Financing a vessel that loses value
Marine lending sits between a car loan and a mortgage: terms are longer than for a vehicle, rates are higher than for property, and the asset depreciates throughout. This calculator handles the credit side of that arrangement.
The instalment is only part of the outlay. Mooring, winter storage, insurance and servicing frequently exceed the loan payment itself, and none of them stop when the boat is not in use.
The formula behind the number
An amortising loan is repaid in equal instalments. Each one covers the interest that accrued since the last payment, and whatever is left reduces the balance. The instalment that brings the balance to exactly zero on the final payment is:
Here P is the amount borrowed, i is the monthly rate (the annual rate divided by 12) and n is the number of payments. Nothing else enters the calculation, which is why two lenders quoting the same three inputs must arrive at the same instalment.
Worked example: $40,000 at 7% over 7 years
The calculator opens on this scenario, so you can follow every step:
- Amount borrowed: $40,000
- Annual rate: 7%, so the monthly rate is 7 ÷ 12 = 0.5833%
- Term: 7 years, so n = 7 × 12 = 84 payments
Paying $603.71 every month for 84 months comes to $50,711. Subtract the $40,000 you actually borrowed and the cost of the credit is $10,711, or 27% of the sum borrowed.
Where each payment goes
The instalment never changes, but its composition does. The first payment carries $233.33 of interest and only $370.37 of principal. By payment 42 the split has moved to $133.59 interest against $470.12 principal.
| Payment | Instalment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $603.71 | $233.33 | $370.37 | $39,630 |
| 2 | $603.71 | $231.17 | $372.53 | $39,257 |
| 3 | $603.71 | $229.00 | $374.71 | $38,882 |
| 42 | $603.71 | $133.59 | $470.12 | $22,431 |
| 84 | $603.71 | $3.50 | $600.21 | $0.00 |
Depreciation usually runs faster than principal repayment in the early years, which means the balance can exceed the resale value for a substantial part of the term.
What moves the answer most
Two levers change the total, and they do not pull with equal force.
Add one percentage point to the rate and the instalment goes from $603.71 to $623.45, which is $1,658.28 more over the full term. Cut 2 years off the term instead and the instalment rises to $792.05, but total interest falls from $10,711 to $7,522.88. A larger deposit is the most effective protection here, because it keeps the balance below the value of the vessel from the start.
What this calculator leaves out
Running costs, registration, and the survey a lender may require are excluded. Budget for these before deciding the instalment is affordable.
Related calculators
- Depreciation calculator — how fast the asset loses value
- Auto loan calculator — the same structure over shorter terms
- Down payment calculator — how much deposit changes the balance