Can you lease a Boat?

[QF3 MROCP]

The simple answer is yes, the long answer requires a sh*t load more info, but in the long run it will come down to your credit worthyness, high risk, low chance, low risk high chance. Why do you want to lease it being the first, if it is to get the repayments down, leasing gets the monthly committment down but to eventually own the vessel it will cost you more then a straight loan over the same term or is it for some business purpose? If it is for business ask your accountant before you consider what type of finance package to apply for. There can be a large variation in GST and tax benefits that you need to consider.

I was just thinking along the lines of a company car where the lease covers all servicing and repairs (if not caused by me) and when the lease term finishes, just like the car, I get another newer model. Generally with all the warrantys being for such a long term eg 5 years, repair costs are covered. Like many high cost short term life items now a days - computers, car, plasma screen, even washing machines, I am wondering if a low capital input (leave more cash for running costs) is a better option by using the "banks money". The straight loan is one for thinking about.

My grand idea though was to pay monthly fee (lease, loan) + have a great time on the water + let some else worry about off loading it when is gets out of fashion + get another upgrade.

Maybe the alternative is to just rent as and when the engine hours are running, just like an aircraft.

P

[QF3 MROCP]

The simple answer is yes, the long answer requires a sh*t load more info, but in the long run it will come down to your credit worthyness, high risk, low chance, low risk high chance. Why do you want to lease it being the first, if it is to get the repayments down, leasing gets the monthly committment down but to eventually own the vessel it will cost you more then a straight loan over the same term or is it for some business purpose? If it is for business ask your accountant before you consider what type of finance package to apply for. There can be a large variation in GST and tax benefits that you need to consider.

I was just thinking along the lines of a company car where the lease covers all servicing and repairs (if not caused by me) and when the lease term finishes, just like the car, I get another newer model. Generally with all the warrantys being for such a long term eg 5 years, repair costs are covered. Like many high cost short term life items now a days - computers, car, plasma screen, even washing machines, I am wondering if a low capital input (leave more cash for running costs) is a better option by using the "banks money". The straight loan is one for thinking about.

My grand idea though was to pay monthly fee (lease, loan) + have a great time on the water + let some else worry about off loading it when is gets out of fashion + get another upgrade.

Maybe the alternative is to just rent as and when the engine hours are running, just like an aircraft.

P

[TimiBoy]

I'm not sure you'll find anyone willing to do it. I may of course be wrong, it has happened a couple of times, ask the wife!

The potential costs to the people leasing to you are high, much higher than a car IMO. So they would approach such a deal with a great deal of caution - remember they will always set it up so they make money...

You'd pay high interest, get very little residual, and have plenty of exclusions as they would hedge their bets every step of the way. If it's for Business I bet you'll end up with a chattel mortgage (you get the GST back immediately) maybe with a residual. It'll cost you less than a lease over the long term probably.

Then at the end either trade up, sell or buy out!

Bowser's right, you should check with your Bean Counter.

Cheers,

Tim

[QF3 MROCP]

Thanks Tim for the good thoughtful info.. chattel mortgage.. I'll research more

Peter

[Noelm]

OK, lets look at this from a simple persons (me) point of view, the loan/finance company/bank will only do it if they make a tidy sum of Money, correct? now if they make money, who do you suppose paid this money? so, I can't see in any way shape or form, that unless you have some cash stored under your bed that you want to "launder" how it could be of benefit to lease a Boat for the "average Joe"

[ozbee]

BOAT bring on another thousand we've all heard it and it doesn't run away if there's no tax break theirs no point in leasing unless you know your finances are going to increase in a 3 to 5 year period.

[dec0guy]

Is that what you are after?

http://www.smartpowerboathire.com.au...FRYiagodMDQ7LQ

Met a guy a while back who worked for some timeshare/club which owned a whole range of toys (boats, cars, jetskis) which you could use. The hours you could use depended on you membership but they had boats from 6m boats to Rivieras. He said for $20k per year membership you could probaly take the Riviera out 4 times (ie once every 3 months and a lot cheaper than owning a $500k boat!)

[Ocean_Spirit]

I would seek professional tax advice before you entered into any lease arrangement in this regard.

You also need to be aware of the operation of s.26-47 of the ITAA 1997.

Further, to clear up some incorrect facts above, FBT will apply to any non-cash benefits provided to employees in the course of their employment. You use a type 1 or type 2 gross-up factor to gross-up the value of the benefit, and then multiply by the top marginal tax rate 45% plus the Medicare Levy of 1.5%, giving you the current FBT rate of 46.5%.

For more information on the ATO's position, have a read of:

http://law.ato.gov.au/atolaw/view.ht.../NAT/ATO/00001

There is a significant amount of case law also related to such issues.

[Bowser]

I was just thinking along the lines of a company car where the lease covers all servicing and repairs (if not caused by me) and when the lease term finishes, just like the car, I get another newer model. Generally with all the warrantys being for such a long term eg 5 years, repair costs are covered. Like many high cost short term life items now a days - computers, car, plasma screen, even washing machines, I am wondering if a low capital input (leave more cash for running costs) is a better option by using the "banks money". The straight loan is one for thinking about.

My grand idea though was to pay monthly fee (lease, loan) + have a great time on the water + let some else worry about off loading it when is gets out of fashion + get another upgrade.

Maybe the alternative is to just rent as and when the engine hours are running, just like an aircraft.

P

Mate what you are talking about is an operating lease. The difficulty here is that when the lenders work out an operating lease they have a fairly good idea of the costs associated with this and importantly the trade in value at lease end. With this info they can work out a repayment schedule including their interest charge to earn a profit from the transaction. The difficulty with boats is that they are not a well known and understood item like a car or truck. The cost variables are just too high for the main stream lenders to take on without having a solid gold head and by charging an exorbitant rate of interest to cover risk. There are boutique lenders around in the boat share companies that are essentially doing this. They may be prepared to do a one of but I don’t like your chances.

In reality this method of finance is the most expensive way to buy an item. Although this is in true terms a rental and as such there are no components of capital reduction, interest etc to work them out there are these costs. You are charged interest on the capital borrowing, the built in service costs and have a residual that is based on a pessimistic guess of the residual value of the unit. As a youngster I was once told that the cheapest way to buy something was cash on the nose, then deposit finance or hire purchase and then lease. At that time operating leases weren’t a fact, but having since been involved in the finance industry in some way or another for many years I can assure you that this statement is correct and that the operating lease is the most expensive way to buy something.

I do see where you are coming from in that you want the boat but also want to have a known cost of boat ownership. Wouldn’t we all, but as was also told to me “A boat is just a hole in the water that you pour money into”. So you do have a certainty of the cost if you buy one, PLENTY.