ANNAPOLIS – A strong economy and low interest rates are driving potential boat buyers to the loan market in unusually large numbers, said several marine financiers attending the sailboat and powerboat shows here this week.
The U.S. Sailboat Show, held over Columbus Day weekend, generated strong interest in boat financing, drawing contracts for loans as high as $500,000. The U.S. Power Boat Show, which began Thursday, is expected to be no less busy.
“The sailboat show was terrific – people were definitely in a buying mood,” said Nancy Wagner, an associate at First New England Financial. Wagner added that about 10 percent of the people she spoke to at the shows ended up buying a boat, compared to only 5 percent in previous years.
Jill Tomsuden, who manages loans in Maryland and Virginia for Essex Credit, agreed that potential buyers seemed more committed to the idea of working a boat loan into their budget than in years past.
“What I saw at the financing booth was people asking with questions about specific boats,” she said.
Sterling Acceptance President Karen Trostle said that, in addition to bringing in big cash commitments, the sailboat show provided a forum for potential buyers to become aware that financing is available. Trostle, whose firm brought in loans averaging about $125,000, said contact with these customers is as important as bringing home a good bottom line. Median loans for boat financiers generally hover around $100,000.
“People really still need to make their negotiations over the next 30 to 45 days,” she said, but “in terms of interest and phone calls and conversation, that’s been very good.”
The financiers attributed the strong buyer turnout mainly to strong, sustained economic growth, which is giving buyers the confidence to take out large loans for an essentially recreational purchase.
“People are making a lot of money in the stock market, especially in mutual funds,” Tomsuden said. “Also, interest rates are very good – we were doing about 7.99 percent” at the sailboat show, she said.
That rate was about the standard at this year’s show.
Approval for a boat loan can come as fast as that for a car loan, said Lawrence T. Regan, a manager for National Horizon, but the amounts involved more closely resemble those of a home mortgage.
The loan “is secured for up to $1 million,” he said, “but we can also offer 24- to 48-hour loan approval, because when a customer makes his mind up to buy the boat, the next question is, `When can I get it?'”
Essex Credit also does loans for as little as $10,000 — about $5,000 less than the minimum for most loan agencies. Tomsuden says the smaller loans help to hook people on boating who normally wouldn’t consider it because of the expense. These people, she hopes, eventually will move up to larger, more expensive boats as their incomes grow.
“We want to get first-time buyers involved in boating because we hope that when they move up, they’ll come back to us for financing.”
Regan’s average borrower, however, usually is around 40 to 45 years old and, not surprisingly, affluent, with an income of “at least $8,000 to $10,000 a month,” he said.
First New England’s Nancy Wagner, who doled out loans of up to $400,000 at the sailboat show, deals with a similar demographic, and adds that people in this income range appear to have more money to play around with in the wake of sustained economic growth.
“Discretionary money — that’s what boats are,” she said. “People are spending more discretionary income on sailboats” than in past seasons, she added.
In addition, the season to buy boats started earlier and shows no signs of abating, Regan said. He began to see strong sales as early as February, and expects things to get even better as the trade show circuit kicks into high gear during the fall.
“Ninety-seven has been a good year — a steady year for boating,” he said.
Tomsuden expects big things of the coming weekend. “Power boaters tend to come [to the show] and say, `I’m going to get this today,'” she said. “Sailboat customers will think about buying a boat for next year.” -30-