Boat Loan vs Boat Lease: Which Option Is Right For You?

April 12th, 2019 by


The boating industry in the United States has never been hotter. In 2017, marine expenditures approached $40 billion, which was a new all-time high.


Over 262,000 new powerboats were sold in 2017, a 5 percent increase from the year prior. This sales figure was the highest throughput in the past decade.


The boating industry is buoyed by a strong national economy. Demand for new and cheap used boats is stronger than ever.


Now that we have convinced you to get on the water, the question is whether a boat lease or financing is the best option. Many boat consumers struggle with this choice.


Read on to explore whether a boat lease or loan is the best option for you. Learn about the various factors to consider when making this decision.



What Are the Benefits of a Boat Lease?


From a conceptual perspective, a boat lease is nearly identical to an automobile lease. There is a short-term fixed duration, usually two to three years.


Lease consumers are happy with this arrangement for a number of reasons. For starters, it nearly eliminates the risk of costly repairs and lifecycle maintenance costs.


When the boat lease term ends, you simply exchange it for a newer model. This is also an appealing characteristic because you are essentially getting a new boat every few years.


Another benefit is that it removes the hassle of negotiating a trade-in boat price. This is a contentious topic because many boat owners feel their boat is worth more than it really is. Factors such as resale value and depreciation are not relevant at the end of a boat lease.



How Is the Monthly Payment Calculated?


Next, we will walk you through the calculation of a monthly payment. Like any financing option, the monthly payment includes interest charges and fees.


Another key variable is the lease term. Typically, a boat lease includes 24 to 36 monthly payments.


Finally, the lender and consumer negotiate over the principal amount. On a traditional loan, this is pretty straight forward as both parties negotiate the unit’s sticker price.


On a lease, the negotiation process takes a different form. Instead, the consumer is responsible for the delta between the sales price and the boat’s residual price. The residual price is the perceived value of the boat at the end of the lease term.



How to Negotiate a Lease?


Leasing is slightly more difficult to negotiate than a traditional loan. This is because there are two price points to consider.


The first is the boat’s sale price. This is the retailer’s selling price and includes freight, setup, and other fees.


Like an automobile negotiation, the recommended strategy is to pay the lowest price as possible. The lowest price is would be amount that the retailer paid the manufacturer for the boat. In special circumstances dealerships even sell boats for under what they paid for it depending how long they have had it in stock.


The next negotiation point is the boat’s residual value. You will discuss with the sales agent the projected resale value of the boat after the lease term ends.


Lastly, the lender may have flexibility on the interest rate. Typically, lenders can offer more competitive interest rates to consumers with excellent credit history.



What Are the Downsides to Leasing?


Like any financing option, there are disadvantages to moving forward with a lease. For starters, you do not have an ownership stake in the boat. This means that you are not building equity with each monthly payment.  


You are essentially passing on the financial benefits to the boat retailer. The cost of asset depreciation is passed on to the consumer. It is important to note that depreciation occurs more rapidly in the first few years of ownership.


Another potential downside is limits placed on the boat’s usage. The lease terms may limit the number of miles or hours put on the boat each year.



Where Can I Find a Boat Lease?


Finding a boat retailer that offers a lease option is not easy. This is a relatively new financing option in the boating industry.


The most obvious places to look are a boat dealership or a charter club. It will take some research to find boating distributors that offer leasing packages.



What Are the Benefits of a Boat Loan?


Leasing is not the right selection for everyone. A boat loan, for example, is better suited for shoppers looking to take ownership of an asset.


At the end of a loan term, the boat’s title transfers to the consumer. This means that you are officially the owner of a boat.


Another benefit of financing a boat is that the loan terms are much longer. While a lease is generally up to 3 years, a boat loan term ranges up to 7 years.


With a 5 or 7-year loan term, the principal is spread out over a longer time period. The end result is cheaper monthly payments.


When you are financing a boat, there are no usage limits placed on it. This means that you can drive the boat as often and far as you like.


There are also many more lenders to secure financing. In addition to boat dealers, you can pursue a personal loan at any local bank or credit union.


Because of the wide availability of credit, you can shop around for the best deals. Now, the best strategy is to find the lender offering the most competitive interest rates.



What Are the Downsides of a Boat Loan?


The biggest downside is that the onus of maintenance and repair is completely on the consumer. After the manufacturer warranty expires, the lendee is responsible for any unscheduled maintenance or repairs.


Another disadvantage is that a boat loan may require a significant downpayment. In some cases, a lease does not require any money down.



Wrapping It Up


Investing in a boat is a great decision. It is certain to bring you enormous pleasure and improve the quality of your life.


While leasing is not widely available yet, it is growing in popularity and a solid option. Depending on your needs, both leasing and loans give you two reliable alternatives to acquire a boat.


If you are interested in learning more about the boat lease vs. loan debate, contact us today to schedule an appointment.