There’s nothing like buying something brand new. This is especially true when it’s something you’ve always wanted. Whether it’s an expensive purchase like a car or a boat or a much smaller purchase like a new outfit, the fact it’s new and it’s yours brings forth feelings of joy, excitement and pride.
What happens when you don’t actually own it outright? Do you love the boat as much when you “have” to buy a new truck to pull it with? Is there an obligation to use the boat or drive the truck more often than you’d like in order to justify the astronomical monthly bill?
When I see a brand new Ford F250 pulling an equally new pontoon boat cruising down the road, I imagine a trail of money being left in its wake. The base price of a new F250 is around $45K. Keep in mind, this is the base price, no frills. A Lariat model is around $82K with a King Ranch version spiking to $90K. You can see how it starts getting out of hand pretty quickly.
Boats are harder to figure and can run the gamut. For reference, I’ll use a round number of $40K for a new pontoon boat. Taking the Ford F250 Lariat version and adding it to our pontoon boat, the total all in cost would be north of $120K. Financing both of them, your payments could look like this:
Ford F250
$82,000 financed
72 month loan
7% interest rate
Payment: $1,370/mo
Pontoon Boat
$40,000 financed
72 month loan
7% interest rate
Payment: $665/mo
Total Payment: $2,035/mo
This assumes no money down, which most likely wouldn’t happen, but you get the idea. These two items alone would cost you $2,035 per month! That’s a crazy figure when you consider both are depreciating assets. The second your truck tires hit non dealer pavement and your new boat rests in the lake, you’re losing money. Imagine losing hundreds of dollars in the stock market every week for several years and you get a sense of what’s happening.
Rather than purchasing a new truck or boat, consider purchasing one or both of them used. Allow someone else to absorb the depreciation so you can enjoy your purchase without being saddled with massive debt. Let’s look at the difference:
2020 Ford F250 Lariat
$40,000 financed
72 month loan
7% interest rate
Payment: $627/mo
2020 Pontoon Boat
$15,000 financed
72 month loan
7% interest rate
Payment: $250/mo
Total Payment: $877/mo
By allowing each asset to depreciate, you’re able to save $1,158 while still purchasing both the truck and the boat that you want. The assets will continue to depreciate but at a less accelerated rate than if you had purchased them new. You would save even more with a better interest rate or more money down to reduce the loan amount. Of course, purchasing both of them with cash is always the preferable option if possible.
Trucks, boats and any other toy we have in our garage provide us joy and relaxation in our stressful lives. If purchased new without the money to pay for them, they also add to the stress we were attempting to relieve in the first place.
Your boat already comes with an anchor, don’t allow your financing to come with one too.
