FINANCE

The Caveat – First, please understand that our expertise lies in matching individual sailors with the sailing or power cat that will best meet that buyer’s particular boating needs. When it comes to financial matters, we recommend that you ALWAYS refer to a professional in that field.

So, the following should not be construed as either advice or “gospel.” We offer it simply as “general information.” (Sort of like those reprinted charts with the small-print disclaimer – “Not to be used for navigational purposes.”)

The Loan – Okay, keeping the above disclaimer in mind, we can tell you that about 15% of our catamaran buyers pay for their boats themselves – and the remaining 85% post a down payment, with the remainder of the purchase sum coming from a loan institution.

Boat loans are simpler than home loans. There are no “points”, “closing costs,” or “pre-payment penalties.” The vast majority of our buyers decide upon a 15-year loan, make a down payment of 20%, and get a loan for the remaining 80% at interest rates currently ranging from about 7.75% to 8.5%. Sometimes if you put 25% down, you can get a slightly better interest rate. And some lending institutions will accept only 10% down. Generally speaking, your credit rating must be better than that which is required for buying a house.

Typically, you’ll get the best rates from any of the companies specifically geared toward boat loans. Our clients have had good results with companies such as Dimen Marine Financial [ (866)486-2628 ], First New England (formerly National Horizon), and Essex Credit Corp. (Telephone numbers available upon request.)

Don’t Ask / Don’t Tell – Sometimes boat buyers will think that because they will be putting their vessel into a commercial activity that the lender will look more favorably toward okaying the loan. Wrong! Lenders almost invariably take the other tack. They assume that if you’re placing your boat into commercial activity, it may well be because you otherwise cannot afford to buy it. Given that assumption, they fear that if anything should happen that sidelines your boat from its commercial activity (storm damage, dissolution of the business representing the boat, downturn in the economy, etc.), you’ll then be UNable to make your monthly loan payments. And the last thing that a lender wants to face is repossession of your boat. He’s not in the business of selling used vessels. And meanwhile his loan money is suddenly not being repaid.

So, it’s not uncommon for people who are purchasing a boat that they will then place into a business venture (charter, floating B&B, etc.) to not “trouble” the loan officer with that information. Mind you, we are not recommending that tack; we’re simply reporting what we’ve heard is sometimes done by certain buyers. As little as five years ago it was almost impossible for an individual to get a loan on his own for a boat that would then be put into charter if he announced the boat’s destination to the loan officer. Very recently, a few companies have begun openly soliciting buyers who were seeking loans for charter-base bound boats.

Other Expenses – All new boat buyers will probably face the following costs in addition to the above loan matters.

• Insurance.  For US coastal sailors this will cost approximately 1% of the claimed value of the vessel. Of course, there can be mitigating factors that affect that approximation. For example:

• Are you an experienced sailor? If not, understandably you’ll probably pay a bit more. (You can “fudge” about this. But if you subsequently make a claim and the adjuster discovers that you “padded your resume,” you may discover that the insurance company rules that grounds for NOT recognizing your claim. Hence, your “whopper” could “come a cropper.”)

• Will your cat be used for commercial purposes? If so, then insurance will undoubtedly cost you more. For example, it’s no uncommon for boats engaged in bareboat (i.e., no paid crew onboard) to pay about 3% for insurance coverage. If there IS crew onboard, then you may be charged less. (Important note: while some buyers don’t announce to their loan officer that the vessel will be placed into a commercial venue, it is imperative that you are completely candid with your insurance broker about the type of use the boat will see, and who will be helming the vessel. While there are many highly reputable insurance companies, NONE of them are looking to make payment on a claim if the boat was in use under conditions other than those covered in the policy.)

• Are you sailing near or far? The above rates are typical for “coastal” or “coast-wise” sailing. Generally that means within a certain distance from shore (50 or 100 miles, or whatever). If you know, for example, that as an East Coast sailor you may want to sail to Bermuda at some future date, it’s probably cheaper to purchase a coastal-coverage policy that allows for a subsequent “rider” to the policy if/when you decide to sail to Bermuda. (In other words, riders for future voyages may make your overall policy cheaper than to pay, from the git-go, for a policy that include all regions to which you may someday sail.) 
       Sailors who plan to go transoceanic are likely to pay higher rates – sometimes much higher. In fact, many ocean sailors are, in effect, “self-insured.” That is, once they venture beyond the normal limits of their insurance policy, they accept that they’re liable for their own repairs or replacements. More commonly, ocean sailors will carry a “total-loss” claim. So they pay for ANY damage costs except for the total loss of their vessel. This strategy can result in thousands of dollars of savings on your insurance policy…and those saved dollars can buy some very helpful safety and navigation tools.

• Documentation – Every US private boat must be either state licensed or documented. The latter is a sort of “national licensing.” Virtually every boat-loan company will require that your vessel be documented. This is a one-time cost of about $450 to $600. You can do it yourself for under $100. If you wouldn’t perform a self-tracheotomy, we don’t recommend self-documenting. The down side for either DIY activity can be equally dramatic!

• Dockage – This is pretty self-explanatory. Rates in a major US coastal city can run from $6 to $50 per foot per month. (And if $50 sounds like too much, you may wish to bypass berthing in downtown New York City.)

Operating Costs: Sail vs. Power – Interestingly, the cost of purchasing and operating a sailing cat versus a powercat (equipped with “average” vs. “huge” engines) over, say, a two-to-five-year period are approximately the same. The “premium” that the sailor pays for the added cost of his cat’s mast, rigging and sails about equals the added cost that the powercat user pays for the larger diesels in his boat. And mile for mile, the cost of operating either vessel over a multi-year period is remarkably similar.