Free as a Bird: Financing your Boat
During the past year, Trade-a-Boat has enlightened readers with a quarterly series covering wide-ranging boat finance topics. We've taken you through finance processes to assist you in wading through the 'leisure loan' hodgepodge. So it comes as no surprise, due to popular demand, that we're continuing the informative series.
In this instalment, Credit One’s managing director and founder, Michael Rojek, offers his expertise on how to best finance a boat purchase. And Rojek is adamant that financing your boat is the smarter option.
“Some consumers will use up all their capital on the purchase leaving no money for boating accessories,” he says.
“Consequently, on many occasions, their boat is left sitting at home on its trailer for months on end! However, like most large purchases such as a home, motor vehicle or RV, the vast majority of boat buyers will finance their purchase rather than paying cash.”
Rojek adds that if you have recently invested in a home, car or boat or anything in between, you probably know how much of a hassle it can be to secure a fast, hassle-free approval for a big purchase.
“You will also know that making the right choice in financing can save you thousands of dollars in the long run as well as making the purchase more affordable (and more enjoyable!) in the short term,” Rojek advises.
So, let's look at what you need to know before securing financing to make sure you get the best deal possible.
Firstly, you need to ask a few questions: what determines how to best finance a boat? And what factors determine the kind of finance and interest rates you can get for a new or used boat?
“Just like home and car loan rates, boat interest rates move in line with what the market and RBA is doing,” Rojek says. “Boat rates, particularly on new to three-year-old assets generally 'shadow' what other leisure loan rates are doing.”
So with both car and home loan rates being at historic lows, now is maybe a great time to look at financing a new watercraft. However, what other factors influence the interest rates on boat loans?
“Credit scores are becoming an increasingly bigger influencing factor,” Rojek says. “With the recent introduction of Comprehensive Credit Reporting (CCR) changes to credit files, credit scoring is now playing a much bigger factor than in years gone by where rates where mainly determined by year model of the asset (lower rates for new assets and slightly higher rates for older assets).”
A general rule of thumb is the higher your credit score, the lower interest rates that lenders will offer. However, having a small historical blemish on your credit score doesn’t mean you can’t find a good deal. A finance broker such as Credit One, with a panel of more than 34 of Australia’s best lenders can offer bank-beating rates to the full spectrum - clients from the very best credit scores right through to the most modest.
But is the year model of the asset still a big factor in determining an interest rate on a boat?
“It can be, depending on the lenders,” Rojek explains. “On new boats to those less than 10 years old, Credit One can offer rates that are comparable, if not better than those found advertised as new boat specials.
“Some lenders will still charge slightly higher rates on older boats. On scenarios like these Credit One is unique in that we have our own finance company to assist, and generally no rate premium is given to older assets. This is an exclusive financier to Credit One and is not available to other brokers or banks.”
Is your deposit an influencing factor when determining interest rate?
“Generally a little less so for boats rather than cars,” Rojek says. “On motor vehicles, lenders will often work on book value and a percentage on LVR (Loan to Value Ratio). On boats, lenders are generally a little less focused on this.
“However, a 10 per cent deposit or so can assist in securing a better rate and gives you a best start on paying down the loan balance, while also reducing monthly payments.”
What else should customers look for when financing a boat?
“One area we recommend clients look at is to do their research on the dealer’s finance provider or finance broker that the dealer uses,” Rojek advises. “Check online reviews to see if any customers have discussed finance and interest rates. If possible contact other customers to see if they are happy with the deal they got.”
Incidentally, Credit One has one of the highest possible Google review scores available (4.9 out of 5 stars rating) and hundreds of testimonials from current customers to review. Credit One has also won ERIC Insurance’s Queensland “Broker of the Year” for three successive years.