According to industry estimates, 60 percent of boat buyers finance their purchases. The reason so many do is because loans for boats are widely available and rates and terms are competitive. What often surprises people is finance terms on most boats are longer than those on cars. Common terms on a $20,000 car loan would likely be three or four years; common terms on a $20,000 boat loan would likely start at about five years. That means the monthly payment amount on the boat will be less than the payments on a similarly-priced car. Lenders make longer loans for boats because of the favorable history of the product and the better credit quality of boat buyers.
Almost everything that floats can be financed. Small boats costing $4,000 to $5,000 are candidates for installment loans; mega-yachts that top $1 million are regularly paid for through a monthly installment plan. Many banks, savings institutions and credit unions finance boats today as do specialized marine financial service companies. In addition, boat builders and their retailers often establish customized boat loan programs with national finance concerns, and some of these arrangements offer incentives to buyers that could lower the finance rate or provide other incentives to buy. Marine lenders can be found across the country. Boat buyers should check with their own bank to see if it makes boat loans, ask the dealer or broker they are working with about lending sources, look in boating magazines to find the advertisements of marine lenders, or visit a local boat show where many lenders exhibit. Of course, lenders are also easily found on the Internet.
Those borrowing to buy a boat can expect a few basic responses. Generally, loans on new boats will offer better terms (lower down payments, the best interest rates and longest payback terms) than used boat loans (higher down payments, higher rates and shorter terms), but many lenders welcome borrowers of boats five to ten years old, and in special cases even older ones. Most lenders allow the cost of a boat's accessories or other equipment to be included in the loan amount, and some will allow sales tax to be financed. Expect lenders to be particular about the paperwork. Bigger boats may be required to be federally documented (a higher level of loan "perfection" and protection than a state boat title or other commercial recording). Larger loan amounts may trigger requests for more financial detail on borrowers, including tax returns. However, many borrowers receive conditional boat loan approval in as little as one-hour to a day or two at most.
Long-time boat owners will tell newcomers that there are two important details about borrowing they should note:
Use a marine lending specialist whenever the deal approaches or exceeds $25,000 because state and many federal regulations can change the nature of the transaction and may have both positive, and negative, tax and legal consequences. For deals under $25,000, using a boat loan expert will likely provide the most flexibility and favorable terms, and speed up and better insure the process.
Avoid the "no down payment" loan if it is offered, especially if you believe you will be trading boats in two to three years or planning to refinance. "Zero downs" look attractive at first glance, but they do not inject "equity" into boat ownership. Without any underlying value in a boat, the owner may find a trade will take additional cash to complete, or lenders unwilling to extend more funds if and when rates fall.
According to industry estimates, 60 percent of boat buyers finance their purchases. The reason so many do is because loans for boats are widely available and rates and terms are competitive. What often surprises people is finance terms on most boats are longer than those on cars. Common terms on a $20,000 car loan would likely be three or four years; common terms on a $20,000 boat loan would likely start at about five years. That means the monthly payment amount on the boat will be less than the payments on a similarly-priced car. Lenders make longer loans for boats because of the favorable history of the product and the better credit quality of boat buyers.
Another surprise: boats that have living accommodations (galley, bunks and head) can be claimed as "second homes" and the loan interest paid can be deducted from federal income taxes (check with a tax professional for full details).
