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Should You Get A Boat Loan? (An Unbiased Answer)

Deciding on getting a loan is a decision many people who are looking at buying something new may be faced with. Obviously, the answer is not just black and white as there are many different people with many different financial situations. As a financially minded person, I will try to answer it the best though.

So, should you get a boat loan? Although dealers and the banks may try to make you believe that you need one, for most people, it’s not actually a good idea to get a loan for a boat. It’s usually more worth it to just get something used, or save up enough cash to buy it outright.

I’m glad that you’ve landed on my website as I have no bias to push you to get a loan at a bank as many other blogs do to make money. Don’t get me wrong though, sometimes getting a loan can be a good idea as I will explain later in the article.

What’s so bad about a boat loan?

Loans are a way to put you into debt. People especially in the real estate world know the difference between good debt and bad debt. Bad debt is debt where you are making no money from, therefore, it is a net loss. You end up paying the bank more than what the product actually costs due to interest.

How much more money will you be paying in interest to the bank if you get a boat loan?

To estimate how much money in interest you will be paying on a boat loan before getting the actual loan, use a loan calculator such as this one here. Put in all your information to the calculator, and it will show how much money you will really be spending.

If you need some help finding what numbers to put where, follow these steps:

  1. You first need to take the price of the boat you want and multiply your downpayment to it (common downpayment is 0.02).
  2. Then subtract that number to the price of the boat. Enter this number in the Loan Amount section.
  3. Now enter your interest rate (common number is 3.5%).
  4. For the term, it’s all up to you to decide. A lower term means higher monthly payment but less money spent on interest, a higher term means the opposite (most people get a 10-year loan for boats).
  5. For the fee and prepaid charge, just leave at zero, but you will most likely end up spending some money on fees.
  6. Now calculate the amount and the number over Finance Charge is how much money you will be spending in borrowing fees to the bank.

It’s crazy to see how much extra money you will be spending! This is why I strongly dislike boat loans, although, if you are willing to pay that extra money to not have to pay straight up in cash, that’s completely fair. Many people are willing to do so, but as a financially minded person, it’s just not my thing.

If you don’t feel like doing that look at this example

If you’re buying a fancy new bass boat for $45,000, your loan will probably be around $36,000 if you put down 20%. Now put that into a 10-year loan with an APR of about 3.5% (APR will depend on your creditworthiness and bank), and here are the results:

$6,718.66 (without including other fees) is spent on borrowing fees from the bank. Making the boat essentially cost $51,718.66 instead of $45,000. For some, it may be worth it as they don’t have to spend a lot of money upfront, but personally, I would just find a cheaper boat.

So if you think long-term, loans will generally be bad as they make you spend more money than just paying upfront in cash.

Boat loans are bad debt

99 percent of the time boat loans will be bad debt unless you’re using your boat for a business or a way to make money. So, most people won’t be making money off their boat, but you will be having fun and that’s what life is really about, right?

Well of course happiness is more important than wealth, but ask yourself this:

Would you be just as happy if you got a used boat that you could pay cash for instead of getting a loan on a new expensive boat?

This used boat doesn’t even have to be old. Just getting a boat from 5 years ago could save you a huge amount of money, and I’m positive it will make you just as happy as any super expensive brand new boat would.

So, in conclusion to this section, if you don’t have enough money to buy the boat you want upfront, look at getting a used cheaper boat that you can buy with cash instead of getting a loan from a bank. This will end up saving you money and stopping you from accumulating any debt. Or at least just get a smaller loan where you won’t be paying so much money in interest and other fees.

Think about what would happen if you lost your job or source of income all of a sudden, would you still be able to consistently pay your bill? There’s always much less risk when paying cash for a cheaper boat than getting a loan on an expensive one.

How much cheaper are used boats?

By examining many boats selling on the market, by just getting a boat 5 years old, you could save around $10,000. Always shop around before purchasing a brand new boat, you’ll be surprised at how much you can save by going used.

Heres some data I collected on some popular boats and what they are selling for used compared to new:

BoatCost
MasterCraft Prostar (2021)$74,995
MasterCraft Prostar (2016)$54,850
MasterCraft Prostar (2011)$29,950
MasterCraft Prostar (2006)$29,500
MasterCraft Prostar (1996)$21,000
Yamaha 212x (2020)$62,799
Yamaha 212x (2015)$44,995

How much should you spend on a boat?

Now, this isn’t a guide for everyone, as some people can afford to get a new boat, but believe me, 99 percent of people can’t. A boat is more of an expense than an asset as the resale price depreciates, so you should never be putting a large chunk of your net worth in a boat (over 15%).

Most people should only be spending around 5 to 10 percent of their net worth on a boat, and even that’s a little high in my opinion. Buying a boat should never put you in a situation where you are cutting costs throughout your life just trying to afford it.

if that’s the case, you need to either get a cheaper boat or save/get more money. Investing, asking for a raise, getting a second job, and driving for Uber are all different options you may consider to get some extra income to afford what you want.

Who should be getting a boat loan?

In my opinion, those who need to get a nice boat for their work should be the only people getting a large boat loan. This means people who have a fishing charter or some kind of tourist business where a boat is needed.

If you don’t have a business and you want to still get a boat loan, I’d recommend you still go used. Make your loan as small as possible and pay it off as quickly as possible. the longer you have your loan and the larger it is, the more money you will be wasting on interest and other fees.

Try to go with a 5-year loan instead of the more common 10-year. It may seem hard at first due to the large monthly bill, but you will end up saving money in the long term.

Sam