Boat Buyer's Guide
Trade safely - some known scams
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Remember:
It is essential for you to trust the seller – and be sure the boat is genuine – before parting with any money, even a small deposit.
Deal with those you can trust
When looking to arrange finance, it is important to deal with a reputable finance company with a good international rating. It’s far more likely to treat you properly as it has a strong reputation to protect.
Toyota Financial Services, which offers Toyota Marine Finance, has a Standard and Poors rating of AAA/Stable and an AAA rating by Moodys, when raising funds. That is higher than any of the major trading banks in New Zealand. Toyota Marine Finance is also backed by the Toyota brand, one of the world’s largest companies.
In recent years, a number of people have been tempted to buy their new boat by “putting it on the house”; in other words, by simply extending their mortgage to cover the amount they want to borrow.
At first glance, this can seem like an easy, painless solution to acquiring a new boat. One simply goes to the bank, signs some papers and either pays a small amount extra each week or extends the life of the mortgage by a few years. Either way, the difference is hardly noticeable.
Unfortunately, the old adage “if it sounds too good to be true, it probably is” applies very much in these cases. While the extra payments might appear negligible on a weekly or even monthly basis, it’s because there are so many of them, especially if the mortgage is for 25 or 30 years. The borrowers do not realise how much extra interest they are paying over the term of the loan.
Consider this example: An extra $5000 on a $100,000, 20-year mortgage could easily generate $20,000 in interest. Imagine if the loan was for $25,000 on a $500,000 20-year mortgage – the interest bill could be $100,000.
It might seem painless at the time but that is very expensive boating! And it is not only banks that are enticing borrowers with these long-term loans; some finance companies are now apparently offering loan terms of up to 15 years as well.
The simple truth is that people should always arrange their finance over the shortest possible time to minimise the interest they pay. This is why, at Toyota Marine Finance, the longest loan period we offer is five years. Of course, we also offer the convenience of balloon payments to help minimise monthly loan repayments. Balloon payments allow borrowers to “ring fence” up to 20 per cent of their loan. This amount is then due at the end of the loan term but can of course be refinanced.
As many people look to trade up to a new boat after a few years, a five-year loan combined with a balloon payment is a popular choice for many of our clients. At the end of the loan period, the boat is sold, the balloon payment repaid and the remaining equity (substantially greater than was initially used to buy the original boat) is used as a deposit for a bigger, better or more suitable craft.
For more information contact 0800 GET A BOAT (0800 438 226) and talk to an experienced finance advisor or go online at www.getaboat.co.nz