.

That's a quick answer to your questions. I'm on the boat and haven't pulled up additional statistics but that should be enough to get you some basic answers.

-- Edited by Woodsong on Friday 28th of January 2011 05:16:14 PM

 

[Pineapple Girl]

I think I am in the minority that I financed my boat.*

* The boat is doing a lot better as an asset*than the house.*

I'll send you a PM as the loan broker asked us not to disclose some details.* there was an issue around the value but it worked out fine.**

 

[Tom.B]

Pineapple Girl wrote:I think I am in the minority that I financed my boat.

I financed mine. If your statement is true, I would think it's been true throughout history.

Anyway, I am not a broker, but talk to them often. One of the problems that plagues both the boat and housing market is that many people are upside down with their boat value. They think their boat is worth FAR more than it really is because they bought at the height of the market and their boats sit on the sales market longer than they really should. I suppose I wouldn't want to owe tens of thousands of dollars to a bank AFTER selling my boat,so I can't blame them.


-- Edited by GonzoF1 on Friday 28th of January 2011 05:45:40 PM

 

[Egregious]

I wonder if borrowing from one's self can be considered financing...* I financed maybe 30% of the cost of my boat using a home equity line.* Right now, that is something like 2.25%, and the interest is tax deductible too!* So far, we buy all automobiles using this credit line as well and has worked out well.

 

[Marin]

JohnP wrote:

Is cash still king?*

Bottom line is -What is your opinion of the health of the boating industry?

Don't know if cash is any kind of king but back in 1998 when the economy was doing very well we paid cash for our boat.* This is based on my philosphy--- learned from a very successful, self-made businessman--- to never finance*my toys.

There can be advantages to financing but in our case we did not want to pay any more for the boat than the agreed-on purchase price so we did not want interest payments.* Paying cash also makes the purchase process very, very simple and quick.

A very good broker we know has told us that the market is coming back, at least in the higher end boats like GBs that he deals with.* Selling prices are currently lower which makes it a buyer's market for anyone with the cash or financing to take advantage of it.* One of his customers recently*bought a brand new GB47 that was owned by the bank that foreclosed on the former GB distributor in Seattle for exactly half price.* This is a boat that sells for well over $1 million and they got it for a bit over $500k.* Of course, one needs the $500k to be able to pull this off.

*

 

[Woodsong]

Gonzo,
upside down boat owners is what is driving the repo market (obviously). Just in the last 12 months I have had 5-6 different sellers have to write a check between $75-100k in order to sell the boat and pay off the loan. Talk about the not so fun part of boat ownership! 99% of the population simply are unable to write a check like that and still survive, so they go back to the bank. It's a very sad situation for many people. I have seen so much of it that it largely resulted in our selling our 2005 Silverton 38 Sport Bridge. I could see the writing on the wall so we sold that boat while I could still get equity back (we put a lot down) and then bought our trawler for cash. I personally don't think I will ever have a boat loan again. We paid cash for our 2003 33' express, had the big loan on the sedan, and now we are back to cash and I plan on staying there. I found, in the long run, that the loan got to be a drain on my joy of boating. Anyway, I digress....

There is nothing wrong with financing at all- it really depends on personal preference and situation. Reality is that boat loans right now are relatively cheap money and as long as one ha the ability to service the debt and has is not bothered by writing that check each month then it's a great option.

 

[JohnP]

Egregious wrote:

I wonder if borrowing from one's self can be considered financing...* I financed maybe 30% of the cost of my boat using a home equity line.* Right now, that is something like 2.25%, and the interest is tax deductible too!* So far, we buy all automobiles using this credit line as well and has worked out well.

********* Woody,* In theory we all borrow from ourselves,* Any cash spent could*have been*invested and growing.* The past two years the stock market has rebound and been a great investment oportunity.

********* Tony,* Upside down loans in housing is called underwater, guess that does not sound to good on a boat loan.

********** Smart move with your prior boat,* interesting info about the repo boats, I geuss those who paid up to get out were *interested in saving their credit rating.* Still seems sad to bring money to sell anything.

********** I think there will be more inventory than people ready, willing ,and able to pull the trigger for quite a while.** As Marin said- there are great buys in high value boats if you can take avantage of it.* He may get his Fleming*for half price.* Or should he wait till it goes to 75% off?

********** For me I think I will hang on to my paid for tub and just enjoy being out on the water.


-- Edited by JohnP on Friday 28th of January 2011 07:16:16 PM

-- Edited by JohnP on Friday 28th of January 2011 07:17:50 PM

 

[KJ]

There are some new folks on the forum that have just purchased boats or are getting ready to (like me). Perhaps they can give us some idea of their buying experience or expectations. I personally can't wait (actually, I have to wait), to get out there and start the process. Several of the brokers I've contacted (mostly in Fla) have indicated that the*boats that*are selling are the ones for*which the owners have set realistic prices (relatively low) and are willing to deal/negotiate,*compared to similar boats that owners still think they can get the higher price. These sellers are hoping to find a buyer that has "fallen in love" with their boat and will pay any price to get it.* However, there are so many boats on the market that most savvy buyers are willing not to fall in love with any one boat, and will*walk away from a boat that the owner is not willing to deal on.*It seems a lot of offers are coming in at half the asking price and are*being accepted. Apparently a lot of sellers are tired of "carrying" the boat and just want to unload it.
The main reason I joined this forum is to gain as much knowledge as I can*from the experienced trawler owners here before I make the big buy.* So far, so good.** *KJ

ps* I will be buying with cash.* Don't*want to have to*worry about no stinkin' payments.**
**

*

-- Edited by KJ on Saturday 29th of January 2011 02:11:47 AM

 

[Navigator]

Hi KJ,

Before deciding to build we were in the market for a second hand boat. The sales where we*were able to track down the owners revealed that 40% off of the asking price was not that uncommon, however, at the time (10 months ago) there were still a lot of sellers still in denial that the market had readjusted itself to allow for a more realistic depreciation schedule to be applied based on age of vessel etc. I think some of them are, even now,*still hoping for a return to the days when you could almost get your investment back but I think those days will be a long time returning (if ever). Having the funds/finance in place certainly made a big difference when we were searching.

 

[FF]

Why bother ?

There are mountains of fine boats out there for under $20K.

Just save up.

 

[JohnP]

FF wrote:

Why bother ?

There are mountains of fine boats out there for under $20K.

Just save up.

********* FF-* You make a good point about saving up 20k.** If you can't do that you will never be able to afford the upkeep on most boats.*

* The boat upkeep money has to be totally extra money.** After living expenses, cars, kids education, insurance, building a 6month reserve, and funding a retirement savings.

******** Once you have all that going is there more money left to service a boat loan?


********I am keeping my boat until I can snap up a Kadey Krogen 44 for under 75k.

******* In otherwords forever!** JohnP**

*

 

[JohnP]

Carl,* The KK44s on yachtworld are now in the 700k plus range.* I could see them going down to 400k* but I think at 75K the world econony would be so bad I would hate to see it.* JohnP

 

[Phil Fill]

Even when the market was good financing was a problem as many people did not have the credit score or the required equity.* So they could not even borrow.* If you go back on read PMM it was recommended to be pre approved so you know what price range.* There is nothing wrong with financing a boat provided the boat is worth the price paid.* I to have used a home equity loan that has a low interest rate and the interest can be deducted to finance stuff.


*
When we bought out boat we were house, children and grandchildren poor, so we had to finance the boat.* I was more concerned about cash flow than the interest rate of the loan and the condition of the boat.* Cash flow is KING, not just cash.* Many times it better to buy a boat in good condition paying a higher month payment and buying a cheap boat that is not in good condition that will hundred/thousand dollar you to death.* So dont just look at the low price and/or the interest rate but what the total round trip cost is going to be and at the cash flow when buying a boat.**

Also make sure its a boat that you*want, will use and get the valuenout of it.* Most boat after a few years mostly sit and start becoming a drain on your fainances and person live, which is not good.* In other words if you can not afford the boat and the boat is not what your spouse and you want or will use, then don't buy it.* no matter how good the value/deal*

 

[Sailor of Fortune]

Boats never make good investments. You have to get over the fact that we "play boats " because it is fun. Reconcile the fact that they are expensive and time consuming but it is what we love to do and you are ahead of the game.

Nobody on their death bed says" Damn, I should have spent more time at the office!"
If mama and family enjoy boating also, its a no brainer!

 

[Nomad Willy]

Sailor of Fortune,

"Boats never make good investments."

Not true. In the 70s when I worked at Uniflite people were buying new Uniflites and selling them a year later for more than they paid for them. In 2000 some of my mutual funds we're making 28% interest too. Those days will never return.

 

[Sailor of Fortune]

Was that during the pre inflation 70's , or the post inflation 70's? 20% return looks good until
its inflation adjusted. I try to keep my investing and boating separate. I will concede to weighing the costs of equipment and machinery against value though. If I start thinking that my boating is anything other than fun, I won't be able to sleep nights.
In the mid 80's I remember talking to a marina manager friend of mine in Boston. I was getting the nickel tour of the new marina (Shipyard Quarters Marina). He said the ONLY reason that the marina was built was to add value to the condominiums. The marina made a small profit, not enough to justify the cost or operating expense.

 

[FF]

The marina made a small profit, not enough to justify the cost or operating expense.

This is getting truer with every condo built.

So a boater should set up the boat to live well at a mooring ,

as land access is easier to come by than slips with 240V 50A power.

For non freezing water locations , independance is easy to do, just a different outfitting concept than the Power Hose lifestyle.

Vastly cheaper and more rewarding living than the dock Zoo.

 

[JohnP]

FF wrote:

The marina made a small profit, not enough to justify the cost or operating expense.

This is getting truer with every condo built.

So a boater should set up the boat to live well at a mooring ,

as land access is easier to come by than slips with 240V 50A power.

For non freezing water locations , independance is easy to do, just a different outfitting concept than the Power Hose lifestyle.

Vastly cheaper and more rewarding living than the dock Zoo.

********* FF.** Owning your dockage space is even better, and I am sure you will attest to that.** JohnP

*

 

[FF]

"Owning your dockage space is even better, and I am sure you will attest to that."

Damn right , with space for 5+ 50 'fters my tax bill becomes a joke compared to what renting the space at a marina costs.

The best advantage is parts storage , and of course a workshop.

Here in Turkey Creek there is also no "homeowner rules", so my 35 ft bus conversion sits in my yard .