5 things you should know about boat financing
Groupe BENETEAU Financial Service (GBFS), BENETEAU's preferred marine financing partner, gives you a few tips and tricks on what you should know about financing your future boat. From evaluating your financial situation to negotiating your monthly payments, these expert's tips are worth the read!
Before buying any new or pre-owned boat, evaluate your financial situation
- Check your credit history. Log on to www.annualcreditreport.com for a free evaluation of your credit situation.
- Verify your income and assess your budget: consider down payment, monthly loan payments, boat storage costs, upkeep and repairs, insurance, gas etc…
- Be prepared to offer a down payment: usually from 15% to 20% of the loan amount. This figure will vary depending on the age, size, type and use of the boat and the loan amount. Some lenders offer lower interest rates for higher down payments.
Why financing your boat makes sense.
- Financing can make boating more accessible, which is why the majority of boat buyers seek a loan from a marine financing company using the boat itself as collateral. This allows you to keep cash and in some cases to deduct interest expense on the boat loan. Make sure you check the latter with your CPA before buying your boat.
- Boat financing can make your life easy: your dealer works with financial specialists that can guide you through every step of the financing process.
- Marine lenders can offer competitive terms, fast credit decisions, trade-in offers as boat loans are at the core of their business. Most will even allow tax and marine accessories to be included in the loan amount. At GBFS, we never charge prepayment penalties or processing fees.
- A boat can qualify as a “second home” if it has a berth, head and galley, providing a tax deduction. Check with your CPA first to make sure your boat falls under this category.
Once you decide to buy a boat, compare offers
- Terms up to 20 years with down payments between 15 to 20% are common, but they can vary depending on the boat and loan amount.
- Determine which lender is best for you considering your personal financial situation and the boat you are buying. Your dealer can help you decide.
- Consider the 'big picture.' It's easy to be seduced by attractive rates, but there are other factors to consider when choosing a boat finance source – how long you intend to keep the boat, terms and prepayment penalties. Read the small print!
Finance application and negotiation.
- Gather all documentation needed for the loan process including a personal financial statement, credit report and tax returns. Be meticulous. A tip to improve your financing options - have a pre-approval letter from your lender before you go to a dealer to buy a boat. It shows you are serious about buying and will give you leverage and it will speed up the process.
- Finance your boat at the lowest term that allows the monthly payment to fit into your budget.
- Fixed-rate simple interest loans can be less risky than variable rate loans. For variable rate loans, make sure you check the number of years your loan rate stays fixed.
- You will need the Manufacturer’s Statement of Origin (MSO) when buying a new boat to register it and insure it. You or your loan company should receive the MSO when you take delivery of the boat.Calculate your monthly boat loan costs.
- Your monthly boat payment plus the cost of insurance, storage and maintenance should be 40% to 45% of your disposable monthly income.
- Being able to afford your monthly payment does not automatically mean you will be approved for the loan.
- Although taxes vary by state, most new boat sales are subject to sales and property taxes. If you’re purchasing a used boat, it may also be taxed.
You are all set now to go and find the boat of your dreams!