What's the depreciation vs. boat loan on a 20 year loan

[TallRedRider]

8 hours ago, Eagleboy99 said:

It makes sense for a boat??  I home, I understand as it generally appreciates over time.  I highly doubt a 80K VTX will be selling for $150K in 20 years.  Also, I notice that loan uses  amortization.  That is not common here except for houses IME.

Meaning that you can take out a 100K loan on a boat, owe 83K 5 years later, and somehow not be upside down.  That is what the market has done for the last 11 years.  It won't last, but that is what is driving the market.  Many of us keep saying it can't continue, and it does.  

A boat sold 20 years ago is worth what it was originally purchased for now, so a boat sold today may be worth the same in 20 years.  Past performance may not predict future performance.  

I have enjoyed my new boats more than my old.  My old boats were pretty good, but not at the same level of reliability that a new boat has.  Things break down with time.  The new gadgetry has made boating more enjoyable.  I used to say that my old boat was equally fun to a new one to justify not spending on the new one, haha.  

@kerpluxal I would like to join your investments.  They may have had those returns in a year or two, but if you have a fund that has consistently done that, post the results, please.  

 

 

 

[justgary]

2 hours ago, kerpluxal said:

... My mutal funds have been paying out 10% annually...

Yes, please share your knowledge.  Start a new investment thread in Off Topic if you have to....

I'm estimating 2.5% return on my investments for retirement to help prepare for the worst.

[vanamp]

7 hours ago, jaciche said:

This causes people to think "Maybe I should take a 100k/5%/20 year loan out on a boat" 

If you can't afford it, don't buy it. The only asset that anyone should finance is their house or something that will create a positive return like a rental property, a business etc. I think more boat consumers need to stop looking at the other fancy new boats at the lake/dealership and the trucks parked at the launch and only consider buying what they can with their own $$$.

That made so much sense that I sold our boat and bought what I can afford with cash.....

Now my wife and kids are pissed and I'm not sure why.  Do you think you could talk some sense into them for me?

 

[justgary]

Your wife is pissed because she's supposed to be the only unicorn you will ever find, but then you threw another one in the pool.

Kids are pissed because the unicorn ate their phones.

[hethj7]

I agree you can have fun on any boat.  But, without a doubt we enjoy our new boat more than the old one.  More creature comforts, size, and ease of setup.  How much more dollar value are those things worth vs our old boat is for individuals to decide.   But for us, we go out more often and enjoy our time on the water with the newer boats.  

A nice pre-surfgate boat with GSA, integrated ballast, etc may be just as convenient as well.  

[wakesonthesnake]

39 minutes ago, TallRedRider said:

@kerpluxal I would like to join your investments.  They may have had those returns in a year or two, but if you have a fund that has consistently done that, post the results, please

If you haven't blown 4.5% yearly out of the water with your investments over the last 10 years than you need a new financial adviser or stop doing it yourself.  

[ctvandy23]

7 hours ago, jaciche said:

This causes people to think "Maybe I should take a 100k/5%/20 year loan out on a boat" 

If you can't afford it, don't buy it. The only asset that anyone should finance is their house or something that will create a positive return like a rental property, a business etc. I think more boat consumers need to stop looking at the other fancy new boats at the lake/dealership and the trucks parked at the launch and only consider buying what they can with their own $$$.

I totally agree that if you can’t afford it don’t buy it, but that’s the only thing I can agree with...you sound very judgmental in your proclamation “the only asset that anyone should finance is their house or something that will create a positive return like a rental property, a business etc”.  Are you saying that every home, rental property and/or business is guaranteed to appreciate?  Not sure that is accurate!  If I want to look at my fancy new boat I will and love every second of it!  If you choose to live with an older boat that is long paid off that is your right! Please don’t pass judgement on those that choose to take a loan based upon their own financial decision and thoughtful consideration.  This topic has been played out here several times and it’s the same rant about paying cash versus taking a loan.  Life is way to short and if I choose to enjoy it with a shiny new boat that I can afford I don’t need a lecture about financial responsibility!

[BlindSquirrel]

It was said a couple times in this thread, and really stood out to me.... “you can make more money, but you can’t make more time.” The time my family has on our boat(s) is priceless. I’m in sales and I guarantee the last thing I will say on my deathbed is “ man, I really wish I would have made one more call.” Or “man we really shouldn’t have taken that last vacation”. Get what you want and enjoy! Life is short.

Edited July 2, 2019 by BlindSquirrel

[surfdude]

Boats roughly depreciate 50$ an hour for the first 3 years ad gas and maintenance, it probably cost closer to 100$ an hour to run one. Best 100$ an hour fun I’ve ever had!

[kylesullens]

5 hours ago, Eagleboy99 said:

Finance 102 - compare forgone interest on cash sale to interest loan sale.  Add nonmonetary stuff like being able sleep at night when your income changes (baby, job, medical etc.)

this is an excellent point  that is too often overlooked.  if you take on an $800 payment and then your circumstances change and you can't make the payment, your options are not good.  either sell at a loss and pay the differemce out of pocket, which sucks.  or let the bank take it back, lose any equity you may have had, and ruin your credit for the foreseeable future. 

 also, if a major repair comes up I'm not trying to cover a huge monthly payment and a big repair.  which typically happens in july so yo wind up paying all year for the boat and then losing your summer boating window. 

being able to sleep at night has a great deal of value for me.

[Five Cent Worth]

7 hours ago, ctvandy23 said:

I totally agree that if you can’t afford it don’t buy it, but that’s the only thing I can agree with...you sound very judgmental in your proclamation 

This.  100%. 

[Five Cent Worth]

This thread makes my head hurt.  It's like a Trump / Obama thread.  You have to be on one side or the other.  It seems hard for someone to understand we all have different strategies and goals. 

Paying cash for everything seems like such an archaic way to approach finances / life.  Financing something you can't afford seems idiotic to me too.

[ahopkins22LSV]

Please don’t turn this thread into this debate, we’ve done it so many times and it just gets worse from here. You have no idea what anyone’s fianances are like so you don’t know if their method of paying for a boat is a good one or not. What works best for your situation isn’t going to work best for me and my method isn’t going to work best for the next guy. There are tons of ways to purchase a boat and be safe with your money. How do you know the guy who took a loan at a low interest rate doesn’t have piles of money saved but doesn’t want to touch it because it’s making more in the market? And vise versa how do you know that the guy who paid cash didn’t spends his last penny on it and tomorrow he’s in a serious accident and now has a mountain of medical bills that he can’t pay. Please keep that in mind and not let this thread go any further down the death spiral of the past. 

[carguy79ta]

Okay!!!

[LarsJensen]

Another perspective on 2nd half of original question ...”and what will a 125K boat be worth?”

i work in the aviation industry and the prices for used general aviation aircraft (pipers, cessnas, Beechcraft, etc from the 1950s-1980s) have increased well above the original purchase price in some cases.

Why, you ask? Because the price of new aircraft is so high it is a barrier to entry for most which forces the average consumer to purchase from a dwindling supply on the used market. 

There exist many parallels between our two industries but at the end of the day, good hulls with good engines that can do a little of everything are getting hard to find. Therefore, the prices will remain strong and not coincide with normal depreciation rates found on a spreadsheet. 

Whats the (market) value of a 125k in 10 years??? At least lower than half of original value. Beyond 10, your guess is as good as mine but I’m guessing still well below what one would pay for it. 

Edited July 2, 2019 by LarsJensen
Additional two cents

[NWBU]

36 minutes ago, LarsJensen said:

Another perspective on 2nd half of original question ...”and what will a 125K boat be worth?”

i work in the aviation industry and the prices for used general aviation aircraft (pipers, cessnas, Beechcraft, etc from the 1950s-1980s) have increased well above the original purchase price in some cases.

Why, you ask? Because the price of new aircraft is so high it is a barrier to entry for most which forces the average consumer to purchase from a dwindling supply on the used market. 

There exist many parallels between our two industries but at the end of the day, good hulls with good engines that can do a little of everything are getting hard to find. Therefore, the prices will remain strong and not coincide with normal depreciation rates found on a spreadsheet. 

Whats the (market) value of a 125k in 10 years??? At least lower than half of original value. Beyond 10, your guess is as good as mine but I’m guessing still well below what one would pay for it. 

Good analogy. I've been out of flying for 12 years but now that I'm getting back into it, the same exact planes (model, year, etc.) I was looking at buying back then for $40-60K are now $60-90K! And they have 12 more years of use.

[LarsJensen]

5 minutes ago, NWBU said:

Good analogy. I've been out of flying for 12 years but now that I'm getting back into it, the same exact planes (model, year, etc.) I was looking at buying back then for $40-60K are now $60-90K! And they have 12 more years of use.

It’s really funny to hear people say, “Time to get a new boat, we’ve passed over 1000 hours.” In the aviation world, that’s barely just getting started. Yes, after a certain timeline, depreciation means nothing. The questions to ask....

how good was maintenance?

how nice is the interior?

how nice is the gel coat?

any major repairs or accidents?

if all those are satisfactory, hours mean nothing and it’s all about supply and demand. 

 

Aside - a friend bought a 1957 Cessna for 12k in 1982. After a hail storm totaled it in 2002, Insurance cut a check for 28k.  Per Wikipedia, the original MSRP when new was about 9k. Obviously inflation will play a role hear but we get the idea. 

[TallRedRider]

15 hours ago, kerpluxal said:

2 sides to the coin. First and foremost.. your money.. your decision. However... I have 4.5% financing on my boat for 12 years... My mutal funds have been paying out 10% annually... Leaving my money in market returns me 5.5% with the loss of the 4.5% interest. So I have growth in my money while I finance.

These are first world problems and different strategies by all. I had a friend by his boat on his credit card so he could get the points then payed it off... 

No matter what, if you enjoy it, use it, and keeps the family out of therapy... then probably a better form of money spent than giving to therapist.. that is my motto  

 

12 hours ago, wakesonthesnake said:

If you haven't blown 4.5% yearly out of the water with your investments over the last 10 years than you need a new financial adviser or stop doing it yourself.  

He said 10%.   I want to know which fund.   And the point is that it won't be 10% every year.  Timing is important, cannot be predicted, and when the next tank of the market occurs, it will eat into that gain.  

[Malibuwrench]

On 7/1/2019 at 9:49 AM, pauley71 said:

Personally, I think you can spend 1/2 as much and have just as much fun.  Having a 100k+ boat is a want, not a need.  This is 100k, 5%, 20 yrs.  The real challenge is when the market takes a poop and you are stuck with a luxury item that's value will take an immediate hit.  Today the market is strong but try to sell that used boat when the market tanks.  I'd say you will be stuck with it initially (a bigger depreciation hit at first) but you might have a shot of catching up in the 5-10 year range ... IF we stay on the current trajectory.  I would say that we can't continue this trajectory but I've said that before and ....   

This, If you have to take out a 20 year loan on a boat I have news for you. You cant afford it. Market tanks and lets say you loose your job now what? Then when the boat is out of warranty and you have to repair on your own dollar. Plenty of awesome boats can be had for 30K

[jaciche]

12 hours ago, ctvandy23 said:

Are you saying that every home, rental property and/or business is guaranteed to appreciate?

Nope, but the chances of these appreciating in value are probably higher than your boat. Would you agree with that?

@vanamp Sure, I'll come talk about personal finance and fiscal responsibility. 

 

Edited July 2, 2019 by jaciche

[kerpluxal]

11 minutes ago, TallRedRider said:

 

He said 10%.   I want to know which fund.   And the point is that it won't be 10% every year.  Timing is important, cannot be predicted, and when the next tank of the market occurs, it will eat into that gain.  

I am getting 10% on dividends earned... It is a mixture of Funds with different growths through USAA and all are USAA . This year thus far I have only had a 2% growth. I take pay out at end of year on Dividends, reinvest some of it and pay myself some of it.. 

As stated.. "next tank of the market occurs, it will eat into that gain.  " that is why I pay myself the dividends and move them to CD or Savings.

I have a weird way with my finances and it works for me... And I will leave it at that  

[vanamp]

19 minutes ago, jaciche said:

Nope, but the chances of these appreciating in value are probably higher than your boat. Would you agree with that?

@vanamp Sure, I'll come talk about personal finance and fiscal responsibility. 

 

Can you also mix in a little reality? You know, things like humans are not immortal and have at the top end 100 years to live and kids are only young once?

Tell me your doomsday scenario about financing a boat and I will quickly show you how out of touch you are.

 

 

[ctvandy23]

14 minutes ago, jaciche said:

Nope, but the chances of these appreciating in value are probably higher than your boat. Would you agree with that?

 

I would agree, but there are no guarantees in life.  So like I said, feel free to keep your older boat that's paid for and I will continue paying a loan I can afford!  I cast no judgement on your process and would expect the same back from you!  

[UWSkier]

Old boats rule, but I appreciate all those folks buying the new ones!  Your new boat might be mine in 15 years.  Treat it well!

On depreciation, my boat is approaching 20 years old.  In the condition it's in now, I can sell it for approximately 55% of what it cost new.  It's not really depreciating anymore.  Maybe a couple hundred dollars per year if that.

[jaciche]

@ctvandy23 no judgement

@vanamp I don't do boat loans because of a doomsday scenario. If crap hit the fan, the toys would be the first thing to go. Considering the demand for Malibu's, I don't think there would be an issue selling a newer boat if it's at a reasonable price compared t the value. The reason why I won't ever have a note on a boat is because I'd pay a higher amount of money than the initial price due to the interest. Boats are still depreciating in value, despite how many of you say that they barely depreciate or maybe they will be worth more than the initial sale price in the future. Your guess is as good as mine, but currently they are still depreciating. 

Example: I decide to buy a brand new 2020 21 VLX: I took the MSRP of a 2019 and added 4% which is my estimate for next years mark up:

https://www.skipperbuds.com/inv/2019-Malibu-Wakesetter-21-VLX-SkipperBuds-Madison-Z0099/ 126,234 *1.04 = 131,283.36 (2020 MSRP)

I'm a tough negotiator so I pay 75% of the MSRP for this boat: Sale Price: 131,283.36*.75= $98,462.52

Local Tax = 5.6% so that's  an extra $5513.90

Dealer Prep fee: I negotiate that down to $1,000 (which they'd never go that low if I was paying 75% of msrp unless it was a demo or new leftover)

TOTAL PRICE PAID: $104,976.42

Now I like to have my investments keep earning a return so I decide to get a loan on this boat. Interest Rate = 5%, Term = 20 years. I put a down payment of 20% which is $20,995.28. The loan amount is $83,981.14.

Making the minimum payment each month for 20 years, the principal and interest combined would be $133,017.20. Add the down payment, the total amount paid is : $154,012.48

If I double the monthly payments which would take 7 years and 8 months to pay off the loan, the principal and interest would be $101,124.29. Add the down payment, the total is $122,119.57

These costs do not included any of the boat usage costs like gas, insurance, equipment, maintenance, repairs as needed, maybe a maintenance plan etc. I'll be generously low and put those costs at $2000/year.

If I wanted to sell the boat as soon as I paid off the loan (I have to estimate the value of the boat after 20 years based on current market conditions.) The value/sale price would be $65,000.

So, my loss over 20 years would be 89,012.48 plus the $40,000 in usage costs over 20 years = $129.12.48. The loss and expenses per year comes to $4450.62

 

If I wanted to sell the boat as soon as I paid off the loan making double the payments (I have to estimate the value of the boat after 7 years and 8 months based on current market conditions.) The value/sale price would be $80,000. So, my loss over 7.66 years would be $42,119.57 plus the $15,320 in usage costs over 7.6 years = $57439.57. The loss and expenses per year comes to $7498.64

 

With my current boat, I pay for usage costs only at $2000 year (probably less because my insurance premiums are lower than the premium of a brand new 21 VLX). If you are okay with losing that much $ (4,450.62-7,498.64) per year on owning and using your boat, do it. I am not. This is the great divide. Maybe you look at these numbers and think the loss and expenses per year are chump change. I look at those costs per year and cringe. My only added liability is to pay for all maintenance and repair costs, most of which I do by myself. For how much I save per year, I'm happy to have an older boat that does not throw as nice of a surf wave. The added value of having a boat that I can barefoot with, open water slalom ski, wakeboard and surf makes it so worth it. We always have a good time on the water, and that's the most important thing. This is my contribution to this thread and I won't comment again.

Edited July 3, 2019 by jaciche