A boater wishing to become the owner of a pleasure craft has several options for purchasing their boat. Some of us can buy our sailboat using our savings. But this isn’t the case for all boaters. This is especially true when buying a new boat. Here are some options. 5 solutions to finance the purchase of a new or used boat.
Buying a boat is a very expensive investment. Calling it an investment is actually a mistake; it’s more like financial folly. But even knowing this, we still buy boats. While the used boat market is full of good deals, the prices of new sailboats and motorboats have skyrocketed. And the question of how to finance the boat becomes a crucial issue. In any case, boating is a leisure activity. It’s important to keep this in mind, especially in a sector where passion often overrides reason.
Calculate your boat budget carefully
It is therefore important to take your time to buy a used boat, as for buy a new boat. You must assess all the costs and expenses related to your future boat. You must evaluate the cost of the marina berth, boat insurance, and maintenance.
The main maintenance costs of a boat:
- Insurance
- The harbor place
- Wintering
- The fairing
- Engine maintenance
- Equipment and its maintenance
- The sails
- and of course the purchase of the boat
Next, you can explore different financing options if you don’t have the necessary savings. However, it’s always wiser to assess your investment capacity and loan repayment ability before signing a preliminary sales agreement.
There are several solutions for financing the purchase of a boatLet’s see which ones.
Financing your boat through a traditional loan
The first, and most common, solution is financing through a traditional consumer loanWith current interest rates being low, there are some excellent opportunities available at minimal cost. Traditional loans are obtained from your bank, insurance company, or a lending institution. You can choose between a secured or unsecured loan. A secured loan requires an invoice. This invoice serves as proof of the loan’s purpose. This type of loan is often less expensive.
The safest approach is to limit the term to a maximum of 5-6 years. Beyond that, it’s no longer advisable. In addition to the interest rate, carefully check for any application fees and the cost of the death/disability insurance. This type of solution is the simplest and offers you the most flexibility.
How to buy a boat through leasing or LOA?
There Rent with Option to Buy is an increasingly common solution in the automotive industry. In boating, the LOA It has existed for a long time and is very often offered when buying a new boat.
This solution allows you to finance a new boat, generally speaking. The idea, for the boater, is to no longer own their boat but to lease it from a financial institution. The advantage of rent with option to buy It’s twofold. The first idea is to commit to a purchase based on a given amount and rent. At the end of the commitment period, you choose whether or not to exercise the purchase option.
The other advantage is financial; in boating, a boat purchased under a lease agreement is subject to a reduced VAT rate of 10% instead of 20%. The leasing rate Since the VAT rate is lower than the difference in price, you buy your boat for less than you would with cash. And the best part is, you can even finance the boat’s equipment through this type of financing.
The Rental Management Solution
The third solution for financing your boat is somewhat different from a loan. Here, we’re somewhere between financing and investment. It involves… rental managementThe idea behind charter management is to purchase your boat from a professional charter company. A contract will bind you to this professional. In effect, you agree to make your boat available to them for a specified period in exchange for a fixed or variable income, depending on the program.
Some charter companies have bases on all the world’s oceans. Depending on the program, you can finance the entire boat or just a portion of it. The only impact will be on your income and any remaining costs. The advantage of this solution is that you can partially finance your boat through chartering while enjoying ten weeks of sailing on different bodies of water. All maintenance and upkeep of the boat is handled by the charter company.
Buying a boat in co-ownership
Finally, for those of us with fewer resources who don’t want to commit to a restrictive financing solution, there remains the co-ownershipSome boaters opt for this solution, with 2, 3 or 4 people. The idea is to share the initial investment and annual costs related to the boat, such as the berth and maintenance. Knowing that we only sail a few weeks a year, everyone can use the boat regularly.
However, the constraints of co-ownership can quickly lead to discord. First, navigation schedules must be agreed upon. This isn’t always easy, especially during the summer and spring weekends. Then, the anticipated expenses must be agreed upon. Here again, disagreements can arise. Finally, reselling isn’t always straightforward, particularly if only one co-owner wants to sell.
In summary, there are several ways to finance the purchase of a boat. But in all cases, before considering the type of financing, think about your borrowing capacity and the amount of savings you are willing to use for your future sailboat or motorboat.