So you’ve decided to buy a boat, congratulations! Chances are you will require a boat loan and if you are a business acquiring a new vessel for your operations, you will most certainly require marine finance.
Boat loans for private buyers and marine finance for businesses are available from many banks and lenders. The types of loans offered differ for personal and business buyers. To maximise your boating pleasure and/or the cost-effectiveness of your working boat, you will want to achieve the cheapest boat loan possible while ensuring that the terms, conditions and structure of the loan are tailored specifically to your individual requirements.
• Personal Secured Boat Loan: the most common type of loan for individuals purchasing a boat for their own recreation, pleasure or sport activities. The lender uses your boat as security against the loan.
• Unsecured Personal Loan: if you can’t or choose not to provide security against your loan, you may be able to source an unsecured loan.
• Marine Chattel Mortgage: the most popular form of business finance as it suits business that use a cash accounting method; GST can be claimed at time of purchase; interest is tax deductible.
• Boat Leasing: an off-balance sheet option for businesses that use an accruals method of accounting; monthly lease payments are tax deductible; GST applies and can be claimed on monthly payments but not on interest element.
• Marine Commercial Hire Purchase: suitable for businesses that use a cash accounting method; GST on the boat purchase price can be claimed at time of purchase; some elements of the loan are tax deductible.
As a general guide, with most forms of boat finance, the interest rate is fixed, the loan term is fixed and monthly payments are fixed. The exception being an Unsecured Personal Loan where the interest rate may be fixed or variable. With business finance, an option exists to include a balloon, residual or buyback amount which is payable when all other payments are finalised. Most lenders will take the value and condition of the boat into consideration when pricing a boat loan so if you’re purchasing a used boat or a restoration project, you will want to have strong negotiating skills to bargain a good deal or better still, use a broker.
Once you’ve found your boat, or even before you start looking, you need to decide where you are going to source your finance. We’ve canvassed some of the options and outlined the pros and cons of each
Banks and finance companies:
• Most banks and finance companies will offer finance for a boat loan. But if they don’t have a specific marine finance facility you may be offered a generic loan which may be priced higher.
• If you approach the bank or lender yourself, you may be required to meet all their strict guidelines and if you don’t, they may not offer you a loan or charge a higher interest rate as they rate you as a higher risk.
• Handling your boat finance process yourself can be time-consuming and you may not have the level of financial acumen required to analyse all the elements and fully understand all terms and conditions.
• In order to be in a position to compare multiple loans, you may have to apply to several lenders, going through the same extensive process multiple times. This is not only time-consuming it may also have a negative effect on your credit report, which can hinder your current and future financial situation.
Finance broker: • The services of a finance broker are available to both individuals and businesses and can greatly ease the burden of sourcing a boat loan.
• A broker that specialises in boat loans and marine finance will have specialist lender contacts that understand the boating industry and will likely be more prepared to offer better-priced loans than say a general bank.
• A broker can negotiate hard on your behalf and work to structuring your loan to suit you, rather than you having to fit into the strict bank guidelines.
• Ensure the finance broker you select is independent, accredited with many lenders but not specifically aligned or connected with any one financial institution. This independence allows them to consider loans offers from a much wider field and provide you with a totally objective analysis of which one is best for you.
• Having a broker source multiple quotes to compare will not impact your credit report.
• Brokers save you time and in the end, very often save you money by sourcing you a cheaper boat loan.
If you’re interested in speaking with a finance broker about your boat finance requirements, we know people that work in that area and would be happy to make the necessary introductions. Just contact us for details