Go Fast Boat Finance 101 (in 2010, at least)

[Matt Trulio]

Hope some of you find this useful, http://www.boats.com/boat-content/2010/04/performance-boat-loans-still-tough-but-not-impossible/.

[DollaBill]

who's this Patnaude guy and what does he know?

[DaveP]

who's this Patnaude guy and what does he know?

:iamwithstupid: LOL!

[DollaBill]

hahahaha. Thought you'd like that.

[Von Bongo]

Wow. 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 it

[JupiterSunsation]

I 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.....

[Matt Trulio]

I 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.....

Great 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.

[boomer35]

Great 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.

how in the world is it not illigal and grand theft to pull the motors drives, etc of the banks boat thats about to get repoed

[Matt Trulio]

how in the world is it not illigal and grand theft to pull the motors drives, etc of the banks boat thats about to get repoed


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.

[JupiterSunsation]

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.

Yes 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?

[boomer35]

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.

then how do these owners get away with, heck i hear about guys taking the power out, letting the boat get repoed, then sellign the engines to the guy who buys the boat at auction, doesnt seem like you need any top detective work to figure this all out

[DaveP]

I 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.....

"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.

[DaveP]

how in the world is it not illigal and grand theft to pull the motors drives, etc of the banks boat thats about to get repoed

Oh its very illegal and the banks have and will go after the owner for all deficiencies in the collateral. But by the time that happens, usually the person has already lost almost everything.

[DaveP]

How many boats did Passport, Lake Cumberland or Fastboats dump into the open market in 2009?

Somewhere between alot and a sh*tload.......but more like a sh*tload! :ack2:

[Matt Trulio]

then how do these owners get away with, heck i hear about guys taking the power out, letting the boat get repoed, then sellign the engines to the guy who buys the boat at auction, doesnt seem like you need any top detective work to figure this all out

Boomer,

You're right about what could be done. Absolutely. But in real time, meaning by the time any of the "detective work" gets done, the bank is screwed, regardless. Owner goes to jail, bank is still screwed. Bank finds the engines and gets them back—and how quickly do you think that would happen—and re-installed in the boat, the bank still mostly screwed.

Can you imagine trying to sell that boat and having, by law, to disclose all that happened to it?

"Yeah, the boat you're looking at is a repo. Before we could get our hands on it, the owner pulled the engines and drives and sold them to some guy in Florida. We got them back from the guy, but had to pull them out of his boat because he'd been running them, about six months later. But hey, we checked them out and don't think he did anything too bad to them?"

Let me put it another way: Would you buy that boat, knowing its history?

So yes, justice can be served, and it should be served. And the bank? It's still gonna be screwed.

Dave P, did I get that straight?

[Matt Trulio]

As 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.

[DaveP]

Dave P, did I get that straight?

Yes sir! Bottom line the bank gets screwed and then the rest of us pay for the scum sucking thieves misdeads in the way of higher interest rates and limited access to banks that want to finance them.

[JupiterSunsation]

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.


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.


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).

[Expensive Date]

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.

[DaveP]

I 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

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............:rolleyes:
He gives you $2500 - $5000...........he is serious! :sifone:

[DaveP]

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.

Tim - being self employed and a W-2 earner + bonus is the best way to go. It shows great stability in your business and the income of your business.

[JupiterSunsation]

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............:rolleyes:
He gives you $2500 - $5000...........he is serious! :sifone:



Latest guy put down 10% (17K) in broker's escrow acct.......still trying to close the deal....

[showtime83]

The first time I tried to get a loan I was denied because of lack of credit, that was almost 4 years ago. I purchased the boat cash instead. I am now looking at center consoles, called the bank for a laugh, I couldn't believe it when they told me they would loan me the money, times are tougher now, I have not established any more credit. I don't understand it??

[DaveP]

The first time I tried to get a loan I was denied because of lack of credit, that was almost 4 years ago. I purchased the boat cash instead. I am now looking at center consoles, called the bank for a laugh, I couldn't believe it when they told me they would loan me the money, times are tougher now, I have not established any more credit. I don't understand it??

You may have not opened additional accounts but the accounts that you do have, now have 4 years of history. That is a plus.

Maybe when you originally applied the accounts that you had open were relatively new (less than 36 months)

[Big Time]

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.

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.

[DaveP]

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.

Nope - the customer is contracted to pay the loan amount in full and is also is contracted to keep the collateral in good fully operational condition less normal wear and tear.

[Big Time]

Nope - the customer is contracted to pay the loan amount in full and is also is contracted to keep the collateral in good fully operational condition less normal wear and tear.

Going back to my example...bank repo's the boat and gets $60k at auction, $10k more then the financee owed to the bank. Does the bank make off with that $10k or is there some sort of "make-whole" process?

[DaveP]

Going back to my example...bank repo's the boat and gets $60k at auction, $10k more then the financee owed to the bank. Does the bank make off with that $10k or is there some sort of "make-whole" process?

Any overage of sale goes back to the owner less any fees that were incurred with the repo, prepping, listing and auction fees.

[Big Time]

Any overage of sale goes back to the owner less any fees that were incurred with the repo, prepping, listing and auction fees.

Gotcha, thanks Dave.

[Expensive Date]

Hey Dave not for me but others might be interested.Is there a way to pre qualify someone without running the credit.Like with a credit score from one of the sites.That way the buyer or seller has a general idea if financing is even possible.

[DaveP]

Hey Dave not for me but others might be interested.Is there a way to pre qualify someone without running the credit.Like with a credit score from one of the sites.That way the buyer or seller has a general idea if financing is even possible.

No - unfortnately not. The score that the banks pull will definately be different than all of the online services. Plus the bank's report has additional information that is important to the bank but not necessarily for the consumer.

[Expensive Date]

Ok

[DaveP]

Tim - there are questions that can be asked to see if someone would qualify even before the credit report is pulled.

Those key questions are:
1) How much overall credit card debt if any?
2) Any late pays in the last 7 years?
3) Ballpark idea of the person's credit score?
4) How much did the person make last year and showed on their taxes?
5) What does the person's current total monthly bills add up to? (mortgage, ccards, car payments)
6) How much in liquid assets does the person have?

By getting the answers to those questions even before we pull the credit report I can have a real go idea if someone would qualify or not.

[Expensive Date]

I always love when I ask my customers how there credit is...and they tell me clear.I just claimed bankrupcy.