When you come to the decision to purchase a yacht, it is often one fraught with many questions; the main one being, how much boat can I afford? If you’re wondering how far your money will go or what boat you can afford, we’re going to share some steps on how you can best determine the right boat for your budget.
Four Steps to Determine How Much Boat You Can Afford
As with any big purchase, the first step will be to determine a budget. You may be wondering how much boat you can afford, but you’ll also want to set parameters of how you’re going to secure this new investment. If you’re not sure where to begin, working with a licensed broker is a great place to start as they’ll be able to guide you through the complete process from start to finish.
It’s no surprise that owning a boat is a luxury not everyone can afford. If the question is, “can I afford a boat” or “how much boat loan can I afford,” there are some tricks of the trade to figure this out.
If you’ll be using a loan to purchase your yacht, lenders will review your current debt, and set it against your overall income to determine your risk. There are a number of these calculators online you can play around with; or speak to your broker who can advise you.
However, if you want to learn more today about what you can afford, here are a few things you should consider.
- Downpayment – Depending on the purchase price of your boat, many lenders will expect roughly 10-20% of the purchase price as a downpayment. The smaller yachts will run on the lower side, while the larger yachts, or if you are deemed a “higher risk” this percentage could increase.
- Boat Payments – As with any loan, there will be monthly repayments based on the purchase price, and down payment received. Most boat loans will run for a 10–20-year term with your repayment calculations based on the remainder owing and the interest rate you secured. Most interest rates will sit around 10-15% but this can change based on several factors so it’s always best to speak to a professional.
- Boat Insurance – This is non-optional; any boat on the water must have boat insurance. Similar to your home or car insurance, an insurance broker will calculate your rates based on a number of things – how old is the vessel? Where will it be cruising? How many days will the boat be in use? Where is it stored when not in use? What are the safety features on the boat? Don’t forget to add these quotes to your annual running costs to get a better idea of how much boat you can afford to own and run every year.
- Boat Maintenance or Usage Cost – The running costs or boat maintenance costs are what you need to pay to “run” your boat every year. When trying to figure out what boat you can afford, you’ll want to keep these maintenance costs in mind. It’s no use stretching your budget and buying a large boat that you can’t afford to use. A few things to remember are fuel costs, insurance fees, crew (if you are hiring any), towing and storage fees, mooring fees, registration fees, and where you’ll be cruising (this can also impact your fuel, wear and tear, and provisioning costs).
If you’re just entering the yacht market and curious about what type of boat you can afford or how to secure a loan for your boat, your best port of call is contacting a trusted broker to help guide you. YATCO’s directory of licensed and reputable brokers is a great place to start.