upside down on 97 dancer

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snydersmj

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Joined
Sep 23, 2005
RO Number
19119
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Hi everyone:

we purchased our 97 Sea Ray about 3 and 1/2 years ago and financed it. Felt we had a good deal and that we could upgrade in 3-5 years. Didn't put much money down and now, at least on trade, we are finding our boat to be worth about 52,000 and we owe about 9,000 more than than that.(That's the price from a local dealer anyhow. How did we mess up like that? This boat is the early 97 style; it has a bow pulpit and an arch that leans back. It is clean with only 360 hours. We have year old camper canvas with strata glass, new carpet, a windlass, and a generator. Everything works perfect and the engines are the 4.3 V6 so it's great on gas. The boat is very clean and and it is professionally maintained by our marina.
The cabin has the typical stove, refrigerator, bathroom with vacuflush, and a nice sofa with table. The gelcoat is 9/10. We'd like to trade; maybe even considering a day boat since we have moved to the lake this year. Yes, we have air/heat and the boat sleeps 6 rather comfortably. We have taken long trips and it handles well. What should we do now?

Thanks much.
 
Financing is not a bad option when rates are low like they are now. Say you get a 6% boat loan and can write the interest off on your taxes like we do. At a 40% tax bracket you are really looking at 4% interest or less. We are making much more than that in the stock market so in theroy we are using someone elses money (the banks) at 4% on the boat and make 11% plus on our money in the stock market.

Same theory can be applied to a house. We were on an aggressive schedule to pay ours off but recently did the #'s wtih not paying it off and we come out way ahead investing the extra dollars saved each month.
 
snydersmj,

You are probably not too bad off. You've just not paid for your boat, yet by financing a lot of it, it's easy to be upside down. And if you sell it for 52, it's only another ~$3 per year. Pretty cheap boating. Chalk it up to cheap boating. I've got friends that are loosing 30 grand a year on depreciation alone, but that's normal. If you paid close to retail for a 97 Dancer 3.5 years ago, I be surprised if your depreciation alone wasn't close to 10 grand a year. I paid less than wholesale for my 27 and it will cost me close to 4 per year.

However, I think the 52 is optomistic. Not to be negative, but boat price are down, even some of the dealers admit that (and they never tell you it's down).

I'm a serious cash buyer for a 29 Sundancer or Regal, and I expect to pay somewhere in the 35 to 40 range for a 97 to 2000. I missed a 2000 Regal for $35 and a few 99 Dancers and Regals in the 40 range. All twins, 5.7, gen and air, low hours. There's still one one the dealers floor that I'm waiting til he get's hungry. I also haven't ruled out the 31 or 33s, lots of steels out there, but I'd have to rebuild my lift.

So, you options are: Trade up and STEAL your bigger boat and it will make you feel good. Or just keep your current boat, heck it's a fine boat. If you trade down, you can steal your smaller boat, but will still suffer the low price on your Dancer.

Now, you can detail it, put a price on it and hope for a better price. And if you have time, worth trying. I'm doing that with mine, but when I need to sell, I'm not holding out for another few months for 5 or 10 grand. (and it could easily turn into 6 to 10 months.)

Good luck.
 
Larryo, take your $35K and invest it. Say at the worst you make 7% on it over the next 15 years. If you finance a boat at 6% over the same 15 years and write the interest off each year you are ahead. You invested "your" money at 7% and borrowed some elses mony at 4% (6% less 40% tac bracket, deducting th einterest each year on your taxes). Do the numbers, it makes sense. I have always been a cash person too but have recently re-thought this once I saw the #'s. If I can borrow at 4% and invest at 7%+, it's a no brainer.

Paying cash feels good, no debt, but you just gave someone else your $35k to invest. Now if interest rates go up, way up, paying cash may make more sense.
 
quote:
Originally posted by MrsRobinson

Larryo, take your $35K and invest it. Say at the worst you make 7% on it over the next 15 years. If you finance a boat at 6% over the same 15 years and write the interest off each year you are ahead. You invested "your" money at 7% and borrowed some elses mony at 4% (6% less 40% tac bracket, deducting th einterest each year on your taxes). Do the numbers, it makes sense. I have always been a cash person too but have recently re-thought this once I saw the #'s. If I can borrow at 4% and invest at 7%+, it's a no brainer.

Paying cash feels good, no debt, but you just gave someone else your $35k to invest. Now if interest rates go up, way up, paying cash may make more sense.

Click to expand...

Greg and Amy,
While your philosophy can work there's a lot of holes in it. First you can't get 6% unless someone's buying down the note, or unless you get an equity loan. Second, never buy anything for a tax savings (enjoy the tax benefit after you've made a good deal first), besides I'm sheltered enough with real estate. Third, there's a risk factor in having debt on toys that are not income producing that I won't take. Fourth, you may be forced to insure the boat, and rates are high now. And I'll just use some of the dollars that I've invested a few years ago that's play money. And last, you could fall into the trap of also buying your car and plane that way and really rack up some serious debt. That's how folks go bankrupt.

I don't borrow from banks or lending instutions as a rule, I use private financing (much better rates) and they don't do boats. I take my cash (working money) and try to invest wisely to create play money for toys. No consumer debt.

You can play that game, and I could see borrowing if you came across a real steal, and I don't mean a 25% discount. A steal where you could run it for a few years and get most of your money back, and they're out there today.

Also, you could apply your philosophy to buying a good investment with the money you borrow instead of a boat and pay cash for the boat in a few years. Now, that works a lot better. You could actually rent a boat and come out way ahead. Think about that one.
 
Larryo, good points. I did not suggest suggest this as a lifestyle or a way to buy what you really cannot afford or playing a game, only an option if it makes sense, which for us it makes a lot of sense.

If one is going to purchase more and more toys they cannot afford to begin with than that is a totally differnet story. My point is, if you can afford the purchase to begin with (you have the cash) then consider financing as an option and keep your cash working for you.

We got 6% on our boat loan last year, we are in a 40% tax bracket so the loan is really a 4% loan after we write off the interest on taxes (the boat qualifies as a 2nd home). I will take a banks money, or anyones money, at 4% any day of the week and leave our cash in investments, currently making over 15%. Using $35k as an example, $35k over 15 years at lets say an average rate of return of 10% compared to borrowing $35K over 15 years at 4%....I will take the $35k invested over 15 years earning 10%.
 
quote:
Originally posted by MrsRobinson

Larryo, good points. I did not suggest suggest this as a lifestyle or a way to buy what you really cannot afford or playing a game, only an option if it makes sense, which for us it makes a lot of sense.

If one is going to purchase more and more toys they cannot afford to begin with than that is a totally differnet story. My point is, if you can afford the purchase to begin with (you have the cash) then consider financing as an option and keep your cash working for you.

We got 6% on our boat loan last year, we are in a 40% tax bracket so the loan is really a 4% loan after we write off the interest on taxes (the boat qualifies as a 2nd home). I will take a banks money, or anyones money, at 4% any day of the week and leave our cash in investments, currently making over 15%. Using $35k as an example, $35k over 15 years at lets say an average rate of return of 10% compared to borrowing $35K over 15 years at 4%....I will take the $35k invested over 15 years earning 10%.

Click to expand...


Yea, I hear ya. I'm also buying houses from folks that have done that and are loosing their homes.

Now, if I had your philosophy, I'd borrow $70 grand on the same terms that you say above and invest it like you say, and would be able to pay cash for your 33 in less than 5 years, and still have all the tax breaks, and not a dime out of your own pocket. And that's with only a 10% rate. And what's stopping you from borrowing 10 or 100 times that much and not working at all? With your philosophy, you could do it.

Nothing wrong with what you're doing, but you sound like you can handle it, and I could too. The problem is that MOST folks don't know how to manage that situation and next thing you know, they're broke. I still like my way better, and it's worked me into a position of being unemployed so I have lots of boating time and no payment worries. I just don't need to have every dime of mine working.

Now, I think your real asset is just great boat knowledge, and I'd love to learn more from you as I progress into bigger boats.
 
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