How the Boat Loan Calculator Works
A boat costs more than its price. You pay sales tax and fees, you pay interest on the loan, and then you pay to insure, store, fuel and repair it. A boat also loses value every year, often faster than you pay the loan down. The Boat Loan Calculator shows all of this in one place: your monthly payment, the full monthly cost of owning the boat, and how much of the boat you really own each year.
What you enter
- Boat price: the price on the sales agreement.
- Down payment and trade-in: the cash you pay up front, and the value of any boat you trade in.
- Sales tax rate and how it is charged: some places tax the full price. Others tax only the price after the trade-in.
- Fees: documentation, registration, dealer prep and similar costs that you add to the loan.
- Interest rate and loan term: the yearly rate and the number of years. Boat loans often run 10 to 20 years.
- Yearly costs: insurance, storage or marina fees (monthly), upkeep and repairs, and fuel.
- Yearly loss in value: how much value the boat loses each year, as a percentage. This is a guess. Boats often lose 5% to 10% a year.
How the results are worked out
First the calculator finds the amount you borrow. Then it works out the monthly payment with the standard loan formula, where r is the monthly rate and n is the number of monthly payments:
sales tax = taxable price x tax rate amount borrowed = price + tax + fees - down payment - trade-in payment = amount borrowed x r / (1 - (1 + r)^-n) boat value after y years = price x (1 - yearly loss)^y equity = boat value - what you still owe monthly running cost = insurance / 12 + storage + upkeep / 12 + fuel / 12
Each month, part of your payment pays the interest on what you still owe, and the rest reduces the loan. Early on, most of the payment is interest.
A worked example
A boat costs $60,000. You pay $12,000 down, the sales tax is 6% of the full price, and the fees are $800. The loan is 8% for 15 years. You expect to pay $1,200 a year for insurance, $250 a month for storage, $1,500 a year for upkeep and $1,500 a year for fuel. You expect the boat to lose 8% of its value each year.
| Result | Amount |
|---|---|
| Sales tax ($60,000 x 6%) | $3,600.00 |
| Amount borrowed ($60,000 + $3,600 + $800 - $12,000) | $52,400.00 |
| Monthly loan payment (180 payments) | $500.76 |
| Total interest over 15 years | $37,737.10 |
| Running costs each month | $600.00 |
| All-in cost each month (payment + running costs) | $1,100.76 |
The loan payment is $500.76, but the boat really costs about $1,100 a month, more than twice as much. That is the number to compare with your budget.
Do you owe more than the boat is worth?
A boat loses value quickly at first, while the loan falls slowly. So for some years you can owe more than the boat is worth. This is called being underwater. If you sold the boat then, the sale would not cover the loan. In the example:
| End of year | You owe | Boat is worth | Equity |
|---|---|---|---|
| 1 | $50,515 | $55,200 | +$4,685 |
| 3 | $46,262 | $46,721 | +$460 |
| 4 | $43,867 | $42,984 | -$883 |
| 6 | $38,465 | $36,381 | -$2,083 |
| 9 | $28,561 | $28,330 | -$231 |
| 10 | $24,697 | $26,063 | +$1,367 |
| 15 | $0 | $17,178 | +$17,178 |
In this example you owe more than the boat is worth in years 4 to 9, and the gap is widest in year 6. A bigger down payment, a shorter loan, or a boat that holds its value better would shorten that period.
Chart: what you owe and what the boat is worth
Start Owe ███████████████████████████████████ $52,400
Worth ████████████████████████████████████████ $60,000
Year 5 Owe ████████████████████████████ $41,274
Worth ██████████████████████████ $39,545
Year 10 Owe ████████████████ $24,697
Worth █████████████████ $26,063
Year 15 Owe $0
Worth ███████████ $17,178
The calculator draws this as two lines for your own numbers. Where the "owe" line is above the "worth" line, you are underwater.
Tips
- Put more down. A larger down payment lowers the loan, the interest and the time you spend underwater. With only $3,000 down in the example, you would be underwater from year 1 to year 11.
- Think about a shorter term. The payment is higher, but the interest is much lower, and you build equity sooner.
- Plan for the running costs. They are easy to forget, and they can be as large as the loan payment.
- Compare loan offers by rate and term, and check for fees or a penalty for paying early.
- Ask about insurance early. Lenders usually require it, and the cost depends on the boat, where you keep it and where you use it.
What this calculator does not include
- Yearly property or personal-property tax on the boat, where it applies.
- Trailer, gear, electronics and other extras you may buy later.
- Changes in fuel and insurance prices, or big repairs such as a new engine.
- Any income from renting the boat, or the tax effects of a loan on a boat that is also a second home.
- The real rate of loss in value. It depends on the type, age and condition of the boat, and the number here is only your estimate.
This tool gives an estimate for general information only. It is not financial advice. Your lender's offer sets the real rate, fees and payment.