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#33003 - 05/19/04 11:23 AM Negotiating Interest Rates on your new boat  
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GoFirstClass Offline
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Grand Poobah

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Pasco, WA
I'm not sure how many boat buyers realize that the rates you get from a boat dealer are often negotiable. Here's how it works.....

The dealer will be set up through one or more banks to do "direct loans" for the bank. This means that you can do all of the paperwork at the dealership without having to go to the bank.

The dealer "buys" loan money from the bank at a discount to what he "sells" the loan to the customer. This is a HUGE profit center of any dealership...a dealer can make as much profit from the loan as he made on the sale of the boat. This profit is often used to offset a particulary good deal ("low ball price") on a boat he really wants to get rid of because it's been in inventory a long time.

The dealer's rate from the bank is called the "Buy Rate" and the rate he gives you has a variety of names such as "Retail Rate". The more loans the dealer does through a particular bank, the cheaper he gets the Buy Rate. Banks also frequently offer loan rate specials to dealers. This additional discount gives the dealer an incentive to place his loans through that bank rather than the competitor banks.

As an example of how much profit there could be for the dealer, take a loan amount of $40,000 at 6% for 15 years. That loan will have a payment of $337 and a total interest charge of $20,757 (assuming the loan is not paid early). If that dealer's Buy Rate for that loan is 4.5%, the total interest charge would be $15,079 or a difference of $5677. This difference is called "Finance Reserves" Of that Finance Reserves difference, the dealership might get to keep as much as 60%, or $3406.

If you're a boat buyer with very good credit (Credit score of 700 and up) and have a good down payment (10-20% or more plus the taxes and license fees) you very likely may be able to negotiate the rate you are charged for your loan as part of the total purchase package.

If you could talk the dealer down just 1/2% (to 5.5%) in my example above your payment would go from $337 to $326. That $11 bucks a month might as well stay in your pocket as go to the bank.


"Beachcomber" 1995 Sea Ray 550 Sedan Bridge


Anchor's down......Bottoms Up!
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#33004 - 05/19/04 12:25 PM Re: Negotiating Interest Rates on your new boat  
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Acemart Offline
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Acemart  Offline
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Coeur d'Alene, Idaho
GFC,

Great post. Having been in the lending arena for several years I can't over-stress the importance of a great credit rating. My wife and I have gone to extraordinary lengths to keep ours impecable and it always pays when getting a loan...whether its a vehicle or home or boat. We just bought our new boat...with no money down (other than a bit of equity in the trade) and was able to go from 5.25% down to 4.99% because of credit ratings.

Even if yours is not great now, you can manage your debt over time to improve it. My kids, like many young folks, screwed up their credit when first on their own. They finally listened to Dad and now they are in their 30's and have recovered to the point of having super credit scores.

It isn't rocket science and I am willing to share strategies if anyone is interested. Just drop a PM and we'll get started.


Acemart
2008 Chaparral 256 SSI
VP 8.1 DP 375hp
#33005 - 05/19/04 12:26 PM Re: Negotiating Interest Rates on your new boat  
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WaterMutt Offline
Bilge Rat
WaterMutt  Offline
Bilge Rat
Admiral

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Massachusetts
So if you finance the boat through the dealership, and they get thier cut, what happens if you pay off the boat in three months time? Does the bank get really ripped about it, or do they usually have an early payoff penalty?


Malibu Wakesetter 23XTI
Bryant 214 Limited (gone, but not forgotten)

"That's my boat..."
-Forest Gump

#33006 - 05/19/04 12:41 PM Re: Negotiating Interest Rates on your new boat  
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GoFirstClass Offline
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GoFirstClass  Offline
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Grand Poobah

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Pasco, WA
 Quote:
Originally posted by wetdog:
So if you finance the boat through the dealership, and they get thier cut, what happens if you pay off the boat in three months time? Does the bank get really ripped about it, or do they usually have an early payoff penalty?
wetdog,
There's usually a period (60-90 days) where if the loan gets paid off early the dealership gets a chargeback of the Finance Reserves amount they were paid up front on that loan.

I have seen instances where a dealership that was hurting for cash flow talked customers who were going to write a check for their vehicle into financing it, keeping the loan beyond the chargeback period, then paying off the loan. The dealership would pay the customer up front for the interest costs they would incur by doing that, and do it in the form of further discount on the vehicle.

Needless to say it wouldn't take a bank long to see the unusually high number of loans being paid off very early and they would likely investigate further.


"Beachcomber" 1995 Sea Ray 550 Sedan Bridge


Anchor's down......Bottoms Up!
#33007 - 05/19/04 06:12 PM Re: Negotiating Interest Rates on your new boat  
Joined: May 2004
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ChiefRCD Offline
Warrant Officer
ChiefRCD  Offline
Warrant Officer

Joined: May 2004
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Deltaville VA
I just negotiated a boat loan a month ago. I went to two different nation wide marine finance companies. After talking with the first and getting their best offer of 5.25 for 15 years on a used boat, I called the second and told them what I had gotten...they offered me 4.99 for 20 years..and it made the buy possible....it's certainly something to shop around for. The 20 years actually made it possible for me to purchase a larger and newer used boat.



Albin 28 Tournament Express
#33008 - 05/19/04 06:17 PM Re: Negotiating Interest Rates on your new boat  
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Wet Doggg Offline
Admiral
Wet Doggg  Offline
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Rockford, Michigan
Not to derail the thread...but welcome to the board Chief


2007 Tige 22i - Current
2000 Sea Ray 410 Express - Sold
2003 Sea Ray 320 Sundancer - Sold
2000 Four Wins 230 Horizon - Sold
2003 Rinker 250 Fiesta Vee - Sold
1999 Four Winns 205 Sundowner - Sold
#33009 - 05/19/04 06:20 PM Re: Negotiating Interest Rates on your new boat  
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wrkalot Offline
Admiral
wrkalot  Offline
Admiral

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Florida
Great thread... this one should be "stickied".

#33010 - 05/19/04 06:37 PM Re: Negotiating Interest Rates on your new boat  
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Dan Offline
Admiral
Dan  Offline
Admiral

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Piscataway, New Jersey
Acemart,

So true. Having good credit is perhaps one of the best things you can do for yourself in life. One of my favorite pieces of advice that I've given my step-children is to tell them to keep only one card in their wallet besides a debit card. A VISA or MasterCard is all you need. The store cards that everyone offers are full of high interest rates and potential long term payments, which undoubtedly lower your credit score. The next best trick is to keep your outstanding debt to a minimum....no more than about 30 to 33% of your limit. Lastly, making your payments on time and paying even slightly more than the minimum helps keep your score up.
By the way....I had to give you a "5-star" rating upon reading your post. ;\)

#33011 - 05/19/04 06:59 PM Re: Negotiating Interest Rates on your new boat  
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tasuti Offline
Vice Admiral
tasuti  Offline
Vice Admiral

Joined: Mar 2004
Posts: 334
Canyon Lake, TX
Great post GFC and good advice to anyone. Protecting our credit rating is one of our highest priorities.


'04 Cobalt 246 "Let's Roll!"
'98 Corsair F28
'05 Sunfish
'97 F350, 4x4, PSD to tow 'em all
#33012 - 05/19/04 08:11 PM Re: Negotiating Interest Rates on your new boat  
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cny boater Offline
Admiral
cny boater  Offline
Admiral

Joined: Mar 2003
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Central New York
Nice insight, GFC!

How does one know or determine their credit score? I get copies of my credit report periodically, but these are two different entities, correct?


Bob
2002 Cobalt 226 350 MPI B1

#33013 - 05/19/04 08:33 PM Re: Negotiating Interest Rates on your new boat  
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Pontchartrain Offline
Admiral
Pontchartrain  Offline
Admiral

Joined: Jan 2003
Posts: 1,583
Covington, LA (near New Orlean...
Hopefully this is still considered on topic:

Can anyone tell me how to REFINANCE?

Potential problem: I am under $15,000 balance, which often also happens to be the lower threshhold for refinances.

I bought the boat almost 3 years ago and I think I should be able to do much better, interest-wise, nowadays.

Anyone?

Ed


Boat's gone. I'm on an extended boat shopping trip.
Truck's been traded in for a Mini-van. The rugrats are taking over! Update: As of July 2010, might be thinking of getting back in! :-)
#33014 - 05/19/04 08:38 PM Re: Negotiating Interest Rates on your new boat  
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Bones Offline
Admiral
Bones  Offline
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Eddie,

Do you own a home? Go Equity Loan if you do. It's a decent write-off. ;\)

If not, buy a bigger boat! \:D If it has living quarters, enclosed head, a few less etcs, it can also be written off as a second mortgage I believe. (Unless Geo W took care of that too... :rolleyes: )

#33015 - 05/19/04 08:47 PM Re: Negotiating Interest Rates on your new boat  
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Bones Offline
Admiral
Bones  Offline
Admiral

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GFC is a very sharp guy! Goofy at times, :p , but VERY SHARP! ;\)

He was refering to your FICO score I think. Much more important than your standard credit report. (Don't I know :rolleyes: )

It's available online, if you have the nerds, or by snail-mail via phone call.

If you ever get rejected for credit or a loan, it's free. They (the credit reporters) have to explain why, to you, why you were rejected.

BTW....Who's doin' it now-a-days? Experian? Equifax? Transunion?

#33016 - 05/19/04 11:08 PM Re: Negotiating Interest Rates on your new boat  
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GoFirstClass Offline
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GoFirstClass  Offline
Retired Boating Bum
Grand Poobah

Joined: Nov 2003
Posts: 14,923
Pasco, WA
You can get your credit report on line through the three major credit reporting agencies: Experian, Transunion, and Equifax. All three offer a basic credit report for a small fee, and you pay extra if you want to know your credit score.

A person should check their report separately through each agency at least every other year, and it's worth knowing what your score is. The reason each should be checked is that they each look at your credit from a different aspect. They're all similar, but not identical.

Scoring runs from around 350 up to 850+. If you are applying for a car loan a score of 700 is normally an automatic approval. If you are applying for a large loan ($50K+) for a boat or other toy it may take a higher score. Down payment helps too, and can get you approved on a loan even if your score is a bit lacking. And don't be surprised on a loan over $100K if they want a complete financial statement including assets, liabilities, etc.

To answer some of your questions and comments.....

Eddie, you should be able to refinance through your current lender but I'd check around to see who has the lowest rates. If you've been paying for three years and done a good job any lender would take your loan.

One caution about using a home equity loan for a boat or other toy. If times get hard and you have a boat loan, you can give your boat back to the bank to get out of the payment. It shows up on your credit report as a voluntary reposession and that doesn't look good, but some times it's unavoidable. If you have a home equity loan and times get hard the bank may be able to boot your butt out of your home. Total Bummer. \:\( \:\(

Bones, you're completely wrong....I'M GOOFY DARN NEAR ALL THE TIME!!! \:D I just happened to work in retail credit for over 10 years and picked up a few things along the way.

Chief, the downside to 20 year financing is that in the early part of your loan very little of your payment goes to the principal...it all goes to paying the interest on the loan. \:\( That means it takes a much longer time to build any equity in your boat. That means that if you want to trade it in for a newer one in a few years you may have too much negative equity.

As an example, if you compare 15 and 20 year financing on a loan amount of $40,000 at 5.5%--->
---on a 15 year loan your monthly payment would be $326.83.
---on a 20 year loan your monthly payment would be $275.15.
That's the good news. \:\) The bad news is that after paying your payments for 6 years, your loan balance on the 15 year loan would be $28,177 and on the 20 year loan it would be $32,560. \:\(

At the same time if your boat depreciated at 20% each year for the first two years then at 15% per year, it could be worth around $16,000-$18,000. Even if it was worth $20K, on that 15 year loan you could have $8K negative equity and on the 20 year loan it could be as high as $12,500.

That means that if you wanted to trade your boat in you either have to come up with much of that amount in cash, or that amount would be rolled over into your next boat loan and would make your payment much higher. Essentially you would be financing your new boat plus the negative equity from your old boat.

Those numbers are not far off reality. I've seen some pretty huge negative equity numbers in RV's rolled into new loans, and it ain't pretty to watch. RV's probably depreciate at around the same rate as boats, so there are many similarities.


"Beachcomber" 1995 Sea Ray 550 Sedan Bridge


Anchor's down......Bottoms Up!
#33017 - 05/21/04 11:10 PM Re: Negotiating Interest Rates on your new boat  
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Bill Wervey Offline
Lieutenant Commander
Bill Wervey  Offline
Lieutenant Commander

Joined: Sep 2003
Posts: 72
Marblehead, Ohio
We never let our dealer think that we weren't going to finance through them. We feel we got a better price on the boat because they thought they would make some back on the financing. The dealer happened to be using our bank...we made a better deal on our own behalf at our branch. It's not a terrible amount of rate difference, but it adds up on a large long loan. The true upside is that we deal at all times with our branch rather than some nameless person who doesn' know us. The dealer wasn't real happy, but nobody had made any promises and we seem to have a decent relationship with them.
Bill


Blue Moon
Vista 298
#33018 - 05/22/04 05:59 AM Re: Negotiating Interest Rates on your new boat  
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Dan Offline
Admiral
Dan  Offline
Admiral

Joined: Apr 2003
Posts: 316
Piscataway, New Jersey
Good post GFC! For anyone not sure about checking your credit report, let me help motivate you to do so. Several years ago, I had a gasoline credit card through Exxon. I paid them each month and on time every time. Later on, upon realizing that there was no need for it I paid off the balance and closed out the account. Some time later on (perhaps 6 or 8 months later), I started getting letters informing me that I hadn't paid all of the final balance. Naturally, I had the proof that indeed I had. I sent them this proof and they finally went away. Some time later I had my credit report pulled to review. Guess who was tarnishing it! Exxon, although paid, had never bothered to straiten out the mess that they made and it required more letter writing to the credit reporting agencies to correct it. Had I not checked, it would have remained that way. A couple of last comments for all. When pulling your reports from the big 3, by all means, do get your credit scores. As has been mentioned, the scores are one of the first things that potential lenders base their decisions on. Keep to a minimum the number of inquiries that you permit to see your credit report. That is, the more you apply for credit, the lower your score will go because frequent inquiries suggest to lenders that you are actively seeking loans or potential debt. ;\)

#33019 - 10/27/06 02:36 PM Re: Negotiating Interest Rates on your new boat  
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GoFirstClass Offline
Retired Boating Bum
GoFirstClass  Offline
Retired Boating Bum
Grand Poobah

Joined: Nov 2003
Posts: 14,923
Pasco, WA
Bumping it up to the top. \:D


"Beachcomber" 1995 Sea Ray 550 Sedan Bridge


Anchor's down......Bottoms Up!
#33020 - 10/28/06 12:38 PM Re: Negotiating Interest Rates on your new boat  
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Holden Offline
Ensign
Holden  Offline
Ensign

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Posts: 24
San Antonio, Texas
True that dealerships pad the IR. Another alternative to negotiating with the dealership, and smarter IMO, is to just find out who the lender is and at what rate you are approved. Then, just go through them directly. Of course, you can additionally negotiate on the IR w/ the lender, cutting out the dealership all together. But with this method, you can take your pre-approval to any delaership and shop them against one another. You will be shocked at what kind of deals you can secure this way.


2006 Crownline 220LS

"...I have to catch everybody if they start to go over the cliff...That's all I'd do all day. I'd just be the catcher in the rye and all. I know it's crazy, but that's the only thing I'd really like to be..."
#33021 - 10/28/06 03:29 PM Re: Negotiating Interest Rates on your new boat  
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agsbill Offline
Admiral
agsbill  Offline
Admiral

Joined: Jun 2004
Posts: 501
Lake Lanier..Gainesville, Ga (...
DAN,
You said all you need is 2 credit cards and a DEBIT card....I think debit cards are a bad idea...If someone steals your credit card and uses it, all you are liable for is a max of $50.00

If someone gets your debit card they can empty your savings and checking account (if both are covered by the debit card).....you have no protection...none...you are OUT THE MONEY.... \:\(

The DEBIT CARDS are FAKE credit cards.


PS>>>> I think you are entitled to one free credit report each year fom each of the 3 reporting agencies....

see
https://www.annualcreditreport.com/cra/index.jsp
you will have to give your SS# but its safe \:\)


SORRY ALL, I JUST SAW THIS THREAD WAS STARTED IN 2004 \:\(


Bill

2000 Cobalt 226 5.7 VP GSiDP (sold)
2004 Bennington 2575 RFS TriToon w/Honda 225 smile
#33022 - 10/28/06 05:04 PM Re: Negotiating Interest Rates on your new boat  
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GoFirstClass Offline
Retired Boating Bum
GoFirstClass  Offline
Retired Boating Bum
Grand Poobah

Joined: Nov 2003
Posts: 14,923
Pasco, WA
Holden, the rate that the bank gives to the dealer will almost always be lower than what you can negotiate directly with the bank.

The reason they do that is the dealerships send their favorite bank a LOT of loans so the bank treats them very well. Banks also give dealers special low rates when the dealerships have big promotions, off-site sales and boat shows, etc.

The Buy Rate we used to get our loans from a large bank in Idaho was about a full percentage point and a half below what you could negotiate. If the bank's current interest rate they gave their customers on a $25K-$50K loan was 8.99%, we were usually at 7.25%-7.5% on our buy rate.

agsbill
 Quote:
If someone gets your debit card they can empty your savings and checking account if both are covered by the debit card.....you have no protection...none...you are OUT THE MONEY....
Not always--it varies from bank to bank. My debit card has the same protections as a credit card, and also gives the same <30 day float on purchases. All purchases made with the debit card during the month are charged against the account on the last business day of the month. That allows you to earn the interest on that amount of money while it's in your money market fund which is currently paying 5.2% interest .


"Beachcomber" 1995 Sea Ray 550 Sedan Bridge


Anchor's down......Bottoms Up!
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