Boaters Forum

Negotiating Interest Rates On Your Next Boat

Discussion about liens, mortgages, and general information regarding vessel financing.
This thread is a partner to one on negotiating for a lower price on your next boat. The two threads have been copied/pasted from another forum. I am the original author of both threads and posted this one in May, 2004. In the 10+ years the two threads have been on the other forum they were made 'sticky' threads and remained at the top of the page they are on. In that time, they have gotten almost 128,000 page views.

I hope you can get some tips from what I'm sharing to help you get a lower interest rate on your next boat purchase. BTW, these tips also work for cars and trucks, RV's, etc.

Here's a link to this same thread on the other forum if you want to go over there to read all of the comments people have posted.....
http://www.boatingabc.com/forums/ubb...Rates_on_.html

Enjoy......
"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."
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