So Ya' Wanna Buy a Boat
Unless you’re able to plunk down a fistful of dead presidents for your new boat (and most of us aren’t), you’re going to need to finance and insure it. Financing and insuring a boat is more complicated than doing the same for a new car. But if you learn the ropes and rules of the game, you can do both with little or no pain.
It’s best to get a pre-approval from your bank. When you do so, the dealer, the bank and the surveyor (more about the surveyor below) can work together and create a more seamless process.
To protect yourself, your purchase agreement should be subject to obtaining suitable financing, an acceptable survey (for a used boat) and a trial in the water.
Even if you can pay cash, you might be better off financing. Is paying, say five percent interest less than you could make by investing your money elsewhere.
This is interesting. If your new boat will have a berth, head and galley, it could be classified by the IRS as a second home and qualify for tax-deductable interest.
As an alternative to financing through your own bank, you might want to consider a marine lending company. You’ll likely be able to get a longer term and lower interest rate.
Regardless of how you decide to finance your boat, choose the shortest term loan you can afford. If you decide to sell your boat before it’s fully paid for, just as with your house or car, the last thing you want is to be upside-down on your loan. Financing in the shortest time possible will also give you trade equity should you decide to trade up in the future.
If you’re buying a used boat that’s more than five years old or priced at $25,000 or more, your bank and insurance company will probably require what’s called a survey. This is a comprehensive stem-to-stern of analysis of your boat’s condition and value. They’ll want to verify the structural and mechanical integrity of the boat. Rather than thinking of this as a pain in the posterior, you should be happy for it. What if they find a serious problem you missed?
When choosing a marine surveyor, make sure they’ve been certified by a professional organization, such as the Society of Accredited Marine Surveyors, the National Association of Marine Surveyors or a school such as NAVTECH. Don’t expect a one-page summary; you’ll get a thorough multi-page report and learn more about the boat than you think there is to know.
The “Recommendations” page will summarize their findings and include any repairs that should be made for seaworthiness and an estimate of the boat’s value. This can be very beneficial. Should the boat need repairs, you can possibly make the repairs, done by the dealer, a condition of sale.
If you’re buying a small boat, your homeowner’s or renter’s policy might provide good coverage at an attractive rate. Check with your insurer first. For boats longer than 26-feet, or priced at more than $30,000, you’ll probably do better with marine insurance.
Read your policy. Your limits will be described as either “agreed value” or “actual cash value.” If you have an accident, an agreed-value policy will pay for new parts to replace old ones. An actual cash value policy will only replace parts at their depreciated value. Determine the amount of risk you’re willing to accept.
Also make sure your policy specifically fits the geographic area in which you’ll be using your boat.
Before you sign your policy, carefully read the “Exclusions.” The last thing you want is a policy that covers everything except this, this, this, and this.
F&I when buying a boat is more complicated than when buying a car, but less painful than when buying a new home. But understanding how things work will make things easier than you might think. h