08/04/2015
Boat Values - Common Boat Loan Challenge
One of the most surprising issues to customers in boat loans are how boats are valued for purposes of financing. They are often in shock where they are buying a boat which is priced much higher than the book values and what the lender is willing to loan yet it is below or within range of the current boats for sale.
This can happen for many legitimate reasons. One common one is the boat is immaculate or has been refurbished or refitted. A no brainer for buyer and seller for top value. However, lender will only use book values unless engines have been upgraded. Another may be it is the only boat of it's kind up for sale and is demanding top dollar. The books typically are using historical sales for value including boats which have been sold in bulk, dumped or liquidated. Since we were in a depressed economy, those sales prices were low and it has taken some time for the books to average in the high prices of today. And yes, sometimes the boat is overpriced!
What will be used for financing?
Most lenders use one of two main services, either BucValu.com or Nadaguides.com. Every lender is different in how they use them, some use wholesale value, some use low retail with options, and other use high retail. Some will only use NADA and others will only use Buc. It truly is a lender by lender policy decision.
Let's look at an example of a $250k cruiser. If the lender uses high Buc and they require 15% down and high buc shows the value as $220k, the lender will loan $187k ($220k buc value * 85% requirement). Another way to look at this is 15% down off of the lower of Buc or the actual purchase price. In this situation, the true down payment requirement is $63k (or about 25%). This is simply the difference between the $250k purchase price and the $187k loan amount. So understand the down payment requirement assumes the boat will value out. If the boat does not value out in the books, you WILL have to make a higher down payment. If the boat valued in Buc at $290k, the requirement would be $37.5K ($250k * 15%). They disregard the high value and go with the purchase price.
What is the true value?
Just like with anything else, it is what a buyer is willing to pay and a seller is willing to receive. It's just a matter of how much down payment you are going to have to make.
If you have any questions or need help with value or a loan, give me a call at 954-847-1552. Thanks, Jack
