Boating Questions And Answers

Is it OK to buy a boat sight-unseen from a really friendly guy in Nigeria?" Uh, NO! "I want to buy an old boat for $50,000. Is it worth getting it surveyed?" Yes! Some questions are easier than others, and we welcome them all. But some we get again and again, like this one:

How much boat can I afford?

Everyone has his or her own comfort level on how much to spend on fun. But fun can quickly turn into anxiety if we overspend. Rather than use a percentage of income, like realtors (i.e., 36 percent of your monthly income is about right for home-mortgage payments), a better approach is to work backward.

Most people make monthly payments, so decide how much of your disposable income you can fit into your total monthly boat budget. Now subtract insurance, fuel, dockage, and a reasonable monthly outlay for repairs and maintenance (even if you plan to do the work yourself). Throw in an extra 10 to 15 percent for surprise contingencies. (A helpful rule of thumb to estimate future maintenance/repair costs is 1 to 2 percent of the cost of the current year model of your boat, regardless of its age.) What you're left with is your monthly boat-loan payment amount.

Use a loan calculator to find out what that monthly payment can buy you. Then go shopping with peace of mind.

How important is my credit score?

There are millions of people coming out of the Great Recession whose credit scores got pretty banged up. If you're one of those, you may be wondering if your credit is still useful for buying a boat. We asked Don Parkhurst, senior vice president of the marine and RV division at SunTrust Bank and one of BoatUS Finance's lending partners, to shed some light on the question.

Parkhurst says that things have improved since the beginning of the recession in 2009, when boats lost about 35 percent of their value and credit scores nosedived. Dinged credit histories have a limited life span (two to seven years, depending on severity), and they're recovering. Parkhurst says that for prime borrowers (FICO scores over 700) and near-prime (660 to 700), loans are again easily available. Even subprime borrowers (below 660) can get loans. Credit scores (among other things) also determine interest rates and down-payment amounts.

So what does this mean for you? When this article was written, prime borrowers currently pay around 4 to 5 percent interest with 10 to 20 percent down, while near-prime borrowers will pay 5.5 to 6.5 percent interest with 20 to 25 percent down. Subprime borrowers pay much higher rates (up to 15 to 18 percent) and need much higher down payments (25 to 50 percent). Rates will rise and fall, but they are still extremely low for most buyers.

Is it better to rehab an old boat or buy a newer one?

Yes. No. Actually, you'll get different answers from different people. But the answers that matter are from people who've actually rescued, rehabbed, or in some way restored an unloved boat and have owned other, newer boats, too. Fortunately, our members aren't shy about talking to us, and in fact, over the years, hundreds of members have sent us pictures and descriptions of their projects. So we asked them.

John Fitzgerald, who lives on New York's Long Island, restored a 1964 Glasspar Seafair. Fitzgerald spent 20 weekends (that's about 160 hours, or a month of sitting at your desk job) repairing the old boat to its (almost) former glory. When we asked if he'd do it again, he said yes. "But I like working on projects," he said. "I also like salvaging something from the past and having a unique boat. For me, it was worth it. But for someone without the skills and desire, no, I don't think so."

Did his time pay off? Fitzpatrick says he bought the boat for $2,500 and put about $4,000 into it, not including his time. It's value now? About $6,500. Bottom line for Fitzpatrick: If you just want to go boating, you're probably better off buying a used boat in decent shape than restoring a fixer-upper.

William Hand, a member out of New Bern, North Carolina, wanted a quality boat that didn't look like every other boat. He settled on a 23-foot 1973 Seacraft he bought for $1,500. The boat needed "a lot of work," and Hand even converted the sterndrive to an outboard on a bracket. His outlay was about $40,000. His reasoning for refurbishing an older boat? "It's unique. And I got exactly what I wanted," he says.

Was it worth it? Absolutely, he says. "I couldn't have bought a similar new boat for twice what I've put into mine." On the other hand, his boat's actual value is far less than his investment. But that doesn't bother him. Hand says that some people just like old houses, old cars, and old boats. "They have character and aren't reproducible," he says. "Every time I use my boat, I can't image anything better." Would he do it again? Not only would he, he did: Hand bought a second Seacraft and refurbished that, too.

Greg Group, a marine surveyor in the Great Lakes area for 37 years, brings a different perspective. He's rescued and rebuilt plenty of boats in his time and seen plenty of starry-eyed boaters buy older boats that need some work in hopes of getting on the water cheaply. It can be done, he says, but the back lots of boatyards and craigslist are full of partially finished projects. What usually happens, Group says, is the buyer either began with a boat that was worse off than estimated or didn't have the stamina to follow through on a long project.

Dreamers, he says, often don't realize that, for example, the parts for an older sterndrive can cost thousands before the boat even runs. For resale, in his professional opinion, boats with a good reputation are a better bet than rare models. Group has a two-out-of-three rule: Overall structure, cosmetics, and systems/mechanical — pick a boat that rates high in any two. Even then, he says, it's not easy to get your money out of a rehabbed boat.

There's an old joke in the boat-repair business: How do you make $10,000 rebuilding an older boat? Start with $20,000. It often makes sense to spend a little more on a newer model in better shape than gamble that you can save money on a fixer-upper, he says. Plus the two years it might take you to rehab a boat can instead be spent on the water.

How much insurance do I need?

Insurance is designed to protect your boat from loss and to protect you from liability for damage or injury to others. Not having it opens you up to all kinds of potential financial losses.

Most policies have two parts: The one that protects your boat (hull insurance) should provide enough coverage to pay you the value of your boat if it's destroyed, say, by an accident or fire. It will also pay to repair damage from an accident. The other part is called liability, and that protects you from things that you might do to others, such as damage their boat or cause an injury. That amount is typically between $100,000 to $1,000,000, though $300,000 is most common.

The best policies also cover wreck removal in case your boat is destroyed, as well as fuel-spill liability. Talk to your insurance company and it can tell you, based on the purchase price or value of your boat, what amount is right. But make sure you talk to an insurance company that knows boats; homeowners policies often have glaring holes in the coverage.

Where can I search the title history for a boat I'm looking to purchase?

If you've bought a used car lately, you may have used a service such as Carfax to try to learn something about the car's history. Unfortunately, there's no comparable service for boats. Vehicle-history services can query state databases for title history, but not every state requires titles for boats. And even if you did get the history, unlike car titles that are "branded" if a car has been totaled, very few states brand boat titles for rebuilt, sunk, or totaled boats. Also, boat dealers and insurance companies don't report warranty work or claims to a single accessible database.

If you want to learn about your boat's title in a state that has them, you can look up the agency online and ask. It's not always easy, but it may save you some hassle. A seller can show you his title (in states that have them) that will note if a boat has a current lien on it, so at least you'll know a loan will have to be paid off before title can be transferred to a new owner. If a boat is federally documented, you can do a free search in the U.S. Coast Guard (USCG) database. You won't get much more than ownership information with that, though, unless you pay $25 for an abstract of title, which also shows liens.

Visit the USCG documentation database online, or call the USCG Documentation office at 202-267-0984.