Money Smarts Blog

It’s finally summer! And you know what that means—it’s time to hit the water. Boating is a favorite pastime for many of us, and as such, you might be considering purchasing a boat of your own. There are many factors that go into the actual total monthly cost of buying and financing a boat – it’s likely to be a big purchase. Follow our checklist to make the boat-buying process smooth sailing.

Decide what you want to do with your boat

Some people want to tube and water ski with family. Others want to hang out and have fun with friends, and some prefer solitary fishing trips. Boats are not one-size-fits all, and each of these activities is best done on a different kind of boat. Consider what you want to get out of your time on the water and how many people will be on your boat at once. Use the Boat Buyer’s Guide to help narrow your options.

Set a budget

A boat is not a one-time cost. You’ll likely have it for many years, and with longevity comes expenses. The first step to budgeting is listing all of the things that will make up your monthly cost. Purchase price is just the beginning—you should also consider:

• Interest rates: Our best advice — shop around.
• Taxes: Not only do you have to consider sales tax but also the yearly personal property tax.
• Insurance: You can just protect the property or opt for liability insurance, which will cover many of the possible incidents that could occur on the boat.
• Fuel: Or you could always try paddling.
• Storage: Not only will you need a place to dock your boat for easy access, but you also may need a special storage facility during the winter.
• Maintenance: Try factoring in a specific amount to save each month, so you’re prepared to handle any routine or surprise maintenance that might come up.
  

Decide if you want new or pre-owned

There are pros and cons to buying new and pre-owned, but it all comes down to what you value most in your purchase and where you’ve set your budget. It’s tempting to go brand new, and for good reason—there’s no need to worry about the history or how the previous owner maintained the vessel. You can get exactly what you want with the amenities and technology that excite you, and you will have a warranty to cover some costs in the first few years. However, of course, you pay a premium for these perks.

Buying a used boat is easier on your bottom line. Similar to a car, a boat depreciates as soon as you take it off the lot, so you’re getting more for your money if you purchase used. And, if you time it right, you might find a fairly new boat with a year or so left on the warranty. Don't forget you’ll have extra research to back up your purchase – check for any quirks or bugs in that make and model and ensure they’ve been repaired. A boat mechanic should always check it out before you finalize the purchase.

Look into financing options

Your interest rate can have a big impact on your monthly expenses. Knowing up front what you're preapproved for will help you decide whether to look into new or used boats, top of the line or not-so top of the line. Or, if you might need to go back and adjust other aspects of your budget.

Many boat dealers will set up a loan for you, but you’re likely to get a lower interest rate with your bank or credit union. Take a look at our loan calculator to help determine your monthly cost. All you need is proof of income, insurance, identity and residence, and you’re ready to apply. There are many types of loans to consider, including personal, collateral and home-equity—also referred to as a second mortgage. Each has benefits and downsides, so be sure you do thorough research to decide what’s best for you and your family. If you need help understanding your options, give us a call.

Pro tip: Check your credit score before applying (do a soft inquiry at a free site such as Credit Karma, so your score doesn’t take a hit), pay down outstanding debts if possible, and get a pre-approval letter before you set out to make your purchase.

Interest rates can be tricky, but generally, the lower the better. It’s also usually advisable to attain a fixed-rate loan so you don’t have to worry about your rate going up. Once you’ve decided on a loan, calculate how much you want to put down, and the boat is nearly yours.

Have fun!

You put a lot of thought and careful calculation into this decision. Now it’s time to have fun. The last item on your checklist is to enjoy the water in your new boat!