Boat Loans

Frequently Asked Questions About Buying a Boat

Just like buying a house or a car, buying a boat is a large investment that requires a great deal of thought and research. What are you willing to pay for a boat? What will you use it for? How will you finance it? These are all questions you should ask yourself before making a purchase.

What is the average cost of a boat?

“Boat pricing can vary drastically. However, the average cost of a boat is in the $60,000 to $75,000 range,” said Paul Flannery, executive director of the International Yacht Brokers Association in Fort Lauderdale, Fla. The type of boat you buy as well as its size, shape, type, capacity and features will all determine its cost.

What kind of boat should I buy?

There are several different questions you should ask yourself before buying a boat, including:

What is my budget for a boat?

The first step in buying a boat is to figure out your budget. Your budget is what will guide your purchase process so it’s important to come up with a number that you feel comfortable with right off the bat.

“Buying a boat is a discretionary purchase, so it’s important that you consider needed cost-of-living funds in your boat. Research the type of boat you want, determine how much boat you can afford, look into the associated costs of buying a boat and set a realistic budget that makes sense for your income,” said Maggie Maskery, senior public relations manager at the National Marine Manufacturers Association.

What do I want to do with a boat?

People love boating for different reasons. While some enjoy leisurely rides on the water with wine and cheese, others like to boat so they can fish or waterski. After you’ve finalized your budget, think about the main activity you’d like to do with the boat or how you’ll use the boat.

What size boat should I buy?

Will your boat be for your family? Or, is it just for you and your friends? “Thinking about these types of questions will help you figure out the ideal boat size for your needs,” said Flannnery.

The size of a boat and type of power that a boat has determined its cost. Boats are generally considered to be 30 feet or under in length over waterline or length overall and cost as much as $200,000. Dinghies are small watercraft that are under 15 feet. Dinghies are generally cheaper than boats. Yachts tend to range between 30 feet and 80 feet in length and can cost around $1 million. Superyachts are the largest privately-owned boats and they are 150 feet long or more. They can cost well into the hundreds of millions of dollars.

How often will I use my boat?

Some boat owners use their boat every week while others only take advantage of it every once in a while. Your availability, lifestyle and where the boat will be docked will all play a role into how often you’ll use the boat.

Will I use the boat in freshwater or saltwater?

Boating in saltwater can feel more exciting but it does require you to clean the boat more often because the salt can wear it down. You should plan to have to repaint the bottom of the boat on a more regular basis if you use it in saltwater. Freshwater, on the other hand, requires slightly less maintenance and may be a better fit for you if you don’t have the time or desire to maintain your boat more frequently.

Where will I keep the boat?

Will you store your boat near your home or somewhere farther away? Unlike a car, which you can keep just about anywhere, a boat requires a slip or mooring so you can park it. While slips are typically about four to five times pricier than moorings, they offer better protection from harsh weather conditions and other boats.

If you live in a cold climate, you’ll need to haul the boat each winter and store it in dry boat storage. Storage costs vary dramatically by location and how large your boat is. You’ll need to do research locally to find the best fit for the size of boat you own, and for the amount you want to spend.

Should I buy a new or used boat?

You can buy a brand new boat or a used one. “A new boat can give you the chance to customize every detail to your liking, and it can give you the peace of mind of knowing that nobody has ever used or damaged it. However, it comes with a premium price,” explained Flannery.

If you buy a new boat, expect to take a heavy depreciation hit — as much as 10% the first year, 5% the second year and a little less each year thereafter, according to Flannery. Boats, like cars, depreciate the moment they leave a showroom. In addition, you may have to wait a while for a new boat, especially if you want a very popular model or it needs to be built.

Purchasing a used boat is a lot like purchasing a used car. While a used boat can save you a great deal of money, you can’t account for every single event that happened to it. It’s important to get a thorough inspection before buying. “Unfortunately, sometimes people aren’t forthcoming about the history of a boat so you may have to make some compromises to enjoy a discounted price,” said Flannery.

How do I finance a boat?

There are several lenders who specialize in marine financing and employ underwriters who are familiar with the industry. According to Flannery, the major players in the boat financing industry are Bank of America, Wells Fargo and Seacoast National Bank. U.S. Bank , Essex Credit and LightStream also offer boat loans. Check out the National Marine Lenders Association for a list of other lenders.

You can finance a boat for as long as 20 years if need be, much like you would finance a mortgage.

Although you can go through one of these lenders, there are other options that can help you finance a boat as well. For example, you can get a personal loan from your bank or take a home equity line of credit against your house.

What credit score do I need to buy a boat?

According to Maggie Maskery, senior PR manager at the National Marine Manufacturers Association (NMMA) in Chicago, a credit score of 700 or above is ideal but a score in the upper-600 range should not be an issue. You may run into some problems if you have a lower credit score. “If you qualify for a car loan, you’ll likely qualify for a boat loan,” explained Maskery.

Not to fear if you have bad credit and want to buy a boat, though. There are plenty of lenders who specialize in boat loans when you have a less-than-stellar credit rating.

Can I use a mortgage to finance my boat if I’m going to live on it?

If you’re planning on living on your boat, you can get a mortgage. You can take out a Preferred Ship Mortgage, which will be filed with the U.S. Coast Guard if your vessel is over 26 feet in length. In the event it’s smaller, your lender will record its lien against your state title. The lien will be released in both cases once you repay your loan. These kinds of loans can be a bit more difficult to get since the boat you purchase has to be made in the U.S. and you must be a U.S. citizen to be eligible.

In most cases, you’ll need to put 10-20% down on any boat you purchase. Financing a boat you want to live on, known as a houseboat or a floating home (there are distinct differences between the two), is not as simple as just getting a mortgage. Most banks see boats, houseboats and floating homes as different types of living spaces and that distinction is key.
Find out more about financing a boat you plan to live on.

If you plan to live on a boat, keep in mind that it is not a cheap alternative to a house. In addition to paying for the boat itself, you’ll need to pay for electricity, which can cost you anywhere between $3 and $30 a night. You’ll also need to pay for your cellphone, internet, boat parking and a number of other expenses that can add up quickly.

Which lenders offer boat loans?

To begin your search for a boat loan, contact your current lender, bank or credit union and see what they offer. You can also check out these boat lenders:

  • LightStream: A division of SunTrust Bank, LightStream can finance any boat with rates as low as 4.29% APR. Boat financing amounts can range from $5,000 to $100,000 and terms can range from 24 months to 84 months.
  • Essex Credit: Essex Credit is a division of Bank of the West and also offers financing on all types of boat. It offers loans for up to $2 million with terms that range from 48 months to 240 months.

What kinds of boat loans are available?

Maskery explains that there are three basic steps to follow to get a boat loan. First, identify the price and exact boat you want. Then, figure out the price and the boat insurance you need. Lastly, initiate the purchase.

While the average boat loan is 10 years, you can find loans for 12, 15 or 20 years. Most boat purchases will require that you put down 10-20% upfront. You can put down more if you’re able to and if you want to reduce your monthly payments. Check out LendingTree’s boat loan calculator to determine how much you can afford.

Where do I buy a boat?

There are three ways to purchase a boat:

  • From a dealer
  • Through a broker
  • Privately

While dealers have agreements with manufacturers and represent new lines of boats, brokers sell used or brokerage boats. Dealers typically offer warranties and support, and rarely sell used boats. “While a broker may offer you support throughout your ownership experience, they don’t have the same obligation as a dealer,” said Flannery.

Private sales of boats work much the same as private sales of cars. It’s up to you as the buyer to do your due diligence and have the boat checked out before you purchase from a private seller.

Alternatives to owning a boat

If you decide that boat ownership isn’t right for you, there are other options you can explore like boat shares and boating clubs.

The Freedom Boat Club and Carefree Boat Club are two examples of clubs you can join if you’d like to go boating often but aren’t interested in buying a boat. They’re like rental car agencies but you have to be a member. These types of clubs can give you the chance to rent boats for certain periods of time.

What additional costs are associated with owning a boat?

Other than paying for the boat itself, you’ll have to consider other common costs associated with owning a boat.

Dockage

Dockage refers to accomodations for your boat at a dock. While location, season and the length of your boat will play a role in the dockage fee, it’s usually an average of $50 per foot, per day.

Storage

Storage is where you’ll store your boat when you are not using it or during the off-season. The three main options for boat storage include in-water boat storage, dry outdoor boat storage, and dry indoor boat storage. The location and size of your boat will dictate the exact cost of storage. However, you can expect dry boat storage indoors and dry outdoor boat storage to be more expensive.

Maintenance

Upkeep, cleaning and repairs are all necessary to maintain the quality and performance of your boat and its electrical systems, engine, HVAC systems and other important components. Annual boat maintenance costs rarely exceed 10% of the total cost of your boat.

Fuel

If your boat has an engine, it needs adequate nutrition or “fuel” to operate. Fuel costs vary widely and depend on the size of your boat, the number of engines your boat has and how frequently you use it.

According to BetterBoat, fast motorboats use 20-30 gallons of fuel per hour when cruising at speed. If fuel is around $2.50 per gallon and you go through roughly 25 gallons per hour, a five-hour trip could cost you as much as $300 in fuel. Of course, the amount of fuel you use depends greatly upon the kind of boat you own and what it requires. Keep these considerations in mind when you are shopping for a boat.

Towing vehicle and trailer

A towing vehicle is the vehicle in which you haul your boat. The type of tow vehicle you get will be largely determined by the size and dry weight of the boat you choose.
Depending on size, weight and materials, trailers can cost anywhere between $700 and $3,000.

Boating lessons

There are educational or hands-off boating courses that can help you learn about boating essentials and how to properly operate a boat. There are also on-water boating courses that you can choose from.

Most states require some type of boaters’ safety course and an operator’s license. Boat Ed offers boating safety courses by state that vary in price. In Rhode Island, they’re free, while in Ohio they’re $34.95.

Licensing

In 46 U.S. states, you need a license, or at least some formal education to operate a boat. Earning a boat license requires taking a course and passing a test. To learn more about the requirements and pricing where you live, contact your state boat licensing agency and the Coast Guard.

When it comes to fishing, one of the most important items any angler needs before they go fishing on a boat is their fishing license. A fishing license helps protect, preserve and enhance the sport of fishing today and for generations to come. Licensing varies in price and depends on state, but American Boating offers a great resource to find out more.

Insurance

Just like you can’t operate a motor vehicle without insurance, you can’t operate a boat without it either.

You’ll need at least liability coverage, and likely damage coverage, especially if your vessel is newer. Although insurance cost will depend on where your boat is located and its age, the average cost of boat insurance is $429 per year.

Safety equipment

Since the U.S. Coast Guard and local authorities require you to carry certain, specific safety equipment on your boat, you should consider it during your boat purchase. It varies in price depending on what it is and where you buy it.

You must have the following safety equipment on board and can be fined up to $1,000 for each missing item:

  • Life jackets
  • Fire extinguishers
  • Visual distress signals
  • A ventilation system
  • Backfire flame controls
  • Sound producing devices
  • Navigation lights
  • Marine Sanitation Device (MSD)

How do I learn to drive a boat?

There are a variety of resources that can help you learn how to drive a boat. Flannery recommends taking boating courses by the U.S. Coast Guard or enrolling in a course by a federal or state organization. “When you’re learning to drive a boat, don’t depend on an app and learn on a simulator. It’s no substitute for hands-on experience,” he explained.

Where can I learn more about boating safety?

BoatUS, the United States Coast Guard Auxiliary and NauticEd are a few examples of reputable organizations that can offer you an extensive education on boating safety. You can also check out LendingTree’s Basics of Boating Safety guide.

 

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