How it Works

• Dealer financing for a boat works in a similar manner to dealer financing for a car. The dealer gathers information on the buyer and then shops a number of lenders to find which lenders will approve the loan. Boat dealers will normally shop loans to traditional lenders as well as specialized boat lenders. Dealers will also check boat manufacturers that offer financing. Typically, dealer financing requires the buyer to have a 10 percent downpayment and a decent credit record.
  
  

Advantages

• The primary advantage of dealer financing is that it is a simple and quick process for the buyer. A boat dealer offers a one-stop shopping experience, allowing the buyer to choose a boat and finance it at one location. Often the entire deal can take place in a few hours or less. After choosing a boat to buy, the dealer will gather information from the buyer and do the work to secure the loan. Dealer financing options may also have less stringent lending guidelines than other options. This makes approval for a loan at the dealer easier than through other sources. Dealers may also offer financing incentives such as no downpayment or a low introductory interest rate.
  
  

Disadvantages

• Loans arranged by a boat dealer often have higher interest rates than loans from other credit sources. This higher interest rate will significantly raise the cost of the boat when financing charges are included. Buyers can reduce the impact of the interest rate by paying off the loan quickly as long as there is not a prepayment penalty. In many cases boat dealers receive a percentage of the financing profits, which will give the dealer an incentive to not offer the best loan rates to the customer.
  
  

Alternatives

• Buyers that have the ability to borrow a personal loan from a bank or credit union or who can access money through a home equity loan or line of credit will likely be able to borrow money at a lower interest rate than dealer arranged financing. Some buyers may also be able to purchase a boat on their credit card. Buying a boat with a credit card is generally a bad idea due to the high interest rates charged by most credit cards. Another option for a boat buyer is leasing. While leasing a boat is generally more expensive than buying, it may be a better deal than using high interest rate financing to purchase the boat.