Financing

D

Donald Tyson

Member
Last night we visited our financial advisors and they told us it would be a good time to begin our search for a boat with the intent to close the deal early in the new year. We are pretty excited about this as we've been working with this advisor for some time to make sure we don't overextend ourselves and that we can carry on through retirement years.

So We're wondering how many of you worked with brokers in this process? We feel we will need someone that is willing to dig a little deeper and compile a little more information in order to sell us to a credible and reliable lender.

What will I need to know beforehand when making the purchase? If we're going to rename the boat do we need that to be on the paperwork? If we're going to keep the boat on our property is that the only taxing jurisdiction we need to worry about? Will we need to know whether we're going to with Coast Guard registry or state?
The nature of this post is too, hopefully, learn the proper terms and descriptions and draw from your experience a little bit, if we may, to make this slide into ownership easier, accurate and a bit more predictable.
 
An old addage: A boat is nothing more than a hole in the water to throw money into.

Another: If you have to ask details about pricing a boat you want, you can't afford it.

Strangely, many CD owners are very cost conscious about maximizing fuel burn to
save $ when the boat purchase ($$,$$$., some more like I spent $$$,$$$.) and
accessories ($,$$$. to $$,$$$.) are a higher order of magnitude of expense, which
doesn't seem to be of concern.

Why? Maybe for most of us, boating is a recreational endeavor undertaken for pleasure
and quality of life. And everybody knows those dollars spent don't count.

Aye.
 
As the adage goes, Fish or Cut Bait, Well Donald, it sounds like its time to quite cutting bait and start fishing. To help with some of your questions...
Go to your credit union or bank and get pre-approved for a loan for whatever you intend to buy. Be aware that you'll need probably 20% of the cost of the boat as a down payment if you intend to borrow for it. As i recall you're looking for a 16'er so they seem to be going for mid $20s so you'll probably need $5K as a down payment. In our state you'll have to register the boat at DMV and get the tabs tor the trailer and boat.
There will be tax to be paid for that based on the cost of the boat and trailer. It is not necessary to go thru the coast guard as this will not be a documented boat. Much easier to just go to the DMV. Then you're going to want to go to your insurance agent and get that baby insured before you drive anywhere with it. I usually call my insurance agent and let them know of my intent to buy a boat before hand for coverage.
Most of your questions will soon be answered once you land that fish. Like Foggy said a boat in a hole in the water you throw money into.
The good news is that with a C-Dory, if you feel like you've gotten in over your head to can always sell it and recover your $$. good luck.
 
I agree with Dave. Get pre approved if you are taking out a loan. Just register your boat. I know some with 25's have documented them, but I don't understand why. You'll need to license (register) your trailer as well. I know some states will title the motor as well. Here in WI, we just title the boat and trailer. You should be able to find a good used 22 for around $40K in the mid 2000 year range, and for a 25 of that range, around $60-$70K. Where are you going to store your boat and trailer? I'm able to park it behind my house in the winter months, and during the summer, I use it enough, it just gets moved around between the street, driveway, and yard just off the driveway. City says only 48 hours allowed on the street for any vehicle. But I'm fortunate I live at the end of a deadend street and on good terms with my neighbors and the City. I've left it on the street in the same spot for a week. Storage around here for a 25 would run me around $300/month, and can be hard to find. I didn't use a broker as I felt comfortable getting my own load from my credit union. I didn't use a marine inspector either, as I was comfortable doing my own inspection and sea trial. I did however learn in the process with selling my 22 and buying my 25, that things have changed a bit in the transfer of money. Cashiers checks are no longer infallible. I had no problem in the end, but had a bit of a scare when the cashiers check I accepted for my 22 raised some alarm bells with the Bank where I deposited it. They called asking me questions and finally said that the bank that it was drawn on had some fake checks out there, and this didn't look like a normal check. Looked fine to me. As I said, it was all legal, and money transferred as it was suppose to. The person I bought my 25 from asked for permission to work with my bank to insure he was going to get paid. And as usual, everything was happening on a weekend! This too all worked out. So try to do your transaction during a business day so if the seller has any doubt or concerns, at least the banks are open to do business. Going to your DMV or DNR to title/register/license your boat and trailer really isn't a big deal, if you've done that kind of stuff before with a car or any other RV. Get a sales receipt, and know what you are buying. What equipment comes with the boat. Most used purchases will be as is. No warranty or guarantee. Your insurance agent will probably want VIN, HIN, and S/N. (Trailer, boat, motor). Most insurance companies will cover you from the time you purchase as long as you notify them in a reasonable amount of time after the purchase. But I always give my agent a courtesy call up front to let them know I'll be adding a boat to the policy. You probably want to check with your insurance agent to see what kind of coverage they provide. Not all auto insurers are interested in insuring boats. I believe you said you've owned sailboats before. Or perhaps and RV. Or maybe I misunderstood. But it's really no different than purchasing a new or used car. Good luck, and enjoy what you finally get. Colby
 
Yes, the hard part for me is putting the money together in an affordable manner. I have a little bit of cash, but I was advised to definitely keep cash in the bank and use other people’s money. So that’s why I’m using a broker. I need someone with some fire in their belly to help me put this together. I’m told it will all work out.
I have good storage at my house as the city of Easton allows. You to have one recreational vehicle on your property.
For registration, insuring and other, that is routine. This will be fun
 
Be aware that if you are financing a boat, the down payment may be as high as 20% of the purchase price. Depends on the lender.

Also, be sure your lender is familiar with lending for boats. The NADA value of a C-Dory is quite low compared to the actual selling prices because the volume is so low. BUC value is better.

Your financial advisor should tell you how much you can afford. The boat you buy should cost less than the maximum to allow a margin for tax, insurance, , surveys, registration, and immediately needed repairs and updates.
 
I would have a Marine Survey, preferably a NAMS who has multiple ABYC certifications. I find that NAMS have a higher standard than SAMS, who I had a very bad experience with.

Broker--is this a yacht broker? or an insurance Broker?

For the insurance get an "Agreed Value"--for the amount you paid for the boat.

Some say it is better to take a second on the house than a specific marine insurance. I would stay away from those long term loans. You pay a lot of interest.

It is a family decision to encumber your finances with a loan for a recreational item. One does not know how the market will perform in the next few years. I believe it is over extended, but If I had profit taken several years ago I would have missed out on several years of double digit gains.

I figure on at least 25% of the purchase price to upgrade instruments and repair items. There are often costs of purchase, that will include taxes and perhaps transportation.

I am aware of several boats where there were major expenses not found on survey or sea trial (these both may have been skipped). And in one case a new fuel tank was necessary, in the other case the engine was shot and overheated immediately. These type of unknowns can run from $10,000 to $16,000 for repairs.

Coast Guard documentation has some advantages when you are long distance cruising to foreign nation states. It may have some tax advantages, but this may also involve more complexities of a Delaware Corporation. I have done my own documentation when it was advantageous. However I would not recommend it for a neophyte. The Tom Cat and C Dory 25 can be documented. However is many states, the boat must also be state registered. If you come to stay any length of time in Florida, they will want the boat state registered-this does not necessarily mean FL numbers, but it does require a sticker on the left side of the windshield.

No the US Navy or Marines will not come to the rescue of a documented vessel in foreign or International waters. In WWII a number of Documented vessels were conscripted to serve as coastal patrol craft. I am aware of several circumstances where the owner was given a Navy Commission and allowed to skipper his own vessel under orders. We have no idea if that would play out in today's world.
 
Hi Donald,

I bought my awesome 22’ Cruiser last year.

I live in WA.and purchased it in OR.
WA charges 10% excise tax for boat and trailer adding $4K to the purchase price.

I also had a pretty good fight with State Farm to value the boat for insurance reasons. Like stated before make sure you insure for your replacement cost.

I had to prove to the underwriters that a new 22’ Cruiser in around $135,000.00. So I could insure for $50K.

Good luck in your hunt and purchase.

Ed
 
Ouch!
I don't understand the use of the term "Excise tax". Is that simply an "8% sales tax? Or is that a luxury tax over and above the state sales tax?

I sense some learning curves about to happen. Insurance will be one of them.
 
Standard tax on any new or used car, truck, boat, etc.

It is a super ripoff but Washington State figured out how to get a couple of bites of the apple.
 
The tax could be worse, such as California's possessory interest tax or whatever they call it each year. It is a county tax of 3% of the assessed value (by their assessor) of the boat's value. I also had to pay a tax on the water/submerged land under my slip in the Long Beach (Ca.) Marina--about $800 a year.
 
Sounds like you are planning on buying used? Not sure of the state you plan on registering the boat, but IF they charge sales tax on used boats, do yourself a favor and have the seller sell you the engines separately. In fact, on a $50,000 boat, you can have the seller sell you the engines for $49,000 and the trailer for $500 and the boat with no engines for $500 so you are paying tax only on the hull part. And trailer too of course.

I've done this several times in the past in Washington state with only one issue. The person at the DMV counter wouldn't do it so I simply walked out and went to another DMV and registered it there.

As far as I know, perfectly legal, you just need the seller to make you 3 receipts. Trailer, hull, engines.
 
Florida allows separate taxation for boat, motor and Trailer only for a private sale. If it is thru a dealer or broker, then tax on the full amount is collected when sold. However on occasion, they do contact the seller, and flag those which seem excessive or out of the norm.

As for Calif. I had paid $30,000 for a damaged C Dory 25, and had sales receipt and copy of the cashier's check.
The Franchise Tax board accepted this $30,000 number. The Orange County Assessor's office did not, and taxed me (the 3%) based on their calculation that the boat was worth $60,000. I offered to sell them the boat for that amount, and they declined. The next boat was kept in Nevada, which does not appear to have that tax.
 
Captain Starbucks":1cw2nr4p said:
.... Not sure of the state you plan on registering the boat, but IF they charge sales tax on used boats, do yourself a favor and have the seller sell you the engines separately. In fact, on a $50,000 boat, you can have the seller sell you the engines for $49,000 and the trailer for $500 and the boat with no engines for $500 so you are paying tax only on the hull part. And trailer too of course. ...
Click to expand...

Lots of states are on to this. When I was younger it was not unheard of to buy a used car in a private sale for a very low price but pay the owner a lot of money for the owner's manual. They now use their own values on used vehicles to compute the taxes on private sales. If you want to contest their valuation you have to offer proof of the vehicle state (e.g. buying a wreck to rebuild).

In the case above, you might have to show them pictures of the boat without the engines.
 
So sorry to hear about all of this taxation with the initial purchase or annual ownership of a C-Dory boat. In Oregon, upon the purchase of a boat or automobile, there is no tax of any kind nor any kind of taxation after ownership. Not the reason why we moved here but thought I should make mention of it.
 
ssobol":6rsa4lov said:
Captain Starbucks":6rsa4lov said:
.... Not sure of the state you plan on registering the boat, but IF they charge sales tax on used boats, do yourself a favor and have the seller sell you the engines separately. In fact, on a $50,000 boat, you can have the seller sell you the engines for $49,000 and the trailer for $500 and the boat with no engines for $500 so you are paying tax only on the hull part. And trailer too of course. ...
Click to expand...

Lots of states are on to this. When I was younger it was not unheard of to buy a used car in a private sale for a very low price but pay the owner a lot of money for the owner's manual. They now use their own values on used vehicles to compute the taxes on private sales. If you want to contest their valuation you have to offer proof of the vehicle state (e.g. buying a wreck to rebuild).

In the case above, you might have to show them pictures of the boat without the engines.
Click to expand...

Very true. Lots of states are on to this, especially Washington. That's when you pull out the receipts stating you only bought the hull. The engines, electronics, cushions, etc did not come with the boat. And, I believe I mentioned, you must be fully prepared just to walk out and try somewhere else. Pro-Tip: Don't even bother with anywhere near Seattle. This can potentially save you several thousand dollars so completely worth the BS factor.
 
DayBreak,
Our two states have different taxation schedules. Your state of Oregon has a state income tax which seems to cover all the expenses of your states budget, whereas Washington state does not have a state income tax, we have sales tax which depending on the county you live in varies by a few tenths of a percent. For instance in my county (Kitsap) the sales take is 9.2% while in Seattle (king county) the tax rate is 10,1%. The reason for the difference is that the state tax is actually 6.5% across the board but city taxes make up the difference. So that is why when we in Washington state want to make a substantial purchase we will take the drive south to save on the taxes. So if you're investing in electronics to the tune of $5,000, you'll save about $500. This however does not pertain to vehicles or boats that have to be registered. If I bought a boat in Oregon I would have to pay the tax on it in Washington State where I register it. Which is why so many think of creative ways of avoiding the taxes on boats and vehicles. However now a days the state has something like a KBB which they assign a value to your purchase. Pretty sure it isn't going to be in your favor.
Having said all of that and as much as we don't like paying taxes it is a necessary tool to keep the state running and the infrastructure up to standards we all want.
 
Hi Dave and thanks. You are right. I was actually born in Washington State. Washington State does not have an income tax, which is nice and people can travel here and avoid tax on general sales items. The State of Oregon has been trying for years to have a sales tax but the voters keep shooting it down. Oregon is clean, with good roads and I have gotten spoiled in not paying sales tax on small or larger purchases.
 
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