How to Tell If You Can Afford a Boat

sailing boat

For millions of people, boating seems like an impossible dream. The mega yachts they see cost millions of dollars and all the people they know who boat regularly make a lot of money. But the reality is, there are plenty of affordable options for personal boating. If you're willing to do a little bit of work, you can certainly find a vessel that fits well within your budget. The trick is to find something reliable that you can afford – but how can you tell if you can afford a boat?

What Does It Mean to “Afford” a Boat?

What does it really mean to be able to afford a boat? Does it mean you have just enough money to cover the purchase in your account? Does it mean you can purchase the boat without any sort of impact on your finances?

Different people are going to define affordability in slightly different ways. For our purposes, affordability is going to be all about the ability to not only purchase a boat but keep it operational indefinitely without affecting your other living expenses. That means we'll need to consider the initial purchase price, the implications of your financing, and the peripheral expenses of keeping a boat active.

Primary Costs and the Initial Purchase

Let's start by looking at the primary costs and your initial purchase. If you're going to buy a boat outright, the original purchase price makes calculations easy. If you've saved enough money to cover the price purchase without impacting your long-term finances, that's a great first step; just make sure you factor in the cost of taxes and other fees you might owe in the transaction. It's also important to think about your ongoing costs, which we will cover in the next section.

Many people take out a boat loan to fund the purchase of their boat, rather than paying the full cost in advance. This can be an advantageous strategy, but you’ll need to be wary of compound interest potential and the accumulation of extra fees. You'll still need to save up a down payment for the boat, but minimum requirements here are usually only 10 or 20 percent of the full purchase price.

Make sure you shop around for a boat loan and try to find the lowest interest rate you can. Make sure you're also looking at the terms and conditions of each loan, so you don't end up paying hidden fees or face other repercussions.

A simple loan calculator can help you figure out what your monthly payments will be for your boat purchase; this should help you ballpark whether or not this expense can work within your current budget.

Ongoing Costs to Consider

In addition to the core costs of boat ownership, there are several ongoing costs that you’ll face as a boat owner. These will be necessary to keep your boat operational and in accordance with local laws and regulations, but they’re going to stretch your budget even further.

  • The proper equipment. It’s irresponsible to operate a boat without the proper equipment onboard. You’ll need navigation equipment to know where you’re going. You’ll need a radio and flares to signal for help if you need it. You’ll also need a properly fitted lifejacket for everyone who’s going to be on board. In addition, you’ll need to purchase equipment for whatever boating hobbies you have; for example, anglers often need to equip their vessels with rods, tackle, and other supplies.
  • Education and licensing. Depending on where you live, you may be required to take classes and become certified before you operate an aquatic vessel. You may also be required to register your vessel with local authorities. In any case, education, registration, licensing, and other bureaucratic costs can add up.
  • Fuel. Don’t forget your boat will need fuel to run, just like a car – and fuel isn’t cheap. Depending on the size of your vessel, how far you’re traveling, and other variables, you could end up paying hundreds, or even thousands a year in gasoline/petrol.
  • Insurance. Boat insurance may be required in your area. If it’s not, it’s still worth getting as a way to protect your investment and minimize your potential liability. It’s another necessary monthly expense that pushes your total costs higher.
  • Docking and storage. Where are you going to store your boat? Chances are, no matter where you store it, you’ll face some kind of fee or additional cost. Make sure you build this into your budget as well.
  • Cleaning and maintenance. Cleaning, maintaining, and repairing the boat as needed are also important. Don’t neglect these expenses in your financial model.

It’s tough to get a firm and accurate estimate for all of these costs, but with even a small amount of research, you should be able to calculate a rough figure. Add up all these costs and add them to your monthly loan payments – and try to estimate conservatively so you can accommodate any unexpected price increases later. Will you be able to spend this much money on a boat every month while still meeting all your other living expenses and financial goals?

Rules of Thumb

Every person is going to need to do the calculations on their own and consider their own goals when deciding on boat affordability. That said, there are a couple of general rules that can help guide you in your decision. Generally speaking, you shouldn't spend more than 5 to 10 percent of your monthly income on boat-related payments. You also shouldn't take on a debt to income ratio of 43 percent; don't take out a loan that’s going to burden you with excessive debt.

Are you unsure whether you can truly afford a boat? Are you shopping around at local dealerships and feeling overwhelmed at the number of expensive options out there? You’re in the right place. At TheYachtMarket, we can help you find the perfect new or used boat that’s well within your budget. Start browsing our selection of boats for sale today!

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