I may have bought a boat a year too early

I bought mine last year, but I was searching craigslist and I can't believe the quality boats being listed and the prices they are being listed for. I guess this housing crunch and economy is really forcing people to offload their toys.

If any of you are struggling with making payments, you heart goes out to you. I have been there, it was a learning experience. Learn from it, rebound, and you will be a stronger person because of it.

Yes, "Subprime" was just beginning to creep into our vocabulary about this time last year. What a difference a year makes.

Rick:

I sure have not see rock bottom prices. I just bought a new 2007 Supreme V220 Sky for just under $30k. I was looking for months at Craigslist and ebay. I really wanted to buy used between $25-28k.

There were tons of jokers out there with a 3 or 4 year old boats with 200-300 hours and they wanted way over NADA. Many could not even run a NADA calculation correctly and kept re-adding in standard features for the model. In addition, others thought they deserved high NADA.

I also came across tons of guys that were in over their heads on payments and value. There is a Saturday Night Live skit with Steve Martin about 'don't buy what you can't afford.' It was very funny, but rings true. If you are not 100% sure about your job (i.e. - no one), you should not be buying a boat - unless you have a way to make the payments- savings/investments.

I don't follow everything he says but www.daveramsey.com does make a lot of sense. Pay cash, live debt free, etc.

Jay

P.S. I can't wait to see the flak on this post.

^^^^If you wanna get rich get good at using other's money to make money...paying cash and living debt free is extremly conservative route to go.

Leveraging debt is has a bit more inherent risk but the payoff's can be huge

If it makes you feel better I did the same, with the boat purchase a year ago, and bought my house in San Diego 3 years ago at the peak of the market. But the house I sold is also worth a $100K less now so what can you do? Timing is everything and my timing sucks.

Its all about timing. I just bought an 07 denali and I felt I got a fair deal. I bought it right before the gas started to sky rocket. Now I found the exact same on I bought except for 12 thousand less miles and they are asking 2k less than I paid...Sucks, but as others have said its all about timing.

Yup I feel ya. I think 2-4 months after I bought my 07 $60K Esclade they were offering 5K back and 0% finance. Kinda made me feel like thats great GM My rig is worth 5k less right there. I know they need to sell car's but WTF If I was to be the type that buy's a new car every year I would think twice about company's that do that kind of thing. GM just stuck it to everyone that bought a new car.

Leveraging can work on assets that appreciate, but leveraging the purchase of depreciable assets is never a money maker.

Maybe you wont make money but you can spend a lot less.

Hey, i bought an 06 F250 Diesel less than 2 years ago. Paid something like $6k for the diesel engine upgrade to have more power and better mileage. This was when diesel fuel was like 20 cents less than 87 octane. Now diesel is 70-80 cents more than premium gas. So my cunning plan is pretty much out the window. Still like my oil burner, but dang....

Just wait, this mess ain't over yet, far from it actually. Easy credit is gonzo and you will see alot of boats, RV's, big trucks and SUV's coming on the market for the next couple years. The house of cards is collapsing, but slowly.

I'm betting Flux is right on the money. I've been keeping my eyes open since I'm considering upgrading my 97 Prostar. The boats I've been looking at on craigslist, ebay, boattrader, etc are all priced under NADA. My guess is that the market is only going to get better for buyers for at least a while longer.

Interesting and applicable article today in the NY Times about Boat Repos from those that overspent.

T

http://www.nytimes.com/2008/05/20/business/20repo.html?_r=2&th&emc=th&oref=slogin&oref=slogin

I bought new late last summer also. The way I see it, I can afford the boat I have and will continue to be able to afford it. It just means I'll have to keep the boat longer.... But Im cool with that.

Thanks Trevor, that was an interesting read

I agree with Craig, I was happy with both my home and boat purchases at the time and bought neither for resale purposes so I can't complain...but I still do, just ask the wife.

Trevor - Good Article. The dealers must be lying through their teeth. If last year was off 8% this year must be at least 16%.

Sam (wake 1823) - I'm not sure Conservative is a fair term or all bad. When things are paid for, it is easier to build wealth. If you are using other people's money, you need to pay them and still make a return. I bet far more people have lost that gamble than have won it.

Jay

I think I'll start looking for a nice clean used boat in September. I bet it will be a buyers market!

Jay,
Actually I believe through the 80's and 90' more people have won that gamble then lost.

Eric:

If you have any articles or something I would like to review them. My brother and I go back and forth on this debate all the time. He is heavy into debt and I am working towards debt free.

If you are really tied to the market and can foresee any big bumps then, I might tend to agree more.

If the stock market has averaged 11.8% and the money has cost 7-9% that only leaves 4.8 to 6.8% return, before taxes (if applicable). After taxes (at 25%) that only leaves 3.84 to 5.44% on average. I just read an article by consumer reports that said the average investor really only got 4.8% return on market because the mis-time the market. So in that case they lost money. I am all for making money and I have lots of equity - so if I am missing the boat please set me strait.

Thanks for the input - Jay

Jay,
you off just slightly, money cost 5-7% over the last few years, not 7-9%. Consumer reports is right, most lost money, but don't be like most, make money and don't buy what everybody else is. Know that some times you will see the value decline, but be in it for the long haul. And finally how do you think Hedge funds make so much money, its leverage baby, leverage! Don't ask how I know, I just do.

(Message edited by mikerod29 on May 20, 2008)

Why not go balls out in debt? The government makes it so the consequences are not that bad. It's been said that every self made millionaire has been bankrupt in the past.

Steve - I personally know dozens of self-made millionaires that never went bankrupt to become wealthy. There are just as many stories of low income people that became millionaires by a 'magic' trick. The magic trick is spending far less than you earn.

Many of the bankrupt situations were the business not the individual. Big Difference.

My business won a contract out from under a previous producer in 2003 that was in bankruptcy. To date the contract line has brought in over $30 million in sales. So, I love to hear about companies going into bankruptcy.

I also know a guy who is 40, married w/2 kids and living with his parents because of bankruptcy. I know he will not go 'balls out in debt' this time. Even your comment shows how they learned from their mistakes and got a better handle on debt management/elimiation.

Jay

Jay,
I will just give a quick example of why I choose to use debt. I have house that I pay 5.75% interest, 2 vehicles that I pay 6% interest, a boat I pay 4.5% interest, and school loan that I pay 4.25%. Now I could have put an extra 100K down on my house, payed 80K for my vehicles, put additional 20K down on my boat, and payed off my 15K student loan. The average interest I pay is 5.3% on 215K worth of debt. Now my average return has been 10.8% over the past six years. That is a net return of 5.5 on 215K. That means that my return is not only paying my debt interest bills it is still making about 12k a year. I get taxed at 15% of that (at least until 2010), 25% tax is on dividends and short term capital gains for the most part, that still leaves me 10K. Now of course it is not that cut and dry but that is the general concept.
Disclaimer: Debt managed wrong is the worst thing anyone can do (any why our country is in a mess), but there is nothing wrong with a lot of debt.

Erik:

Thanks for a real world example. I know living debt free is counter-cultural.

Your example has merit. However, first you need a secure stream of work income to make this work. Second, one needs the brains to pull it off and the tolerance for risk/stress. I'm not wired that way (brains or stress). The 2 criteria above knocked out about 95% of the population.

^^^Agreed

Erik, You might want to factor in depreciation of your vehicles and possibly your home and then recalculate that $10K profit you think you are averaging.

Depreciation is an absolute factor, but regardless if you pay cash or borrow the variable should be applied in any NPV calculation.