September 2013 Issue
Financing Good Ole Boats
Older boats mean higher risk for marine lenders.
Here is a question that has puzzled me for a long time. Many financial institutions offer financing on “mature” vessels but have a boat age limit of 15 to 20 years. But, if a 1978 classic-plastic boat underwent a major refit in, say 1999, does that make the boat a 1999 in the eyes of the financiers? I’d like to hear tales on how others may have gotten around this “rule.”
Merritt Island, Fla.
The short answer is that the financial institutions simply do not care whether the boat had a recent major overhaul. If it is old, they consider it more of a risk to finance.
According to Peggy Bodenreider, a director of the National Marine Bankers Association (NMBA), in lenders’ eyes, the market for a boat narrows considerably as it ages, making older boats riskier collateral. In their 30-plus years of experience in marine lending, the NMBA member lenders have found that the value of the improvements made during a refit, including rebuilt or new engines, equipment, components, and soft goods, depreciate at a much faster pace than when the boat was new. The age of the original hull has a disproportionate impact on the perception of the boat’s value for future buyers.
Unlike the real estate market, the boat resale market rarely adds the full cost (or even a large percentage of the cost) of refit improvements to a boat’s actual value, Bodenreider explained. In fact, she added, the market value increase may be insignificant, as there are still a limited number of buyers for an older boat, regardless of its condition.
“Lenders have seen this play out again and again when these refurbished boats are repossessed,” she said. “The market for older boats, even those with considerable upgrades and improvements, is not strong enough to bring a price that justifies the risk.”
There are NMBA member lenders who will finance boats as old as 30 model years, but most lenders have minimum loan amounts on older collateral of about $55,000, terms may be shortened to 10 years on the loan, and the rate is likely to be higher than for newer boats.
For more on boat financing, check out “Funding the Dream” (PS, May 2012) and “Stick with the Pros on Loans” (PS, June 2001).
You noted in the PS Advisor in the July 2013 issue that rope versus wire lifelines are a no-no vis-a-vis the ISAF. Who is that? I had new heavy, vinyl-coated, double lifelines installed on my cutter because they look nice, seem much safer than my original, worn vinyl lifelines, and are sturdy and tighter. I was told by the boatyard that they were “legal.” Did I do wrong? I thought that vinyl-coated lifelines are not recommended for boats racing offshore, but I plan to stay near shore.
Kadey Krogen 38
ISAF is the International Sailing Federation, the world governing body for competitive sailing. Its safety standards are meant for offshore racing sailboats, but they are good guidelines for cruising boats as well.
We don’t recommend installing coated lifelines because the coating prevents easy wire inspection and it can actually encourage corrosion when moisture breaches the coating and becomes trapped. The most common places for this to happen are at end terminals.
With new coated lifeline wire, we recommend installing adhesive-lined heat-shrink tubing over the interface where the wire meets any end terminals; do this before the lifelines are exposed to moisture. Also be aware that any coating chafe (by fenders, sheets, etc.) will allow in moisture, and taping over a chafed spot can actually make things worse by trapping water.
Be sure to regularly inspect the wire where it enters the end fittings and check the fittings closely as well. We recommend replacing coated lifelines about every five years.
For more on lifeline systems and inspecting them, check out the online version of this article and stay tuned for the results of the ongoing lifeline test we’re conducting with the U.S. Naval Academy (PS, September 2012).