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Should a boat buyer finance or pay Cash?
In the example below it's easy to see that investment earnings can far exceed the cost of marine financing. In this particular case we are assuming a rate of 8.5% fixed for 20 years on a loan of $100,000, requiring a monthly principle and interest payment of $867.82. The interest cost of this loan over an anticipated life of 60 months is $40,196.30.
If you are in the 30% tax bracket, this interest expense deduction will save you $12,058.91, effectively reducing the cost of the loan to $28,137.39. This same $100,000, if invested earning 9%, would grow to $137,703.68 (after tax) in the same time period. Tax-free municipal bonds yielding 6% could earn $34,885.02 over 60 months. More aggressive investments could obviously make earnings even more attractive.
Note: The above example was developed to help explain the advantages of marine financing and is not a guarantee of what is available in the market at any particular time. Please consult with your financial advisor about your own personal tax situation.
Did you know?
Your yacht may qualify for the same IRS tax advantages that are available for your home, like deductible mortgage interest. And by financing your yacht purchase, instead of liquidating assets or paying cash, you increase your financial flexibility. This enables you to take advantage of attractive new investment opportunities as they come along. The earnings from these investments can easily exceed the cost of your yacht financing. In the end, your yacht may cost less by not paying cash.
Bradford Marine Yacht Sales 3051 State Road 84 Ft. Lauderdale, Fl 33312 (954) 815-8320© 2011 Best Yacht Buys
