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| The Basics | How the big boys pay for their toys
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Looking at a jet ski, ATV or even a new set of golf clubs? Heres a list of payment options for that big, indulgent purchase, and some alternatives to buying.
By Jay MacDonald, Bankrate.com
You've worked hard and done well, but stopping to smell the roses isn't what you want to do to celebrate -- you want to have some fun!
Maybe you'd like to go messing about in boats, tee it up in a luscious golf course, or follow the Lewis and Clark route on a motorized "personal watercraft."
Today's sports toys cost big, big bucks, so before you take the plunge, devise a buying strategy that fits your lifestyle and budget.
Let's consider your options and look at some examples:
Dealer financing: For as little as 10% down, you can be in action, but you'll need good credit and several years of credit history to get a good interest rate.
OEM financing: One option for motorized personal watercraft, as well as all-terrain vehicles, motorcycles and snowmobiles, includes a revolving credit card through original equipment manufacturers (OEM).
Credit card: Quick, easy, accepted everywhere, no credit checks or paperwork. But unless you pay it off quickly, the interest rate on that boat might just sink you.
Co-buying: You and your buddies might buy that ATV jointly, but what happens if someone wants out, doesn't pay or wrecks it the first time out? Look closely at the "what-ifs" to determine beforehand if your deal -- and your friendships -- will survive.
Personal loan: Credit unions and community banks can take the whole bill and feed it back to you slowly at agreeable terms. If you own a home, this may be the most cost-effective way to finance your fun.
Cash: Before paying cash, remember that personal sports vehicles lose their value significantly the minute they're sold. If part of your plan is to keep your new toy in good shape, then resell it next year and get a big percentage of your money back, you may want to reconsider financing it.
Family co-sign: Mom and Dad may be willing to help you get that loan, but what would happen if you couldn't make the payments? Plan on paying this loan back just as if you owed it to the folks themselves -- because you do.
'A good walk spoilt'
Mark Twain once described golf as "a good walk spoilt."
Well, apparently, millions would beg to differ.
According to the National Golf Foundation, there are more than 26 million golfers in the United States alone who spent $4.7 billion in 2002 for equipment to play on some 15,827 golf courses. Golf is believed to be the fastest-growing sport worldwide.
If you're looking to tote a bag of Tiger Woods-caliber clubs, figure on spending in the neighborhood of $100 per iron, $200 to $500 per wood and about $150 for a bag.
And figure on paying with cash or a credit card.
"It would be awfully difficult for us to compete with credit cards," admits Hill Boswell, owner of World of Golf in Naples, Fla. "The credit card has displaced any chance of us becoming financiers."
Still, even a good starter kit runs just $350, leaving you plenty left over to pay your greens fees. To get a bargain on your first set, check into mega stores such as Sam's Club or Costco.
A hole in the water
Pleasure boating has been described as a hole in the water into which you pour money. That hasn't deterred more than 68 million Americans from casting off in search of fun on the water.
Whether it's sailing in the Florida Keys, water skiing in the Lake of the Ozarks, houseboating on Lake Powell or salmon fishing in the Pacific Northwest, if it floats, fast or slow, we're climbing aboard in record numbers.
According to the National Marine Manufacturers Association, there are more than 17 million recreational boats in use right now and Americans spent nearly $30 billion on boating and related items in 2002 alone.
How can you afford your very own hole in the water? Where there's a will -- and a credit history -- there's a way.
If you're looking for a new pleasure boat, you can generally expect to pay a minimum of $500 per foot, depending on size, features and locale. For most of us, that means financing.
Financing through a boat dealer has been both attractive and popular, according to Bill Bachman, finance manager of Tuppens Marine in Lake Worth, Fla.
Simple interest
Boat loans are generally simple interest loans of up to 15 years, with 10% down and no prepayment penalty. That means if you pay it off in three years, you only pay three years' worth of interest. If your credit's not so hot, expect to pay a higher rate and more up front.
Most dealers solicit your loan from any number of marine lenders, which actually set your rate and terms. Because marine lenders are often a centralized department within major financial institutions, your dealer likely has a better relationship with them than your own bank does.
At Tuppens Marine, the higher the dollar amount of the sale, the lower the interest rate. Bachman says his rates on a boat currently start from 5.99% for buyers with good to fair credit, and up to a whopping 20% for buyers with poor credit.
But, Bachman also warns that buyers with so-so credit are going to have a difficult time to get a loan because boat loans are not as easy to get as car loans.
There are alternatives, however. You might prefer to take out a home equity loan through your bank, a boat loan through your credit union or, if you're feeling particularly lucky (or loan-averse), there's good old plastic.
The lease option
Or you may decide to do what many boating enthusiasts do -- lease a boat. Boat owners often lease their boats to help defray expenses.
One type of boat leasing, also referred to as "timesharing," allows you to use a boat for specified periods of time during the year; essentially, as an extended, reserved rental.
Elliott Bay Yachting, which leases 26- to 60-foot power boats in Seattle, charges its club members from $540 a month for a 40-day annual (as much as 20 days per quarter) lease allowance. You'll need to cover a one-time membership fee and a refundable security deposit.
Sure, you'll have no equity and only fond memories for your investment. But it's still a dime-to-dollar investment compared to buying the boat and paying your own moorage, maintenance and repairs.
Before you buy your own waterhole you might want to check into leasing one and make the comparison with real numbers and real boats.
Getting your feet wet
Eric Robinson, salesman for Bay Marine and Sports Center in Marble Falls, Texas, says most of his jet ski customers pay cash. But financing is still an option.
"Jet ski financing is just like getting a credit card," says Robinson.
New personal watercraft retail between $7,000 and $10,500. Used ones cost less -- between $1,500 and $6,500. Trailers run another $700 to $1,400.
Robinson says that even with the best credit, you can expect to pay a bit of interest -- but there are plenty of promotional offers going around these days. Deals range from 3.99% to 17% for two-year loans. Fixed rates for people with good credit are about 7.9%. Most of these deals do not require any money down.
But insuring personal watercraft can be expensive.
"It can be pricey," says Robinson. "I've heard of people who are paying as much as $600 per year -- but usually it's about $150 to $250. A lot of it depends on your driving record."
Another financing option for personal watercraft, as well at all-terrain vehicles, motorcycles and snow mobiles, is a revolving credit card issued by an original equipment manufacturer (OEM) such as Kawasaki, Honda and Yamaha, good on all their products and accessories.
To get the best deal, Robinson recommends looking at used models, as long as they come from reputable dealers who keep the skis maintained.
"You can also lower the price by getting a two-seater instead of a three-seater," says Robinson. Models with less horsepower tend to cost less as well.
"The main thing you want to think about is how much power you need," says Robinson. He says that a 120 horsepower ski will race about 50 miles per hour. Jumping up to a 155 horsepower ski will give you an extra 10 miles per hour. "Are you going to be pulling anyone behind the ski on a tube? Basically, if you have just one person on the ski, you'll need less power than if you pull someone. And get a fat boy behind you and you're really going to feel it."
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