Financing Go-Fast Boats is Tough but Not Impossible
Getting a loan to buy a high-performance boat is still not easy, but if you have excellent credit there are a couple of financing instruments worth looking into.
It’s no coincidence that collapse of the high-performance powerboat market almost four years ago coincided with the collapse of easy credit for big-ticket purchases. Bob Christie, a good friend of mine who was at one time the leading Donzi dealer in the country, recalls the days when getting a loan on a $250,000 twin-engine V-bottom with 700-hp engines was relatively easy.
“If you had a credit score of 750 or more, you were pretty much good to go,” says Christie. “But near the end, we were seeing guys with really high credit scores getting turned down. Credit scores didn’t matter anymore. Your income didn’t matter as much anymore. It was all about your debt-to-asset ratio.”
Fortunately for Christie, an astute businessman who made his early fortune in the financial and publishing worlds, he got out before things got really bad. In fact, he closed Typhoon Marine, his dealership in Toms River, N.J., and had Donzi take back all its models—a contractual condition of a now-extinct financial beast, at least in the go-fast powerboat world, called floor-plan financing—and left the boat sales world.
Christie was far from alone in his decision. Where once there were more than 70 high-performance powerboat dealers in the country, now there probably less than a dozen. The good news for the dealers who survived the purge is that the glut of once-new-but-unsold inventory has thinned quite a bit. The bad news is that financing go-fast boats hasn’t gotten any easier on the consumer side.
“For sportboats that go less than 70 mph and cost less than $100,000, there is some financing available,” says Dave Patnaude, vice-president and client manager for Bank of America Merrill Lynch, dealer financial services. “But for the 120-mph, 1,400-hp cat or V-bottom, it’s still really tough.”
Why are banks so reluctant to make loans, even to highly qualified buyers, on go-fast boats? Quite simply, those boats tend to make dismal collateral because when faced with repossession a lot of unscrupulous owners remove the expensive engines and drives from the boats and sell them. When the repossession agency finally pays the owner a call, it often finds little more than a bare hull.
“Of course that’s illegal, and the owner faces criminal charges, and of course you can take him to court,” says Patnaude. “But good luck recovering the engines and drives. The bank still has to take a loss, so most banks look at the collateral history of performance boats and say, ‘No way.’”
For would-be buyers who lack cash but have securities including investment portfolios and Individual Retirement Accounts, Patnaude says that looking into a securities-backed Loan Management Account is a viable option.
“LMAs have become a good alternative for people trying to finance high-performance boats or purchase boats overseas that can’t be financed until they reach the States,” says Patnaude. “In two instances, one in Italy and one in France, the buyers used LMAs to purchase the boats and bring them to the States, then convert to conventional boat loans.
“When you’re dealing with people who buy Skaters and MTIs [two brands of custom-built high-performance catamarans] and so on, you’re dealing with people who have nest eggs but don’t necessarily want to liquidate assets to buy a boat,” he adds. “An LMA credit line is a very convenient way with very attractive rates, as low as 3.5 percent, for them to finance a high-performance boat. There’s no minimum balance and no annual fee.”
Patnaude also suggests trying to work through your local bank, which may offer more leeway to a longtime customer it knows—one in good credit and financial standing of course—than a larger national financial institution.
“You may be able to find some financing at the local level,” say Patnaude. “I have even heard of some dealer financing happening at that level.”
- Matt Trulio is the co-publisher and editor in chief of speedonthewater.com, a daily news site with a weekly newsletter and a new bi-monthly digital magazine that covers the high-performance powerboating world. The former editor-in-chief of Sportboat magazine and editor at large of Powerboat magazine, Trulio has covered the go-fast powerboat world since 1995. Since joining boats.com in 2000, he has written more than 200 features and blogs.
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Tags: boat financing, go-fast boats, high performance boats, Matt Trulio