D & R BoatWorld FAQ's

The Cost of Owning and Operating a Boat

Starting Up

Naturally, prices for new boats vary depending on size and make, but many boat manufacturers and dealers can put you in the captain's chair for considerably less than a monthly new-car payment. In fact, monthly payments for many entry-level boats can be less than $200.

Financing

You can finance a new boat just like a new car. As with car and home loans, boat loans have carried extremely appealing interest rates in recent years. Terms generally range from two to 20 years.

Outfitting

Similar to new cars, new boats are offered with different accessories and options. When you're pricing boats, factor in the cost of electronics, accessories and water toys and buy what's appropriate for your boat type and size and your home waters. Modern marine electronics are extremely reliable, are loaded with features unheard of just a decade ago and are more affordable than ever. Don't skimp on safety gear. Today's marine accessories can make boating safer, more fun, and downright easier than it was just a few years ago…

 

Boating isn't an activity like driving where you are using gas all the time. In fact, when a person is boating, they may be fishing or swimming and not using the motor at all.  Most of the boats in use on the water today are less than 21' in length.  These crafts do not require exorbitant amounts of gas, so any impact would be negligible.  In fact, 64 percent of boaters say they purchase less than fifty gallons of gas per season—roughly two trips to the gas station to fill up your SUV or Minivan.

Maintenance and Upkeep

A simple freshwater wash down of your boat and trailer after each use and keeping them covered between adventures will go a long way toward keeping your maintenance costs at bay. If you don't feel like you have the time and energy to do it yourself, hire a pro. It'll pay off in the long run. Costs for routine maintenance vary by region, but for more involved services, such as oil changes and winterizing, expect to pay what you would for your car on an hourly basis.  Pre-owned boats can require significantly more maintenance.

Storage

When it comes to storing your boat, you have several options depending on the size of your boat. You won't find a less-expensive way to keep a boat than storing it on a trailer in your driveway or backyard. Another alternative for smaller boats is rack storage. A typical rack storage facility keeps your boat in a covered shed filled with trailer-like cradles. For owners of larger boats, and owners of small boats who crave convenience, a marina slip is the best way to go. Learn more about different types of storage.

Insurance

Boat insurance varies by boat length and type, by the cost of the boat and the level of coverage you want. Your Boat Dealer should be able to supply you with several quotes for comparison.

Buying boats isn't as painful as you might think!

Naturally, prices for new boats vary depending on size and make, but many boat manufacturers and dealers can put you in the captain's chair for considerably less than a monthly new-car payment. In fact, monthly payments for many entry-level boats can be less than $200.

Boat buyers have many choices when it comes to paying for their purchase. Here are a few of the advantages of financing your purchase through your dealer with a National Marine Bankers Association (NMBA) marine lending specialist:

• Lower down payments - the down payment is based on the age, type and price of the boat you are buying, as well as your own credit profile. In today's market, marine lenders offer financing with down payments typically in the 10%-20% range, but often there are programs available through various manufacturers that could allow you to qualify for less, or zero-down on new boat specials.
• Faster credit decisions - because you are working with professionals in the marine industry, those lenders understand boats and their buyers. You can apply for a loan this morning and be boating this afternoon.
• Longer financing terms - marine finance specialists recognize the value of a well-maintained boat, so terms generally will be more attractive than those offered by local banks and credit unions.
• Lower monthly payments - because marine lenders extend longer terms on boat loans than local banks and credit unions, your monthly payments are likely to be much lower than you have expected.
• More electronics and extras - marine lending specialists will allow you to finance optional equipment, electronics, extended service plans and life/disability insurance coverage with your purchase.

By financing your boat purchase you can usually afford a newer, larger or more powerful boat, a better trailer and all the gear that it takes to make boating safer and more enjoyable!

You may be surprised to learn that you can finance a new boat just like a new car. Like car dealers, bankers and dealers can help you obtain affordable financing to make your dream of owning a boat a reality. The links below will lead you to information to help you navigate the ins and outs of boat loans and make the process smoother.

Boat buyers have many choices when it comes to paying for their purchase. Here are a few of the advantages of financing your purchase through your dealer with a National Marine Bankers Association marine lending specialist:

Lower down payments - the down payment is based on the age, type and price of the boat you are buying, as well as your own credit profile. In today's market, marine lenders offer financing with down payments typically in the 10%-20% range, but often there are programs available through various manufacturers that could allow you to qualify for less, or zero-down on new boat specials.

Faster credit decisions - because you are working with professionals in the marine industry, those lenders understand boats and their buyers. You can apply for a loan this morning and be boating this afternoon.

Longer financing terms - marine finance specialists recognize the value of a well-maintained boat, so terms generally will be more attractive than those offered by local banks and credit unions.

Lower monthly payments - because marine lenders extend longer terms on boat loans than local banks and credit unions, your monthly payments are likely to be much lower than you have expected. More electronics and extras - marine lending specialists will allow you to finance optional equipment, electronics, extended service plans and life/disability insurance coverage with your purchase.

By financing your boat purchase you can usually afford a newer, larger or more powerful boat, a better trailer and all the gear that it takes to make boating safer and more enjoyable!

PLEASE ASK YOUR DEALER TO HELP YOU FINANCE THROUGH AN NATIONAL MARINE BANKING ASSOCIATION LENDING SPECIALIST!

If you're in the market for a boat, boat dealers are a great resource.

They have plenty of useful advice, can show you the latest technology and help you find financing tailored to your budget. Many dealers employ financial specialists, whose job is to help you with everything from completing a loan application to closing and licensing your new boat. Others rely on outside agencies to perform these tasks just as seamlessly, or they may refer you to a qualified marine broker.

Purchasing a boat from a dealer offers a number of advantages, including

• access to multiple finance sources and/or special manufacturer and dealer finance programs
• year-round service departments
• extended warranty programs
• manufacturer and dealer incentive programs

Most dealers offer special programs designed to make it easier for you to buy and pay for your boat. Be sure to ask your dealer about the availability of special finance options such as 90 days same as cash, low or no interest introductory rates, or incentive rates on specific boat models.

Boat buyers have choices when it comes to paying for their purchase, and financing is both an affordable and sensible option. But it's just as important to know where to go for a boat loan. The National Marine Bankers Association members -- national and local banks, financial service firms and some credit unions -- offer competitive financing simply because they have made boat loans an important part of their business.

Realistic Down Payments - The down payment is based on the age, type and price of the boat you are buying, as well as your own credit profile. In today's market, National Marine Bankers Association marine lenders offer financing with down payments typically in the 10 percent to 20 percent range. A number of National Marine Bankers Association members have created special programs available through various manufacturers and dealers that could allow you to qualify for less on new boat specials.

Help with Used Boat Loans - Many National Marine Bankers Association lenders work with used boat dealers and boat brokers, so getting help with a loan for a pre-owned craft can be taken care of quickly and knowledgeably.

Faster Credit Decisions - Because you are working with professionals in the marine industry, National Marine Bankers Association lenders understand boats and their buyers. You can apply for a loan and be approved often in a few hours.

Longer Financing Terms - National Marine Bankers Association marine finance specialists recognize the value of a well-maintained boat, so terms generally will be more attractive than those offered by lenders not actively making boat loans.

Lower Monthly Payments - Because National Marine Bankers Association marine lenders understand that boats have longer life cycles than cars, they tend to extend longer terms on boat loans. That means monthly payments are likely to be much lower than you had expected.

More Electronics and Extras - National Marine Bankers Association marine lending specialists will allow you to finance optional equipment, electronics, extended service plans and life/disability insurance coverage with your purchase. By financing your boat purchase you can usually afford a newer, larger, or more powerful boat and all the gear that it takes to make boating safer and more enjoyable!

Sales and personal property taxes - Although this varies by state, most new boat sales are subject to sales and or property taxes; used boat sales may also be taxed in entirety or by varying methods. Lenders will require proof of payment of sales tax to finalize any loan process.

You can find National Marine Bankers Association marine lenders at boat shows, through ads in boating magazines and on the web, including a member listing on this site. Ask your dealer or broker to help you gain the financing benefits offered by National Marine Bankers Association marine lenders.

Here's where you learn about financing your boat purchase - how it's done, who can help you, and why you should be working with a member of the National Marine Bankers Association. Boat buyers have many choices when it comes to paying for their purchase, but they always make the right one?

Here are some tips on how you can determine if you are making the wisest choice by paying cash for your boat.... and why you may want to consider financing your boat instead.

Tax deductibility of interest on yacht loans

Under IRC section 163 (h)(2) a taxpayer may deduct any qualified interest on a qualified residence, which is defined as a principal residence and one other residence owned by the taxpayer for the purpose of deductibility for the tax year. IRC section 163(h)(3) defines qualified residence interest as any interest which is paid or accrued during the tax year on acquisition or home equity indebtedness with respect to any qualified residence of the taxpayer.

In accordance with IRC section 163(h)(4), a boat will be considered a qualified residence if it is one of the two residences chosen by the taxpayer for purposes of deductibility in the tax year as long as it provides basic living accommodations such as sleeping space (berth), a toilet (head), and cooking facilities (galley). If the boat is chartered out, the taxpayer will have to use the boat for personal purposes for either more than 14 days or 10% of the number of days during the year the boat was actually rented, in accordance with IRC section 280A(d)(1).

Form 1098 is not necessary in order to receive the qualified interest deduction. In accordance with IRS instructions for Schedule A, form 1040, if the taxpayer does not receive form 1098, deductible mortgage interest should be reported in line 11 instead of line 10 on Schedule A.

Borrowing against your unencumbered home has limitations

Home mortgage interest deduction is limited to interest paid on mortgage debt used to purchase or improve a residence, or to refinance the remaining balance on a purchase or improvement. If the money isn't used for the home, the interest expense does not qualify for the deduction.

So does a home equity loan

Home mortgage interest deduction is limited to interest paid on home equity loans up to $100,000. By using a home equity loan, you may limit the amount of interest that is deductible, if your boat loan balance exceeds $100,000.

Borrowing against your stock portfolio isn't the best answer, either

Second home mortgage interest deduction is limited to interest paid on second homes that are secured by that second home. You would need to have a written collateral agreement (security agreement) indicating the boat as collateral, which is probably not something your broker would be prepared to provide.

The preceding information was prepared by Gary Boudreau, Deloitte & Touche, LLP, Newport Beach, California.

Should I Finance?

In the example below it's easy to see that investment earnings can far exceed the cost of marine financing. In this particular case we are assuming a rate of 8.5% fixed for 20 years on a loan of $100,000, requiring a monthly principal and interest payment of $867.82.

The interest cost of this loan over an anticipated life of 60 months is $40,196.30.

If you are in the 30% tax bracket, this interest expense deduction will save you $12,058.91, effectively reducing the cost of the loan to $28,137.39.

This same $100,000, if invested earning 9%, would grow to $137,703.68 (after tax) in the same time period. Tax-free municipal bonds yielding 6% could earn $34,885.02 over 60 months. More aggressive investments could obviously make earnings even more attractive.

It's easy to see how financing your yacht could cost you less.

Tax Deductibility of Interest on Boat Loans

Internal Revenue Code (IRC) section 163 (h)(2) states that a taxpayer may deduct any qualified interest on a qualified residence. Qualified residences are defined as a principal residence (e.g., a primary home) and one other residence (including second homes) owned by the taxpayer for the purpose of deductibility for the tax year. IRC section 163(h)(3) defines qualified residence interest as any interest paid or accrued during the tax year on acquisition or home equity indebtedness with respect to any qualified residence of the taxpayer.

• According to IRC section 163(h)(4), a boat will be considered a qualified residence if it is one of the two residences chosen by the taxpayer for purposes of deductibility in the tax year. A qualified residence must have basic living accommodations including sleeping space (berth), a toilet (head), and cooking facilities (galley). If the boat is also chartered, the taxpayer will have to use the boat for personal purposes for either more than 14 days or 10% of the number of days during the year the boat was actually rented, to qualify for the interest deduction in accordance with IRC section 280A(d)(1).
• Form 1098, issued by lenders, is not necessary in order to claim the qualified interest deduction. In accordance with IRS instructions for Schedule A, form 1040, if the taxpayer does not receive form 1098, deductible mortgage interest should be reported in line 11 instead of line 10 on Schedule A.
• Borrowing against an unencumbered home to purchase a "second home boat" has limitations. Home mortgage interest deduction is limited to interest paid on mortgage debt used to purchase or improve a residence, or to refinance the remaining balance on a purchase or improvement. If the money isn't used for the home, the interest expense does not qualify for the deduction.
• Interest paid on a home equity loan to buy a boat also may not be deductible. Home mortgage interest deduction is limited to interest paid on home equity loans up to $100,000. By using a home equity loan, you may limit the amount of interest that is deductible, if a boat loan balance exceeds $100,000.
• Borrowing against a stock portfolio to purchase a boat creates complications in regard to interest deductibility. Second home mortgage interest deduction is limited to interest paid on second homes that are secured by that second home. A written collateral agreement (security agreement) from a broker indicating the boat as collateral is something brokers are not inclined to provide. Loan Calculator

To determine typical interest rates and terms, call a National Marine Bankers Association member, visit one of their websites, look at financing advertisements in boating magazines, or discuss it with a marine retailer.