Thinking about buying a boat in 2023? Not sure as to where to get started or what your options are? Well don’t worry, because here at L&M and Day Break Marina, we get it, having over 40 years of finance experience and having financed over 2,000 boats in the past 11 years.

We understand how it can be stressful figuring out your best financing options for a boat, but it doesn’t have to be a battle. In this article we’re going to explain interest rates, the financing process, loan types, lenders, loan periods, and by the end, you’ll likely know exactly what path you should take when financing your boat in 2023.

Boat Price + Interest Rates

If you’re wondering ‘how do I finance a boat in 2023’ here are some things to consider.

Interest rates are constantly changing and although they may be high, it’s important to consider the price of the boat too when financing. If you finance your boat, even while interest rates are high, you can always refinance to lower your rate, but you can never lower the price of the boat. If you decide to wait, there is a possibility that the boat’s price will increase. 

By waiting for a lower interest rate, you run the risk of spending more money on the boat itself, or you could possibly spend the same amount of money with the increased boat price and lower interest rate as you would have with a lower boat price and higher interest rate. 

The Financing Process

The financing process is extremely simple, you fill out an application online or in person, then that application is reviewed by the Financing Department, who then takes it to lenders to find the best deal possible and then goes from there. Unlike car dealerships, it won’t take all day to get financing on your boat as it’s a much faster process at L&M Marine and Day Break Marina.

Factors That Impact Ability to Finance

Some of the factors that impact your ability to finance a boat include 

• The amount of your down payment (usually a 10% down payment is required)

• Your credit score 

• Your debt-to-income ratio 

• Your adjusted gross income.

Similarities + Differences: Financing a Boat vs. Financing a Car

Financing a boat is similar to financing a car and has the same process as far as the credit application and approval process from the lenders. The difference is that recreational merchandise (such as boats) is harder to get finance approval for versus a house or car since recreational merchandise is under more scrutiny. You may be able to purchase a house or a car with your credit but financing a boat may not be possible. 

This is because lenders know that if there’s a recession or if you’re unable to make a payment, the boat payment would probably be the first thing to not get paid. 

Types of Recreational Merchandise

• Boats

• Motorcycles 

• Motorhomes 

All three of the above are considered recreational merchandise and therefore are under more scrutiny as far as financing goes and a higher credit score may be necessary to receive financing. 

Average Loan Period

As far as payments go, you’re able to pick the date of your payment much like with your car payment but the key difference is you’re able to finance a boat for up to 20 years. The average boat loan right now is 15 years for L&M Marina and Day Break Marina. Some lenders will allow you to have multiple boat loans at once, while other lenders won’t.

The difference between financial rates and interest rates is the same as the difference between APR and APY – annual percentage rate of change versus annual percentage yield.

Finance rates are all based on the customer and their financial situation and the structure of the deal. Material, length, size, and type don’t affect your loan. The type and size of the boat don’t affect your rates although they may be tougher on approval for bigger/more expensive boats.

Financing a New Boat vs. a Used Boat

When you finance a new boat, they’ll let you finance the whole boat, including all the equipment on it. With a used boat, they’re expecting that not all the equipment will be working or that it’s old and may need to be replaced soon. They will only finance the boat motor and give no concessions for the add-ons for the most part. For example, trolling motors, T-tops, may not be able to be added. 

Typically, with a used boat, you need to have more cash down and lenders are more leery of used boats. After you get to a certain year, currently it’s 2021 and back, lenders view all boats from this year and prior are financed as ‘used boats’, even if they are new. 

Loan Types + Types of Lenders

When it comes to financing a boat and choosing a type of loan, it depends on your personal circumstances. Some people use personal loans, but most boat buyers take on the secure, and finance the boat, using the boat as collateral. 

All boat loans are simple interest loans, similar to a mortgage if you’re able to pay them early there’s no penalty for early payoff. The boat is almost always used as collateral, which is a secured loan.

Dealerships can be easier to get your boat loan from as it’s a one-stop shop, most banks are tougher when it comes to boat loans. Especially since dealerships work with all types of lenders including marine lenders and banks, you’re able to see a lot of options in the dealership. 

Timing + Loan Period

Timing makes a big difference because interest rates are always changing, sometimes they’re between 4-5% and current rates are from 7.99-9.99%. Rates change due to the Federal Reserve raising them in an attempt to slow inflation and they also vary depending on a customer’s credit, shore, the length of their loan, and sometimes how much their down payment is. 

The value of the boat determines the loan period and loan periods can vary anywhere from 61 months all the way up to 20 years. You’re able to customize your loan period, and if you shorten the term you may even get a better rate.

• 61 months is the shortest loan period and you're always able to pay off the loan off early with no penalty

• 20 years is the maximum loan period

Payments on a 5-7 year loan are bound to be higher than they would be with a longer loan period.

Why It Can Be Beneficial to Financing a Boat

It’s beneficial to finance a boat if you don’t readily have cash on hand for the price of the boat currently, financing allows you to still purchase the boat but spread out the spending via monthly payments.

Accessories, Insurance + Fuel

When you’re thinking about financing a boat, you should make sure you factor in things like fuel, additional accessories, storage, and insurance. Insurance on a boat is fairly inexpensive, much less expensive than you may think. For example, on average for a $40,000 center console boat, you’ll pay between $500-$600 for insurance per year. Insurance payments are flexible and can be easily paid as a lump sum, or quarterly, or monthly.

It’s also important to be realistic about how often you plan to use your boat when considering purchasing one.

Trading Your Boat In

If you decide to trade in your boat for another, you can appraise it and get the loan all under one loan, just as you would with a car or if you decide to sell L&M Marina and Day Break Marina can sell it on consignment.

How We Provide More Opportunity for Financing  

 Financing is made as convenient as possible for customers and our Finance Department is a one-stop shop. A trip to the bank isn’t necessary as we’re able to explore numerous lenders all at once and title work and sales tax are included in deals for out-of-state customers. Customers have more opportunity financing with us versus banks as we have a lender for any credit. Recent rate increases have made financing more difficult for lenders as it affects what kind of boat you’re able to afford. One major thing to consider is that boat prices will definitely go up, so waiting until rates go down will result in you paying more for the boat. You can never change the price of the boat, but you can change the interest you pay

Summary

The type and size of boat don’t affect your rates but it may affect your approval. If you're able to pay cash and avoid interest you should. But if you’re unable to afford that upfront, financing is the way to go and will split payments up versus paying a lump sum all at once. The average loan term period at L&M Marine and Day Break Marina is 15 years. 

Another thing to consider when deciding whether to finance a boat or not is if you don’t have a certain percentage of the down payment, your interest rate may increase. The more cash you’re able to pay upfront with your down payment, the lower your monthly payments will be and the less you will pay back in total.

You can fill out our finance application here and we’re happy to answer any question you may have about financing online, over the phone, and in person at L&M Marine and Day Break Marine.