The Why And How of Boat Financing – The Consumer View

By Myril Shaw - Dealer Profit Services

Financing makes paying for bigger ticket items easier by dividing the price into smaller, more manageable payments spread out over time.  You have probably done it with a car, with a house (or perhaps you pay rent, which is just another form of payment) or with furniture or appliances.

Financing a boat is by far the most common means of boat purchase.  Why is financing so common with boats?  You probably already understand that answer, even if you can't quite articulate it. 

No one needs a boat.  Buying a boat is buying a lifestyle.  When you buy a boat, you are buying a vision of a life experience that you want.  By conserving cash and turning your lifestyle purchase into payments, you are allowing yourself more available cash to enjoy everything the boating lifestyle has to offer.

You have cash for waterskies, for wakeboards, for fishing gear, for stereos, for tubes and for fantastic sunset dinners at you favorite waterfront restaurants (or maybe just great steaks and seafood on your boat.)

Well over 90% of all boat buyers finance.  Many do it traditionally through the dealer, and, frankly, that is the way it should be done.  Some tap home equity lines…some sell equities…some do hard work and search out lenders and loans before getting to the dealer.

Using the dealer to obtain your financing is the way to go…you should always check that out first.

Boat financing is not exactly the same as auto, home or other financing.  We will help you with some boat financing guidelines and nuances here.

Once you have begun to execute your dream of joining or continuing the boating lifestyle, you will quickly understand how this is a different type of purchase.

First, no one "needs" a boat, in the traditional sense.  Cars are required for daily life.  Everyone needs a roof over your head.  Unless you live on an island and have to do an over-water commute to get to your job, you want a boat, you don't need one.  (By the way, if you are using your boat in order to accomplish your job, financing is completely different.). We are talking about lifestyle financing here.

You will have identified one or more bodies of water on which to enjoy your boat.  You will know whether you intend to store your boat on or at the water or whether you plan to trailer it.  Your question now is – how do I pay for it and can I afford it?

Dealers who offer financing make the acquisition process as easy as it can possibly be.  They will be able to take credit applications, source lenders, help you with the best protective products to ensure your lifestyle and make the paperwork process as easy as possible.  They understand what watersport lenders need and will help you provide everything you need as conveniently as possible.

The dealers have the same mission that you do – get the best payment you can on the best terms you can as easily as possible.  They have access to multiple lending sources and will shop your information to help you get the best comprehensive terms possible.  Keep in mind that while the payment is based on the price/amount financed, as a lifestyle purchaser, your buy/don't buy decision will be based on payment and not on price.  You should never concern yourself with the price of a boat, but rather, what is the payment going to be.

One thing you do not have to concern yourself with is the "lender shopping" process.  In an effort to obtain the best overall deal, it is not infrequent that as many as five (or even more) lenders will be approached – and they will all pull your credit bureau.  As long as the pulls happen for the same purpose (recreational loan) and within a 30 day period, one bureau pull or fifty pulls all have the impact as one pull on your credit score.

Generally, your boat will be financed through a national or regional bank who provide indirect recreational loans (lenders like Bank of the West, US Bank, Huntington, etc.). They may come through national or local credit unions.  A few, very few, boat manufacturers have their own lending source (and even in these cases, they are usually rebranded national lenders.). Very occasionally, they may be private, direct to consumer loan sources.

You will not need to be concerned with the loan source – you just want to be ensured that you are getting the best deal that you can.

When you apply for a loan, you can expect some common questions, ones that you have seen on every credit application that you have ever been presented with.  The lenders will want to know your credit score (note that there are very specific bureau pulls and with very specific credit profile criteria that lenders use for approving boat loans.  Your Credit Karma score is worthless.  It is not uncommon for your boat loan score to be 50 to 100 points lower than your Credit Karma score and often 50 points lower than your car loan score.). Boat loans target the 700 plus scores, they are frequent between 650 and 700, below 650, you may start to see more onerous interest rates – but the good dealers will still find ways to get the loans done. 

You should expect to put 10% down and on the higher end units, it can be 15% - 20%.  0% down is possible up to about $50,000 financed.

The lenders will also look at tradelines, time on the bureau and debt-to-income.  It is common that the lenders will want proof-of-income in the form of recent paystubs or W2s.

All of this may make financing seem like simply a nuisance.  It is not as hard as it sounds and it is all about enabling and facilitating the fantastic boating lifestyle.  Small payments, a great boat, cash for more "fun stuff" – financing makes it all possible and you will find that the process is EASY.

One note of caution and potential confusion – interest on recreational loans is almost never tax deductible.  If you are financing a live-aboard, the process and lenders are completely different than your "fun use" boats and that is an entirely different process.

Financing can be confusing.  Your dealer will have a finance expert who can help you with process and make it easy – sometimes even fun!  They will help you with the finance jargon and process.  Rely on them – it will make your life better (and more boating lifestyle oriented.)

Boating is about the experience.  Go fishing, or skiing or surfing or tubing or just partying.  Your experience is better when you have the best financing available.  Hopefully, we helped guide you down the path not to the best lifestyle experience, but also to the easiest lifestyle financing.

Dealer Profit Services, LLC can help.  Whether you want someone to take over your F&I and just drive profit to your store, help you some of the time, need some quick advice or just provide F&I Training/Consulting, we are here to help you.  Contact us anytime at info@dealerprofit.com or give us a call at (470) 326-0966.