Hope some of you find this useful, http://www.boats.com/boat-content/20...ot-impossible/.
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04-08-2010 04:54 PM
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04-08-2010 05:36 PMWow. All sounds ok except the debt to liquid assets. So you have a 200k mortgage on your house and you have to have 100k in cash assets. That's pretty stiff. No wonder the $100k plus range isn't getting financing. Middle class that bought a lot of boats in that range is shut out of financing unless they are debt free.
Banks have long looked at debt to net worth and liquid assets of 2-6x the monthly obligations but that really is a tough requirement. Boat markets going to be soft for a while at those requirements.
But it is what it is so buyers need to be prepared to meet itLast edited by Von Bongo; 04-08-2010 at 08:02 PM.
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04-08-2010 06:09 PMI have a buddy trying to sell a Top Gun that he owns free and clear. He has found that the buyers are totally uneducated on what the banks will require for loans. Guys show up and sign the contract and then they can't get financed.......
Matt/Dave is this scenario reported the same across the board in boat financing or solely with "go fasts?" I can't see a 50 Sea Ray or 40 SS Formula being any better in the secondary repo market.....
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04-08-2010 07:04 PMGreat question, Jupiter, and the answer is that financing is tougher to get for go-fast boats. And you've hit on one of the reasons—repos. As Dave said in the piece, the go-fast boat repos often come back without engines and drives. The owner of a big Formula probably isn't going to take the time to pull a pair of 496 Mag HO engines and sell them before the bank takes the boat, but that's a far cry from a pair of Sterlings 1400s in a big cat, right? Those are worth some dough.
The banks that lend to the go-fast world are all too aware of this. Dave P, feel free to chime in.
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04-08-2010 08:57 PM
Of course it is illegal and of course it is grand theft. However, that doesn't help the bank when it's stuck with an engine-less, drive-less repo boat. Like insurance companies, banks look at historical data. That kind of stuff just doesn't happen with runabouts and cruisers. But it does happen with performance boats, enough so that banks consider them risky as collateral.
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04-08-2010 09:05 PMYes it will happen with performance boats but I suspect a big center console with triple outboards would more susceptible to this than a go fast.......
It should also be noted that dealers were having a lot of inventory repo'd as well. adding to the influx of HI-PO boats on the market. How many boats did Passport, Lake Cumberland or Fastboats dump into the open market in 2009?
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04-08-2010 09:13 PM
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04-09-2010 12:25 PM
Let me just play devil's advocate here....let's say I bought a boat for 100k, put 50k down and financed the other $50k. I stop making my payment, the bank comes to repo the boat and it is less engines. Couldn't I argue that the value of my boat is worth more then I owe, so I am entitled to the engines?
P.S. Don't bother breaking down the numbers and telling me there is not a hull worth 50k...I'm talking in theory here.
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04-08-2010 09:24 PM
"Go Fast" Boats are definately more difficult than say a Formula 40SS or a Sea Ray Sundancer.
So, say someone was buying a 34 Sundancer for $150k
* Credit score would need to be 700 or better
* Bank would want 20% down (on purchases under $100k usually 15% down)
* Liquid - definately want to see the $1 for every $2 in debt. (if the customer is super strong they could get away with $.50 - $.75 for every $2 in debt
Also - a liquid asset is anything that can be turned into cash within 30 days. So, 401k is a liquid asset, Merrill Lynch / Morgan Stanley / UBS accounts that own stocks and bonds are a liquid asset.
The reason for the liquid asset requirement right now is that with so much uncertainty, the banks want to see that you have staying power. If you get laid off tomorrow and you have a mortgage, a car loan & a boat loan - they want to see that you have enough liquid assets to cover your payments for at least 9 - 12 - 18 months.
Unfortunately the person with $5k in the bank and has a $2k mortgage payment, $400 car payment and $500 boat payment is screwed in a matter of less than 2 months.
I cannot stress enough - PUT MONEY IN YOUR 401Ks!!!!!!! You never see it except for the statements and over time you will have a nice nest egg for your retirement or for an emergency.
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04-08-2010 10:17 PM
That makes me feel better about what the bank calls a "liquid" asset. However their thinking is flawed. 401K/retirement accts are usually free from garnishments/bankruptcies. IF I was in trouble and it was between losing a boat/car/home or losing a 401K the material stuff would go and my money would stay right where it is.
I got a job as a financial planner out of college and quickly learned it wasn't how much you made it was how much you saved! Had an early client that made 450K a year W2 income (Cardiologist) yet only had 180K in assets (mutual funds). He rented his house/cars/even had a good amount of credit card debt. When I asked how did he save the 180K in mutual funds.........he told me his mom died and left it to him! Guy couldn't save a nickel, even with rented stuff and 450K in income (1997 dollars).
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04-08-2010 11:31 PM
Dave right about the 401s or SEPs plus you get the tax savings.Question my employer is a corporation that I own so I file with W2s plus a bonus its all on the tax return so in todays market would I have a problem?Above 800 score and not a lot of debt.Not looking right now but hopefully next winter.
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04-09-2010 08:44 AM
I would recommend to any seller to find out early if your buyer needs financing or not. This will prevent the seller's time being wasted on someone who would never qualify.
You have no idea how many people go into boat dealerships, multiple trips, finally go to contract and then fillout a credit app and the dealership finds out that they have a 500 credit score.
Also - the size of the deposit shows how committed the buyer is.
He gives you $100 or $500............
He gives you $2500 - $5000...........he is serious!
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04-08-2010 09:37 PMAs a side note, I can recall Bob Teague having a pair of his 1200s stolen from his shop. In a really good year, he might build 20 of them and they travel, if you will, in pairs. So they're not exactly everywhere.
And it took forever for him to find them. In short, once stolen engines are installed in a boat it just isn't that easy to track them down.