If you are thinking about purchasing a brand new boat, then you are not alone. Every year, tens of thousands of people become proud owners of a new boat and most of them are very satisfied with their purchase. If you want to join the club and enjoy spending time on the open water in your brand new boat, then you need to make sure you plan out your purchase.
One of the most common questions that want-to-be boat owners ask is if they should purchase their boat with cash or take a financing option? This is a serious question that requires some important analysis so that you will be able to decide what option is best for you. When you crunch the numbers, you may actually be surprised about some of the advantages that come with financing your boat purchase.
Advantages of Purchasing With Cash
When it comes to purchasing your new boat with cash, there are some obvious advantages being that you will not have to make regular loan payments or worry about a lien being placed against your boat for defaulting on loan payments. Other than those two advantages, there are not really any other benefits of paying cash for your new boat.
Generally, purchasing your boat outright with cash will be the best option for you if you have a lot of money and do not want to be bothered with monthly payments. Rich people that have busy lives may not want to deal with lenders and sometimes, it is just easier for the rich to pay upfront as it will save them time.
Advantages of Financing your Boat Purchase
For most people, they will want to finance their boat purchase because although it may require a little more time and effort, it will generally benefit them over time.
When you decide to finance your boat purchase, there are some more obvious disadvantages like having to make regular loan repayments, paying interest, and having to worry about defaulting on your loan. These are issues that people need to think about when they decide to finance a new boat purchase. However, these risks are easily mitigated if you take some careful planning. Also, the benefits of financing your boat will often times out weight the disadvantages.
Favorable Interest Rates
If you do not have all the money required to purchase the boat you want with cash, then financing is the option you will be taking. Generally, financing terms for boat purchases are favorable because they use the value of the boat as collateral to secure the loan. That means the lender can take back the boat if you default on the loan. This is good if you want to finance because it means you will get a favorable interest rate. If you have a bad credit score and are looking to purchase a boat, then there is no need to worry as one of the tips from SeaDream Boat Financing says that companies will still generally lend you money to finance your boat purchase. They say that if you have poor credit, you can expect to have a slightly higher interest rate, but you will still be able to get a long amortization period. Typically the average interest rate to finance a boat is somewhere between 6 and 15 percent and this rate increases a little bit if you have bad credit.
Low Down Payment
Another great reason why you need to consider financing your boat purchase is that lenders will generally only require a small down payment. Typically, the amount that lenders will want you to pay as a down payment is around 15% of the total purchase price of the boat. This is a good way to purchase an expensive boat if you don’t have a lot of money on your hands.
Long Financing Terms and the Time Value of Money
Due to the time value of money, oftentimes it will be more advantageous to finance your boat because lenders generally offer long loan terms. The reason that this works well with a boat purchase is because of the low down payment, low-interest rate, and long amortization period. The fact that you can pick a 15-year term for your boat purchase means that due to inflation and rising wages the same payment you make in 15 years will not feel as expensive as it does today. This is why for many people, financing is the best way to go.
If you are thinking about purchasing a boat, then you will need to decide if you are going to be paying with cash or use financing. In most cases, there are several advantages to financing your purchase but the decision will ultimately come down to what is best for your personal wants and needs. If your financial situation is not ideal, it is important to understand that you will still be able to get financing, but you may be paying a slightly higher interest rate. Whatever the case, if thought-out properly, daydreamers can find a way to purchase their boat and start sailing.