As most any of the more than 12.7 million U.S. boat owners would probably attest, nothing matches the fun, freedom and serenity they feel when out on the water. While it’s true that boats are costly and require a serious time and resource commitment, if you have your heart set on boat ownership you’re in the right place. Here are some great ways to empower you on the path purchasing a boat.
So, assuming that you’ve already landed on the size, make and/or model boat you want, you now have four (or so) ways to go about buying it. Each has its advantages and disadvantages, and it pays to weigh each option carefully. Our mission here is the same as yours: To make sure you get a good value on a quality vessel that you can start enjoying right away.
Financing a Boat
Unless your boat purchase is to be an outright cash transaction, odds are you’ll need some sort of financing. This is where having and maintaining a healthy credit score pays off, because it will help afford you (relatively) cheap access to the capital needed to buy your boat.
Boat financing really doesn’t differ very much from a home mortgage or auto loan in that you’ll kick in a down payment—10%-20% of the purchase price, perhaps—and then make monthly payments to the lender for the rest.
Rates and loan terms vary, of course, and highly depend on factors like your credit score and financial history, income and current assets, and the sale price of the vessel. However, loan terms can last as long as 20 years (for high-priced boats) and interest rates at the time of writing were between 5% and 7%.
Just like with a home or auto loan, you should shop rates and terms across many different lenders and use the internet to your advantage when doing so. Be sure to have your financial house in order when applying for financing, and take steps to improve your credit score in the months prior to ensure you’re a strong candidate for lending.
Heightened interest in boating has given rise and staying power to a couple of alternative boat ownership strategies. For those who want to defray the substantial costs of boat purchase and ownership, these options are worth considering:
- Shared Boat Ownership
- Peer-to-Peer (P2P) Boat Rental
The shared boat ownership model simply entails two or more parties (typically friends or relatives) agreeing to split the costs of buying and running a boat. They then share time equally or as agreed upon between the parties. The advantages are clear: Shared ownership enables you to reduce your overall financial commitment, or perhaps increase your buying power to afford a bigger, better boat than you might on your own.
The down side of shared ownership, of course, is that you don’t fully control the asset. Because disputes can arise and come between friends or family members, it’s important to draw up and enter into a basic contract that governs important items like:
- The division/sharing of use
- How all boat-related costs (docking, fuel, storage, maintenance, insurance, etc.) will be shared
- What happens if one party can no longer afford their share of the vessel
- Settling of disputes
Another way to defray costs and turn your boat into an income-producing asset is by way of peer-to-peer (P2P) boat rental. This concept works a lot like Airbnb, except it’s specific to boats. Willing renters use the Internet to connect with you, the boat owner, or a third party which helps broker the rental transaction (in return for a percentage of the fee).
P2P boat rental is gaining in popularity and can create a ready income stream for some boat owners. However, it’s imperative that you require renters to either buy supplemental insurance coverage (through a third party), or sign an acceptance of liability. That’s because your standard boat policy is virtually certain to deny coverage in the event of an incident for which you were not the boat’s operator.
Buying a Used Boat
Dealers and especially the boat show circuit are excellent sources for buying new or used boats. Particularly if you know what you want to buy, boat shows can provide access to multiple dealers eager to turn over excess inventory. As a result, the boat show environment promotes price competitiveness and gives willing buyers access to multiple onsite lenders as well. For these reasons, you may want to brave the crowds and fast-paced atmosphere.
Now, here’s the most important advice there is if ever you’re considering buying a used boat: Do not make any commitment, financial or otherwise, until you have the vessel surveyed by a licensed marine appraiser. The survey may cost you around $400 for a smaller vessel, and up to around $1500 for a larger one, but the information provided will do much to empower your decision.
Pay particular attention to these two survey components: engine hours and compression-per-cylinder. If a marine survey on a used boat reflects low engine hours and high (and equal) compression-per-cylinder, you’ve probably got a good boat there. If these numbers are suspect, however, it may be an early warning sign about hidden problems and you should walk away or at least use extreme caution.
Lastly, don’t focus so much on the boat that you ignore the trailer. Purchasing a used boats may also mean a purchasing a used trailer which if rusted, rotting or in need of repair can easily break, leaving your new, used boat on the ground before you even get it in the water.
Viable Alternatives to Boat Ownership
In the end, remember that there are many ways to get out on the water, some of which don’t require you to buy a boat at all. Especially if you’re new to boating or lack experience as a boat captain, it’s probably best to test the waters, so to speak, with one of the below alternatives to boat ownership before jumping in and assuming all the costs and responsibility of owning a boat.
Boat Clubs & Time Shares
A boat club membership will afford you access to a fleet of vessels, and because the club handles the storage, cleaning and maintenance for you, you save a lot of money and hassle in the process. The rules and fee structures may vary widely with each club, though, so be sure to do your research and gain an accurate understanding before signing up.
There are also boating time shares, which allow you to buy a block of time in a fleet of company-owned boats. Here again, if you’re new to boating, perhaps try this for a year before deciding whether to buy a boat of your own. Like with any time share purchase, though, don’t be pressured by hard sales tactics. Be sure to ask questions to gain a clear and accurate understanding of the rules and usage structure.
Beyond boat club membership and time shares, there’s still the option of good old-fashioned boat rentals or charters. These allow you a range of options depending on your needs and desires. Taking the time dabble a little bit before making a full-scale leap into boat ownership can help you make an informed decision, and ensure you buy a boat you’ll be happy with for years to come.
Special thanks to insurance and boating industry expert, Jason Peters, for his meaningful contributions to this article.