Boat loan question for newbie

[hellosailor]

"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."

I would disagree strongly with that. Any fool who has gobs of money and no idea what or how to do with it, arguably SHOULD foolishly spend it. Even when that means losing it, as almost every big lottery winner does in a year or three.

You see them as losing money. That's their loss, but the wolves and the overall economy gain from them spending it. They lose, everyone else wins. More used boats, more repos, more bargains for the rest of us. Not quite the same thing as getting mugged, not at all.

It just ain't that hard to get fairly good financial advice. Why, the libraries will even give you some of the finest, for free. Over and over again, every year.

[belizesailor]

Originally Posted by 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 .

The boat builder equivalent is an asset sale after declaring bankruptcy!

[hellosailor]

Surf-
The boat builders pretty much never build so much extra inventory. GM may build 1/2 million extra cars thinking they'll sell them to rental fleets...And then the fleets may decide to change suppliers, or find that rentals are down (Uber competition) or they just want to age out their fleets because of whatever.
Boatbuilders? Mainly don't build "for inventory". They build one at a time to keep the shop busy, and if inventory develops, they lay off employees. Ain't gonna be no fire sales there.
And car makers often play a paper game which you seem unaware of. There may be a 20% profit between the maker and the dealer (that's before the dealer's retail profit to the end buyer.) More like 15% on a lot of cars these days.
So if the maker can finance the car at 0.9%, they're still making 15% of the sale of that inventory, and what they've really done is "sell" the financed car at maybe 10% instead of 15% profit. STILL A PROFIT. Same game is played with factory-financed leasing specials and other ways. The boat industry? Nothing at all like the car industry. The mass market boat industry, even the biggest of them, are small town players. Hicks. Penny ante. And if they go broke? Before the finals days when there is a HIN on the vessel, and maybe on your contract? You've got nothing, you're just a general unsecured creditor. Yeah, they win again.

[TreblePlink]

Using Delos as a financial model is wildly optimistic. Presently, they are video producers (good ones) first and sailors second. Brian is a very smart guy who has skills that lend themselves to working from the boat. And he was pretty young when he made the leap. It will be interesting to see where the tribe is in 10 years.

I don't think I could do it if I had to finance the boat purchase; better also plan on 15% to 40% or more post-purchase fix-ups. And then come cruising costs ...

You could also postpone 2 years while you work and save, then enjoy cruising more with less financial pressure.

[cyan]

Originally Posted by TreblePlink

Using Delos as a financial model is wildly optimistic. Presently, they are video producers (good ones) first and sailors second.
...
You could also postpone 2 years while you work and save, then enjoy cruising more with less financial pressure.

I'm pretty sure nobody here is placing the Delos numbers on a spreadsheet and calling it their financial model, lol.

For the record, their videos are not the best on technical merits. (industry pro here) The editing is rudimentary and the color correction is non-existent. (sad for the underwater footage) They use an unnecessary 4K camera, but have little concept of exposure, while posting HD resolution anyway. Other Youtube channels contain better cinematography.
However- their videos are awesome in my opinion. Never mind the technical flaws- they always tell great stories with their inspiring adventure and tons of laughs.

The Delos lesson is not a financial recipe. It is a counter-message for those of us with too many cautionary tales in our heads. The working stiff who dreams of tropical shores might can appreciate a college educated, 30-something Brian Trautman who flipped the bird at the office life and sailed away.

[TreblePlink]

Originally Posted by cyan

For the record, their videos are not the best on technical merits. (industry pro here) The editing is rudimentary and the color correction is non-existent. (sad for the underwater footage) They use an unnecessary 4K camera, but have little concept of exposure, while posting HD resolution anyway. Other Youtube channels contain better cinematography.
However- their videos are awesome in my opinion. Never mind the technical flaws- they always tell great stories with their inspiring adventure and tons of laughs.

Do you care to point to better sailing cinematographers ? I think their editing and content is the best ... (I spent 20 years at a video production house)

[surf_sail]

Originally Posted by hellosailor

Surf-

The boat builders pretty much never build so much extra inventory. GM may build 1/2 million extra cars thinking they'll sell them to rental fleets...And then the fleets may decide to change suppliers, or find that rentals are down (Uber competition) or they just want to age out their fleets because of whatever.

Boatbuilders? Mainly don't build "for inventory". They build one at a time to keep the shop busy, and if inventory develops, they lay off employees. Ain't gonna be no fire sales there.

And car makers often play a paper game which you seem unaware of. There may be a 20% profit between the maker and the dealer (that's before the dealer's retail profit to the end buyer.) More like 15% on a lot of cars these days.

So if the maker can finance the car at 0.9%, they're still making 15% of the sale of that inventory, and what they've really done is "sell" the financed car at maybe 10% instead of 15% profit. STILL A PROFIT. Same game is played with factory-financed leasing specials and other ways. The boat industry? Nothing at all like the car industry. The mass market boat industry, even the biggest of them, are small town players. Hicks. Penny ante. And if they go broke? Before the finals days when there is a HIN on the vessel, and maybe on your contract? You've got nothing, you're just a general unsecured creditor. Yeah, they win again.

Thanks hello, my statement was mostly in jest, boatbuilders don't have and likely will never will develop their own captive finance organizations as auto oems.

I've actually helped OEMs set up their dealer incentives in several geographies including the "holdback" incentive you reference that allows the dealer to tell you he is "selling below invoice". What you write is mostly correct, but I would take issue in the statement that that the OEM ("maker") is always making money. After dealer incentives, financing offers and customer incentives the OEM often loses money on low value vehicles - but in a high fixed cost business that's the name of the game. Interestingly the dealer often makes more money on a car than the OEM - kind of bonkers when you think about it.

Sorry for the tangent - nevertheless I'm still looking forward to when boatbuilders have trouble keeping their plants full (by the way most can't just reduce capacity by eliminating employees due to French labor laws). Surely they won't offer great financing, but they will offer discounts on their boats. Depressed new prices will depress used prices = great time to buy/upgrade...

[cyan]

Originally Posted by TreblePlink

Do you care to point to better sailing cinematographers ? I think their editing and content is the best ... (I spent 20 years at a video production house)

Hi TreblePlink,
Thread drift into sailing vlogs...

Why don't sailing vlogs look like movies??

To be fair, my background (for decades) is with feature post in Hollyweird. I don't have any experience with a video production house, or with reality TV. I can understand that reality shows don't have the big budget of features, and they have to make compromises. Shooting a reality show with long lenses and feature-quality cameras is not practical. Reality doesn't (usually) allow multiple takes, so a greater depth of field is mandatory.(keep everything in focus) The huge footage amount and camera count means that the image quality has to be lower. (smaller files, more compression)

There are really only 3 cameras that make it to the theater: Alexa, RED, Sony F55/F65. The cheapest, by far, is RED. (and most of the A-list DPs frown upon the sketchy color science in the RED) BTW, the RED Dragon costs many times what Delos has ever used. (with lenses and gack, probably >$60K) One would have to be quite daring to take this type of gear onto a boat, but it is the only way to get cinema quality images.

In addition to cinema cameras, post production for high end productions includes color correction (as you know). In fact, this step (the DI) is seen by many DPs as the most important step in post. Most sailing vlogs don't even attempt color correction. (which is a shame, as it used to cost $400K for Davinci hardware in 1995, now Davinci software is free!)

Finally underwater cinematography almost NEVER has proper LIGHTING on vlogs. Nat Geo divers always use serious lighting. The wonderful coral colors are lost forever in a GoPro in just ambient light. (Delos uses sadly insufficient lights, but at least lately they used SOME light)

There is only ONE sailing YouTube channel that I have seen where a proper RED camera was actually used with cinema glass. (a PITA compared to amateur stuff) These vloggers also used decent color correction, editing, and a well done music track. The down side? They forgot to bring along GIRLS, and they only made 8 or 9 videos. They didn't get very far, then quit. Frankly, it probably took MUCH more time and money per episode than any of the other 100 or so sailing vlog channels I have seen so far.

For the record, I find Delos much more entertaining, but I have yet to see such a technical visual achievement in a sailing vlog as these guys:

Sea Change
https://www.youtube.com/channel/UCEM...VwuigEjRnVx1zw

[belizesailor]

Originally Posted by 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 .

Of course, if you factor in depreciation on a new boat/car then even at 0.9% its not pretty.

Its my unscientific observation that boats depreciate at a slower rate than cars, and hold their value longer, but Ive yet to find good numbers on boats to confirm that. Below is info on new car depreciation rates:

https://www.edmunds.com/car-buying/h...fographic.html

Edmunds shows, on average, a 37% drop over 5 years, the rate varies a lot by year, but averaged over the 5 years thats 7.5%. So your real cost in capital and interest, assuming a 0.9% loan, would be 8.4%.

Me, Im still driving my good old '89 Jeep Cherokee...which I bought used in '92...its so old, and such a popular vehicle, that its actually starting to appreaciate a little! Total capital expenditure (purchase price - current book value) = $7,500 or about $300 annualized, or 2.7% of purchase price...so Im way ahead of the curve. [emoji41]

Havent found good depreciation numbers on new boats, but as one example, I bought a used boat in '95 and sold it in 2000 for $5K more than I paid for it. However, the total cost to carry, including upgrades, was almost double what I paid for the boat! Therein lies the ugly financial side of boats, even if you buy good condition used to minimize new depreciation, the cost to carry can be horrendous.

If just buying a boat for personal recreational use, then there is no upside to depreciation or cost to carry, but if you put that same boat into commercial use...then you can reap some nice tax advantages from the depreciation (tax basis, not market value), provided you have the income to offset. All the mid sized (over 30') boats Ive owned have been in commercial use for most of my term of ownership. When I was still a productive member of society (working) that netted me some really nice tax savings, plus the income usually covered most of the cost to carry. In the end its still a net loss, but I would rather piss it off on boat expenses and enjoy it, than have it stolen by a gang of corrupt politicians.

--------------

Disclaimer: this is just my personal blathering and I dont expect anyone to follow or agree with it, but I do hope that some might find it useful. Maybe I'll make that my new signature line! [emoji16]

[DotDun]

Originally Posted by belizesailor

Of course, if you factor in depreciation on a new boat/car then even at 0.9% its not pretty.

Its my unscientific observation that boats depreciate at a slower rate than cars, and hold their value longer, but Ive yet to find good numbers on boats to confirm that. Below is info on new car depreciation rates:

https://www.edmunds.com/car-buying/h...fographic.html

Edmunds shows, on average, a 37% drop over 5 years, the rate varies a lot by year, but averaged over the 5 years thats 7.5%. So your real cost in capital and interest, assuming a 0.9% loan, would be 8.4%.

Me, Im still driving my good old '89 Jeep Cherokee...which I bought used in '92...its so old, and such a popular vehicle, that its actually starting to appreaciate a little! Total capital expenditure (purchase price - current book value) = $7,500 or about $300 annualized, or 2.7% of purchase price...so Im way ahead of the curve. [emoji41]

Havent found good depreciation numbers on new boats, but as one example, I bought a used boat in '95 and sold it in 2000 for $5K more than I paid for it. However, the total cost to carry, including upgrades, was almost double what I paid for the boat! Therein lies the ugly financial side of boats, even if you buy good condition used to minimize new depreciation, the cost to carry can be horrendous.

If just buying a boat for personal recreational use, then there is no upside to depreciation or cost to carry, but if you put that same boat into commercial use...then you can reap some nice tax advantages from the depreciation (tax basis, not market value), provided you have the income to offset. All the mid sized (over 30') boats Ive owned have been in commercial use for most of my term of ownership. When I was still a productive member of society (working) that netted me some really nice tax savings, plus the income usually covered most of the cost to carry. In the end its still a net loss, but I would rather piss it off on boat expenses and enjoy it, than have it stolen by a gang of corrupt politicians.

--------------

Disclaimer: this is just my personal blathering and I dont expect anyone to follow or agree with it, but I do hope that some might find it useful. Maybe I'll make that my new signature line! [emoji16]

Thanks for confirming my decision to finance! I'm still ahead by 1.6+%!

I'm glad that I don't have to scrutinize costs like you do. I'm surprised you haven't factored in the cost of sales tax, annual licensing, insurance, road tolls, maintenance, gas mileage comparison to newer vehicles, etc. against just using Uber!

There are many purchases one can't financially cost justify, boats are the top of the list. And again, I'm a huge advocate of 'if you can't afford it, no means of leveraging is going to help'.

A wise old man once told me, "People buy things they can't afford to impress people they don't know!"

[valhalla360]

Originally Posted by TrentePieds

Interesting drift, this has taken :-)

There once was a man - a "self-made man", a true American success story, another................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

There is a simple answer to this....the exception does not make the rule.

People have gotten rich playing the lottery but no one will tell you it's a good plan.

[valhalla360]

Originally Posted by cyan

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.

The funny thing is the reason most people get trapped in a cubicle is they are on the treadmill paying on debt only to take more debt out because they aren't willing to sacrifice for a short period of time to get ahead.

Once you are debt free, it's amazing how much faster money comes in and how your options open up because you don't have to make that next payment.

[surf_sail]

Originally Posted by belizesailor

Of course, if you factor in depreciation on a new boat/car then even at 0.9% its not pretty.

Its my unscientific observation that boats depreciate at a slower rate than cars, and hold their value longer, but Ive yet to find good numbers on boats to confirm that. Below is info on new car depreciation rates:

It's probably true that boat hold their value a little better depending on how you look at the data. Cars have higher obsolescence (technology change faster) so you'd think they'd depreciate more especially in the later years. Your average car also gets used way more than your average boat. You should probably compare depreciation of sports car that sits in a garage 99% of the time to that of a sailboat, or depreciation of high use charter boat to
that of your commuter car. Further maintenance costs on boats are unfortunately way higher on boats than cars. You should really lump maintenance costs together with depreciation (because if you don't do it your boat depreciates faster). I'm also just taking SWAG but if you do that I'd bet cars come out ahead in terms of combined maintenance/depreciation.

Either way neither cars/boats are an investment and will take a toll on your bank account.

P.s. Just like cars, boats have serious depreciation the day you take delivery of a new one / drive it off the lot. When considering depreciation costs in the first few years I think a lot of people forget about commissioning costs and yacht transport costs as well as all the little things you have to buy to put it in the water on the first day. For cars this is all baked into the sticker price so you notice it more upon resale.
.

[surf_sail]

Originally Posted by cyan

Hi TreblePlink,
Thread drift into sailing vlogs...


For the record, I find Delos much more entertaining, but I have yet to see such a technical visual achievement in a sailing vlog as these guys:

Sea Change
https://www.youtube.com/channel/UCEM...VwuigEjRnVx1zw

Thumbs up to sea change. They have skills and put effort into their videos and it shows. Anyone know what happened to them?

[belizesailor]

Originally Posted by DotDun

Thanks for confirming my decision to finance! I'm still ahead by 1.6+%!

I'm glad that I don't have to scrutinize costs like you do. I'm surprised you haven't factored in the cost of sales tax, annual licensing, insurance, road tolls, maintenance, gas mileage comparison to newer vehicles, etc. against just using Uber!

There are many purchases one can't financially cost justify, boats are the top of the list. And again, I'm a huge advocate of 'if you can't afford it, no means of leveraging is going to help'.

A wise old man once told me, "People buy things they can't afford to impress people they don't know!"

Analysis is an old work/business habit, but Im apparently getting sloppy...I left out all those items you mentioned! Actually, those were left out intentionally as they are the same regardess of financing.

If its for personal use and I cant pay cash for it...then I cant afford it.

Im also psychologically unwilling to put a lot of money (relatively speaking) in a depreciating asset like a boat or car. Ive looked at and considered relatively expensive cars and boats (and could afford it), but I just cant bring myself to do it. Im much more comfortable putting that same money in a good investment so that I can remain gainfully unemployed (...and likely unemployable at this point). 😆

As you said, one size does not fit all, but at the ripe old age of 57, Ive now been semi-retired for 17 years so my blathering apparently has some practical merit.