As a full-service dealership, one of the many benefits of working with Karma Yacht Sales is that we take care of all the details related to the purchase of your new or brokered boat. If you are looking to finance your boat, we can help put you together with a lender that meets your needs.
At KYS, we've seen more cash deals or self financing as of the past two years. Financing is still being used however, one of the most common misconceptions in the marine market today is that there is a scarcity of lenders out there. While it is true that in 2008 there were some lending institutions that elected to depart the marine financing industry, scarcity is more of a perception than reality. Everywhere you turn, the uninformed media loves to speak of the marine industry as a generalization (Identifying both Power and Sail as one). Sailboats make up less than seventeen percent of the over $22B retail recreational boating market. The default rate on sailboat loans is less than one-percent. The power boat sector of the market is being impacted at a much higher rate by this fact of the current economy. They also represent a larger percentage of the boating market and industry. Like anything, it is always the cry of 'fire, fire' that grabs headlines. Reality is far removed from the sound bites afforded by the lay and some of the marine press.
Recently,We had a chance to catch up with some of our Marine financing experts. We asked some key questions of two of our experts, Chris Hungerink and John Dierkson, regarding their impressions of the current marine financing landscape and what they are seeing. We hope that is will serve to further educate the boaters in Lake Michigan of what is Fact vs. Fiction.
KYS: What are you seeing in the marine market today?
Dierksen: We are seeing activity across the Great Lakes. I can't say that one size range in particular is gaining. People are buying.
Hungerink: People are buying. There are some good deals on in-stock boats out there and real buyers are saving money.
KYS: What are some of the factors influencing the market outside the obvious?
Dierksen: Alot of what we are seeing is misinformation on behalf of the people applying (or not applying). People still think that the 'easy financing' of the recent four years still applies. It is back to lending basics.
Hungerink: Dealer inventories represent good deals for buyers. In some cases over brokered boats. Buyers need to select their selling dealers based on sound criteria: service reputation and business history.
KYS: What is different today versus one-year ago?
Dierksen: Not much, I'd qualify that as compared to as recently as two-years ago. Documentation is king. Lending is back to the basics. There is still money to lend and it's flowing for qualified buyers (i.e. good FICO scores). Lenders ARE lending.
Hungerink: I'd agree. The bigger item is that people hear of the low prime rate or residential retail rates and immediately believe the marine rate should correlate. It's lower than it's been, but no where near what residential retail is at. It's trending at 1 to 1.5% higher than the residential rates.
KYS: What is the standard criteria for borrowers these days?
Dierksen: Lending like it was six years ago (as it should be). Of the ten lenders I deal with, on average they require:
1. FICO credit score of 720 or better for the better rates.
2. Two year's documentation of income. That's taxes, pay stubs, K2's for loan's under $100K. Over $100k, some lenders may require a personal financial statement (pfs).
3. Solid income history.
4. Good debt to income ratios. (not overleveraged).
5. Loan to value ratio (LTV) of 80 to 85% of the value of the boat. It's much harder to hit with used boats.
If all that is on board, the process goes fairly smoothly.
Hungerink: I agree. I might add that if a trade-in is involved, the buyer may still be asked to put money down by the bank. The LTV is what they are looking at. That's easier for new boats for used they may estimate lower values. This applies to trade-ins too, they are basing them on lower values.
KYS: What key points should today's buyers be aware of?
Hungerink: There is money out there to loan. The doom and gloom is spin. Be ready to document and there are deals for people willing to commit.
Dierksen: Smart money is buying now. The rates will not get better, if anything, they may creep up.
So there you have it. In the words of our financing experts. Now more than ever, there are deals ready to happen. Opportunities to save on in-stock boats is money in the buyer's pockets. Advantages over non-stocking brokers are endless. Our 4th quarter of 2008 closed out at a brisk pace. 1st quarter 2009, has been a flurry of activity in patches. There are people buying- are you one of them? Contact us to find out what the latest rates are on new and brokered boat purchases.