Tuesday, October 17, 2017

How Much Boat Can I Afford?

October 1, 2017 by · Leave a Comment 

boat afford title

To be brutally honest, boating can become an expensive lifestyle. If you are a first-time buyer or if you are considering upgrading to a bigger or faster toy, you need to resist the urge until you consult your budget.

Don’t be blindsided by those who make their living turning the boating bug into a sale. No matter how they embellish the allure of being the captain of your own ship, the fantasy comes with a real price tag. Don’t get me wrong — I’m a committed sailor who has been on the water for 65 years. It’s a terrific family activity, and a wonderful way to enjoy nature, but you need to keep your wits about you as you open and close your wallet.

The secret of successful boaters is that they figure out all of the costs of buying and operating their particular craft, adding every conceivable cost of operation, maintenance, storage, and insurance onto the purchase price. That annual cost, added to any loan payment, is an estimate of how much disposable income is needed to feed the boating passion. If it’s not possible, boat rental or boat club membership are appealing alternatives.The secret of successful boaters is that they figure out all of the costs of buying and operating their particular craft, adding every conceivable cost of operation, maintenance, storage, and insurance onto the purchase price. That annual cost, added to any loan payment, is an estimate of how much disposable income is needed to feed the boating passion. If it’s not possible, boat rental or boat club membership are appealing alternatives.

Other than living on the water or acquiring a small boat that can reside in your backyard or driveway on a trailer, you need to find a home for your vessel at a commercial marina or boatyard. Costs vary depending on location and available amenities, but the price quote for a summer slip or mooring may or may not include spring launching, tender transportation, autumn hauling, or winter storage. Depending on the marina operation and environmental laws, you may be prohibited from doing work on your boat. Be sure to factor in the costs of pros for even simple repairs.

Fleet of dollar boats swimming in financial seaThe sea is a harsh environment, so you’ll need to buy new covers as they wear out and replace worn hardware, ropes, bumpers, sails, filters, and hoses. Marine electronics can age faster outdoors and improving technology also makes safety equipment outdated. Fabric in seating areas can fade from the sun or be worn out by wet bottoms, so decorating is a cost in most boats built for cruising in comfort. There are also the routine costs of operating a vessel with many moving parts — a rough estimate for future maintenance and repair costs is one to two percent of the cost of the current year model of your boat.

Fuel expenditure depends on the amount of cruising you plan to do (even for sailboats) and the average amount of fuel your vessel uses per hour. If you’re staying out overnight or for extended periods, the costs of transient spaces at other ports should be part of your calculations.

The cost of boat insurance is variable, so here’s another place to shop around. If you save money by enlarging your deductible, add that deductible figure into the annual cost of insurance when you budget.

Always have a kitty for unexpected emergencies unless your pockets are much deeper than the waters where you may run aground. The annual cost of a tow service is a worthwhile expense to avoid most surprises, but a contingency fund is still always a good idea.

It may be harsh to say that the difference between the proud captain of a luxury cabin cruiser and a skiff is the size of his or her budget, but that’s usually the case. There’s nothing enjoyable about sailing into debt or drowning in bills — boating is all about having carefree but affordable fun!

By William C. Winslow

The author is the Division 5 – Staff Officer Public Affairs, First District Southern Region, for the U.S. Coast Guard Auxiliary, the all-volunteer, non-military arm of the Coast Guard, teaching boating safety education and conducting search and rescue operations. Visit http://cgaux.org/ to join the Auxiliary or for class information.

webPlus_web_green1  Tips for getting the right boat loan

 

Ten tips from Boat Owners Association of The United States (BoatUS) for getting the boat loan that’s right for you:

  1. Check your credit: Before applying for a loan, ensure your credit report is accurate, and get your current credit score. The closer to 700 and higher, the better the rate you’ll get. A free copy of your credit report is available annually from each of the three national credit bureaus at www.annualcreditreport.com. To get your credit score, first try checking with your credit card issuer or bank you do business with. If it’s not provided, you will need to speak to a credit counselor, use a fee-based service, or purchase it from the credit bureau. More at the Consumer Financial Protection Bureau.
  2. Find the right loan type: A fixed-rate, fixed-term, simple-interest loan is the most common. This offers the same monthly payment for the life of the loan. Variable rate or hybrid options may offer a combination of a fixed rate for a few years then a variable rate. With interest rates forecasted to rise in 2017, the appeal of variable rate loans may increase. Don’t forget to ask if there are prepayment penalties for paying off the loan early.
  3. Compare loan rates: Generally, rates are lower and available loan terms are longer for newer boats and larger loan amounts. However, each is dependent on a variety of factors including model year, loan amount, and down payment. Be prepared for lenders to require larger down payments, have higher rates and offer shorter terms on older boats, especially those over 20 model years. There could also be a .25 percent rate difference between some consecutive model years, so be sure to talk with your lender and understand their rate and term structure.
  4. Don’t be fooled by ads: You may see rates advertised as low as 3.99 percent, but there usually will be some small print that could make that loan less attractive. For instance, the rate might only be fixed for a few years or the loan period might be only seven years.
  5. Get pre-approved: Ask if you can get preapproval, or if your lender allows you to start the underwriting process before you have a signed sales agreement. This may save some time.
  6. Consider a HELOC: Thinking of using a home-equity line of credit (HELOC) to buy your boat? This might work if you have equity in your home and you plan to pay the boat off while interest rates remain relatively low. Unsecured loans (loans not secured by your boat) are also an option for well-qualified individuals.
  7. Explore tax benefits: A boat can qualify as a second-home loan interest deduction if it has a berth, head and galley, so buying a boat just large enough to have these features could offer a tax advantage. There’s an overall limitation on the second-home deduction. You can only deduct two homes, and it can’t total more than $1 million in loans. If you count the HELOC, the threshold is $1.1 million.
  8. Get it surveyed: So you’ve secured the loan and found the boat you’ve wanted. Hang on! While you might think the boat is perfect, hire a qualified marine surveyor to inspect the boat to ensure it is in good condition and you won’t have any unexpected repair bills. A list can be found at BoatUS.com/surveyors. Also, many lenders will require a marine survey.
  9. Ask about closing costs: As with any loan, there are some fees involved – sales tax, processing fee, and title and registration fees are common. Check with your lender to find out what to expect.
  10. Calculate your monthly payment: Wondering how much of a loan you can afford? Check the BoatUS online calculator at BoatUS.com/calculator to compute monthly payments. Your lender will also review your debt ratio and other criteria. www.BoatUS.com/boatloans

 

 

is Division 5 – Staff Officer Public Affairs, First District Southern Region, U.S. Coast Guard Auxiliary, and a freelance writer for marine publications. His work has appeared in Sailing, Wooden Boat, and Good Old Boat; he is also the author of Cat Boat Tales.

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