Boat loan question for newbie

[IslandHopper]

Originally Posted by TrentePieds

Interesting drift, this has taken :-)

There once was a man - a "self-made man", a true American success story, another yottie - who lived by the maxim "borrow every penny you can - but repay promptly!". This man started his working life as an errand boy for the pimps in the port of Piraeus. As a yottie, he was on the dark side. His boat started life as HMCS Stormont, though in his ownership she was called Christina. If memory serves, his wife's name was Jackie.

Now he, of course, never borrowed for consumption purposes. He only borrowed to invest in productive assets, and by the time he bought Stormont and refitted her, he could do so with the loose change in his pocket, giving it no more thought than I have to give to tootling down to the grog-shop for a boggle of Jameson's :-)

I'll give you three guesses as to his name. If you are right the first time, you get a bonus guess ;-0)!

Cheers

TP

Not a guess, Aristotle Onassis.....

[belizesailor]

As Aristotle O might advise....regardless of how you slice and dice it, you are borrowing money to finance a depreciating, high cost to carry asset. Regardless of how its done, thats fundamentally a bad financial decision.

[surf_sail]

Originally Posted by belizesailor

As Aristotle O might advise....regardless of how you slice and dice it, you are borrowing money to finance a depreciating, high cost to carry asset. Regardless of how its done, thats fundamentally a bad financial decision.

To be fair to TP, I believe he was suggesting using financing to maintain high earning productive assets (retirement investments), versus the alternative, as I had suggested, of not getting a boat loan and liquidating those assets.

[cyan]

On the surface, a boat loan seems much different than a house or a car loan, in that you don't really NEED a boat- kinda like a loan for a diamond ring or a swimming pool. Also, loans have to be repaid. That probably requires income, usually a job, and a job takes away from boat time. It all sounds bad. Friendly conservative advice points away from this idea.

BUT...

How many people waste all of their prime years sitting in a cubicle drenched in florescent light wondering when their 401(k) will hit that magic number that the really smart financial advisor told them it would have to hit in order to avoid the horror of running out of money in retirement?
Oh, the horror!

In the US, there is a whole industry set up to remind us that we would be CRAZY to stop working before we hit our magical number. The average working stiff does the math and shrugs- "Well, if I work until 77, at least I'll get half way to my 4 million dollar 401(k) goal."

That is the norm.
That is truly absurd.

The OP in this thread asked a question about boat financing related to selling his house. Many replies questioned the wisdom of a loan in the first place.

Here's the thing. Life is short. The world is awesome. A boat can take you there.

Many here follow the SV Delos video logs...
Delos owner Brian Trautman once commented on his multi-year adventure that started in his 30s, when he downsized, sold his house and most of his possessions, got a partial loan on an Amel 53 Super Maramu, and finally quit his Microsoft software job before his 401(k) hit any magic numbers:

“This trip has changed my DNA in a way I didn’t think possible…I’ve learned a lot about what’s important in life and I know it’s not doing the 9-5 rat race!”

[surf_sail]

Originally Posted by cyan

On the surface, a boat loan seems much different than a house or a car loan, in that you don't really NEED a boat- kinda like a loan for a diamond ring or a swimming pool. Also, loans have to be repaid. That probably requires income, usually a job, and a job takes away from boat time. It all sounds bad. Friendly conservative advice points away from this idea.

BUT...

How many people waste all of their prime years sitting in a cubicle drenched in florescent light wondering when their 401(k) will hit that magic number that the really smart financial advisor told them it would have to hit in order to avoid the horror of running out of money in retirement?
Oh, the horror!

In the US, there is a whole industry set up to remind us that we would be CRAZY to stop working before we hit our magical number. The average working stiff does the math and shrugs- "Well, if I work until 77, at least I'll get half way to my 4 million dollar 401(k) goal."

That is the norm.
That is truly absurd.

The OP in this thread asked a question about boat financing related to selling his house. Many replies questioned the wisdom of a loan in the first place.

Here's the thing. Life is short. The world is awesome. A boat can take you there.

Many here follow the SV Delos video logs...
Delos owner Brian Trautman once commented on his multi-year adventure that started in his 30s, when he downsized, sold his house and most of his possessions, got a partial loan on an Amel 53 Super Maramu, and finally quit his Microsoft software job before his 401(k) hit any magic numbers:

“This trip has changed my DNA in a way I didn’t think possible…I’ve learned a lot about what’s important in life and I know it’s not doing the 9-5 rat race!”

Well said Cyan, I couldn't agree more with the sentiment of retiring as early as possible. Unfortunately, for most people, taking a boat loan is more likely to chain you back to the office than set you free. Aren't the sunsets and ceviche the same on a $30-50k monohull as a $500k cat?

The Trautman story is truly inspiring (just look at the before and after pics). But let's not kid ourselves, along with a lot of hard work, unique skills, and a lot of chutzpah, they also had a hefty dose luck on their side. Your own experience may vary...

[TrentePieds]

Quote: "As Aristotle O might advise....regardless of how you slice and dice it, you are borrowing money to finance a depreciating, high cost to carry asset. Regardless of how its done, thats fundamentally a bad financial decision."

QED :-)!

TP

[cyan]

Originally Posted by surf_sail

Well said Cyan, I couldn't agree more with the sentiment of retiring as early as possible. Unfortunately, for most people, taking a boat loan is more likely to chain you back to the office than set you free. Aren't the sunsets and ceviche the same on a $30-50k monohull as a $500k cat?

The Trautman story is truly inspiring (just look at the before and after pics). But let's not kid ourselves, along with a lot of hard work, unique skills, and a lot of chutzpah, they also had a hefty dose luck on their side. Your own experience may vary...

I completely agree about the boat choice. You do not have to spend $500K to see the same sunsets as the people in the little mono. Ceviche? Sign me up!

Trautman's hard work and chutzpah are certainly prerequisites for such an adventure. His "unique" skills quite are similar to those of most cruisers who are DIY fixers by necessity.
A hefty dose of luck? Here's where I disagree.
As far as I can tell, his "luck" involved:
1. Having little brother who was already a dive master and ready to go
2. Running out of money in NZ, causing contact with females
3. Swapping out the first girlfriend for the younger camera-friendly one.
4. Little brother finding a gf NZ with other adventurous girls to tag along
5. Bringing a $200 camcorder just to keep friends and family updated, stumbling into 6-figure vlogger income

[DotDun]

Originally Posted by TrentePieds

Quote: "As Aristotle O might advise....regardless of how you slice and dice it, you are borrowing money to finance a depreciating, high cost to carry asset. Regardless of how its done, thats fundamentally a bad financial decision."

QED :-)!

TP

It does state "might", which makes it Belizesailor's blathering, not Aristotle O....



Borrowing money is a tool, there is nothing wrong with borrowing money and using a boat as collateral. A problem arises when someone borrows money for something they can't afford. Just because they don't have or don't want to invest the money upfront, doesn't make it a bad decision. It's simply a business decision.

[TrentePieds]

@ #37:

Oh, you cynic, you :-0)!!

TP

[belizesailor]

Originally Posted by cyan

I completely agree about the boat choice. You do not have to spend $500K to see the same sunsets as the people in the little mono. Ceviche? Sign me up!

Trautman's hard work and chutzpah are certainly prerequisites for such an adventure. His "unique" skills quite are similar to those of most cruisers who are DIY fixers by necessity.
A hefty dose of luck? Here's where I disagree.
As far as I can tell, his "luck" involved:
1. Having little brother who was already a dive master and ready to go
2. Running out of money in NZ, causing contact with females
3. Swapping out the first girlfriend for the younger camera-friendly one.
4. Little brother finding a gf NZ with other adventurous girls to tag along
5. Bringing a $200 camcorder just to keep friends and family updated, stumbling into 6-figure vlogger income

I very rarely watch vloggers , but on the few I have seen, there appears to be a distinct trend: If you edit out the attractive young women, then you would just have a couple of (still) broke dudes on a boat! 😆

[belizesailor]

Originally Posted by DotDun

It does state "might", which makes it Belizesailor's blathering, not Aristotle O....



Borrowing money is a tool, there is nothing wrong with borrowing money and using a boat as collateral. A problem arises when someone borrows money for something they can't afford. Just because they don't have or don't want to invest the money upfront, doesn't make it a bad decision. It's simply a business decision.

True, it is my blathering not Mr. O's, but in this case its not a business decision to my knowledge (or at least the OP didnt present it that way)...just a personal want.

Leverage is a tool which makes great sense for certain types of investments (a boat is NOT), like income producing real estate, but financing a non-income producing, depreciating, high cost to carry boat, just makes a bad financial decision (buying a boat) worse.

My suggestion to the OP: there are some great less expensive boats out there (like a Pearson 365 just posted here on CF for $30K). Save up some cash, sell the house (presumeably at a profit or at least equity?), buy a good inexpensive boat and go sailing! Dont get saddled by debt that may keep you firmly tethered ashore (Ive watched a few folks do exactly that).

It will likely be one of the best "investments" you ever make, just not in financial terms. [emoji41]

[DotDun]

Originally Posted by belizesailor

True, it is my blathering not Mr. O's, but in this case its not a business decision to my knowledge (or at least the OP didnt present it that way)...just a personal want.

Leverage is a tool which makes great sense for certain types of investments (a boat is NOT), like income producing real estate, but financing a non-income producing, depreciating, high cost to carry boat, just makes a bad financial decision (buying a boat) worse.

My suggestion to the OP: there are some great less expensive boats out there (like a Pearson 365 just posted here on CF for $30K). Save up some cash, sell the house (presumeably at a profit or at least equity?), buy a good inexpensive boat and go sailing! Dont get saddled by debt that may keep you firmly tethered ashore (Ive watched a few folks do exactly that).

It will likely be one of the best "investments" you ever make, just not in financial terms. [emoji41]

My point is your are making statements that are not true for everyone, they are simply your credo wrt your financial decisions that you seem to believe others should follow. If the OP has the cash flow to support both the payments and maintenance, there is nothing wrong with financing a boat (or other 'non-income producing, depreciating' asset).

I purchased a new car recently, an obvious depreciating asset and the manufacturer offered 0.9% financing for 60 months. Why would I liquidate assets earning 10+% when cash flow is sufficient to make the payments? That would be a stupid financial decision.

If I wanted a new boat, I would certainly look at financing, especially if the interest rate is significantly less than my other assets were earning.

As I stated earlier, I do agree that if one cannot afford both payments and maintenance, then financing would be stupid.

[belizesailor]

Originally Posted by DotDun

My point is your are making statements that are not true for everyone, they are simply your credo wrt your financial decisions that you seem to believe others should follow. If the OP has the cash flow to support both the payments and maintenance, there is nothing wrong with financing a boat (or other 'non-income producing, depreciating' asset).

I purchased a new car recently, an obvious depreciating asset and the manufacturer offered 0.9% financing for 60 months. Why would I liquidate assets earning 10+% when cash flow is sufficient to make the payments? That would be a stupid financial decision.

If I wanted a new boat, I would certainly look at financing, especially if the interest rate is significantly less than my other assets were earning.

As I stated earlier, I do agree that if one cannot afford both payments and maintenance, then financing would be stupid.

Youre right one size does not fit all, there may be cases like special financing where it might make sense...like the promotional deal you mentioned. (Ive never bought a new car...so wouldnt know...depreciating assets ya know &#128518. Maybe if an owner really wanted out of a boat and offered owner financing at very favorable terms...that would be such a special case too. I actually started to comment about special cases originally, but didnt want to blather on.

I dont expect anyone to follow or even agree with my perspective...err...blathering, Im just offering my opinion, as is everyone else who posts here. The OP will have to weight the different opinons and see what best fits his situation.

[surf_sail]

I for one can't wait until boat builders are as desperate to offload inventory as auto OEMs so that they offer 0.9% financing .

[TrentePieds]

Quote: "My point is your are making statements that are not true for everyone, they are simply your credo wrt your financial decisions that you seem to believe others should follow. "

Whence does this notion arise that statements made must be "true for everyone"? It is blindingly obviously to me that statements made in this or any forum are personal opinions, and personal opinions only. Every so often (Lord only knows with what rarity that occurs!) someone sez something that someone else finds useful. And may The Force be with the both :-)

ATTENTION: PERSONAL OPINION ALERT!!!

Any man who "invests" more money in such an expensive toy as a yacht than he can walk away from with a smile on his face should have his head read.

Aequum et salutare est :-)!

TP