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Buying & Financing Your Boat

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BOAT BUYING 101

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Purchasing a boat can be an exciting experience, but it’s important to go about it the right way. Most people don’t purchase a car without looking at financing, insurance, and their current budget, and a boat is no different. Before jumping into the water with your eyes closed, make sure you’ve performed your due diligence.

The Right Boat for You

Before you run out and buy the nice shiny boat with the big motor, ask yourself the following questions:

  • What kind of activities do you want the boat for?
  • How many people will be in the boat with you?
  • Do you have a place to store the boat?
  • How will you transport it?
  • What can you really afford to spend?

Once you’ve answered these basic questions you can start looking for the best boat to suit your needs and wants. Don’t be afraid to get a small aluminum fishing boat if it’s only going to be you and another person fishing, but if you and your family want to hit the ocean, then it’s time to start looking into some serious boats.

New or Used – What You Want Vs. What You Can Afford

There are benefits to buying new and buying used, and only you can decide the route you want to take.

New boats come with a warranty and you get the chance to get all the amenities you want. They’re more fun to show off and you and your new boat get create brand new memories together.

A used boat will save you a lot of money. You may find all the bells and whistles you want at a fraction of the cost. If there was anything wrong with it the first couple of years, the problems have likely been fixed. You may not be as worried if your boat gets a little ding compared to a new boat.

Other Considerations

  • Should I finance my boat, and if so, how? For many, financing a boat purchase is a much more attractive payment choice than paying cash in that it preserves liquid assets and offers a variety of flexible terms and programs, attractive lending rates, and often some tax advantages as well.  Speak to a marine industry finance expert, as well as your financial advisor, to further determine how this process may work for your planned acquisition.
  • What is a finance pre-approval and should I obtain one?  Securing a finance “pre-approval” will provide the boat buying individual with a higher level of confidence regarding their credit capabilities and better define the lending parameters, terms and payments for which they qualify.  Consult with a marine finance industry expert for details on how this process may work for your needs.
  • Do I need insurance? Yes, and the good news is that boat insurance is readily available and competitively priced.  It is important to speak to a marine insurance agency representative as coverages vary and it is important to tailor a program to your individual boat use and geographical intentions.
  • Title, Registration and Coast Guard Documentation.  A buyer will need to determine the manner in which they plan to own the boat and where it should be titled and registered.  Your boat dealer or broker should provide initial guidance, but further clarification of your options can be provided by a marine industry finance expert or Coast Guard Documentation firm.

Boat Financing

The three most common options for financing include:

A loan from your bank – By taking out equity in your home you have a chance to get a great interest rate, but it may take longer, require some extra paperwork, and come with a reduced ability for tax deduction of interest, so it is best to consult with your accountant before choosing this path.

  1. Going through the boat dealership – They do boat loans all the time and will have several lenders lined up to meet your credit needs. They want to close the sale quickly and can typically have everything complete before you know it.
  2. Borrowing from a marine finance industry expert – They are specialists in marine financing and may be able to get lower interest, longer terms or lower monthly payments.

Financing today is much different than it used to be. Your credit rating and debt-to-income ratio may qualify you for a 10- or 20-year loan, low interest and no money down. Keep in mind that it always helps to have more money down if you’re reaching for a monthly target goal. It may also help you toward looking at a more expensive boat you didn’t think you could afford.

Are Marine Surveys Necessary?

Not necessarily with new boats, but even new yachts are oftentimes surveyed. Surveys are another cost you have to consider with used boats and some higher-priced boats. It depends on the lending or insurance company. The main types of surveys are:

  • Condition
  • Insurance
  • Appraisal
  • Damage
  • and new yacht

Lending and insurance companies don’t want to fund or insure a boat that will have problems in the near future. You’ll need to talk to your insurance company and your lender about surveys before purchasing the boat. Survey rates can get a little expensive, and some surveyors may have a minimum cost, so make sure you shop around when looking for marine surveys.

Boat Buying

Buying a boat is a long process and your seller should be able to answer all of your questions. Look at boat dealers who’ve been around a long time. A good place to find a wide variety of boat dealers is a boat show. Boat shows have boat dealers from everywhere looking to show off their goods. The later in the season, the lower the prices drop and the better deal you can get.

Look for dealers you may have heard about. Focus on the ones your friends have told you about. Don’t get confused with the dealer versus the brand. Just because the manufacturer has been around for 50 years, doesn’t mean the dealer has.

Get an Idea Now

Has all this talk about getting a boat made you interested in what you can afford? Click here for Welcome to the Water’s Cost Comparison Tool.

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