Financing vs Leasing a Boat or Yacht in Canada

Every year at springtime, water lovers everywhere daydream of spending days relaxing aboard a boat or yacht. For some, their life’s dream is to buy a vessel to call their very own.  Others are satisfied with renting a boat a few times during the warm weather season. There are pros and cons to both; financing vs leasing a yacht or boat is a decision made by comparing the options. Topics covered under this subject are:

  • Facts and Stats
  • Funding via Financing
  • Leisurely Leasing
  • Pondering the Pros/Considering the Cons

Facts and Stats 

The oldest boat ever recovered is the Pesse canoe. It was made from a hollowed tree trunk and is on exhibit in a museum in the Netherlands. Reportedly, the craft was made sometime around 8600 BC! Fast forward to the present age, and recreational boating is enjoyed by millions of people from all walks of life. Among them are those who did not pay cash for their watercrafts but chose to finance or lease their boat or yacht.

Each day, powerboats, sailboats and yachts of all sizes glide across bodies of water from lakes and rivers to endless blue seas.  The immense popularity and interest in this leisure activity is reflected in these statistics:

  • In 2015 alone, $36 billion was spent on boats and other marine products in the U.S.
  • In Canada, $2.1 billion in new recreational boats and $1.6 billion in used boats were sold in 2015 (not including yacht sales).
  • Recreational boating supports 650,000 jobs annually in the United States.
  • In 2016 a whopping 43% of Canadians went boating.
  • In the 2014 European market $526 million was spent on power boats and $101 million on sailboats in just the first quarter.
  • There were 8.6 million Canadian boat owners in 2016.

To learn more about boat financing in Canada, visit Smarter Loans – Canada’s Loan Directory. 

Funding via Financing 

Financing for a boat is a secured loan, which means that the boat is collateral for the loan. Getting a loan for a recreational vehicle like a boat is a lot like other secured financing such as home mortgages and auto loans. Like these, there are numerous financing options from which the buyer can choose. Some questions to ask about financing are:

Q:  Where can a buyer find a loan for a boat or yacht?

A:  Financing can be found at some banks and credit unions. The majority of dealerships that sell boats offer in-house financing. Loans for boats and yachts are also offered by online lenders.

Q:  What are the qualifications to be approved for a boat loan?

A:  Specific qualifications depend on the lender and location but in general, approval is based on some of the same factors as other secured loans. These include credit score, income/employment and other documentation like proof of assets, liabilities and tax returns.

Q: How much interest should a buyer expect to pay?

A: The rate of interest charged depends on the lender, the buyer’s credit score, the market rate and the vessel purchased, among other considerations.

Q:  How much of the cost of the boat or yacht can be borrowed? 

A:  For new watercraft, most lenders will finance 85 to 90 percent of the total purchase price. For a used boat, the terms of the loan will be determined by its age and condition.

Q:  What should a borrower do before applying for a watercraft loan? 

A:  Ask the lender for the details of a loan, such as discloser documents. Get the costs of application fees and find out what are the charges for document preparation and prepayment.

Q:  How can a buyer prepare to apply for financing a boat or yacht? 

A: Preparation should begin with checking the credit report and getting a credit score. To have a greater chance of approval, potential boat owners should repair credit errors by disputing mistakes and raise a low credit score by making timely payments and resolving defaults before applying.

Anyone interested in financing a boat should save a good amount of money before purchase. Financial experts advise buyers to save from 6 months to one year of living expenses and monthly boat payments as a cushion in case of an emergency (separate from the down payment of about 15 to 20%).

Leisurely Leasing

New boaters make up a large number of people who choose financing vs leasing. Renting a boat lets them decide if they really want to take up boating before making the huge investment. Then there are special occasions like parities for which people rent a yacht or boat for one day without the need to commit long-term. Even experienced skippers go the rental route instead of taking the plunge into boat ownership. The most common leasing options are:

  • A bareboat charter is a contract similar to vehicle leasing in that the customer takes possession of the vessel for a certain time period. The lessee is responsible for its meticulous upkeep and all expenses like crew costs, port fees and insurance. This leasing option provides the boater with the “bare necessities”, like tools and safety equipment-as opposed to vacation boat rentals in which fishing equipment, food, and even linens are supplied.
  • A crewed charter is a lease for a specific one-time voyage. The chartering company pays for the crew and all costs.
  • Boat sharing is a concept that works like time sharing. Boat club members share a boat fleet with a variety of vessels for a specific time period. Insurance and other responsibilities for the crafts are paid by the club.

Leasing vs financing is the choice for people who don’t set sail regularly. Boaters who don’t care to do the upkeep that boat ownership requires also choose leasing. Both buying and leasing have advantages and disadvantages that should be measured before making a decision. 

Pondering the Pros/Considering the Cons 

Boating is not an inexpensive activity by anyone’s standards. Therefore, boat lovers need to weigh the selections that are available before obligating themselves.

Pros of Financing 

  • The boater enjoys pride of ownership (and bragging rights) that comes with buying their own boat.
  • Boat owners can set sail when they want, as often as they like.
  • Potential to earn extra income from renting the boat.
  • Families that own boats can save money in vacation costs.

Cons of Financing 

  • Boat lenders don’t usually allow co-signers to the application so credit must be in good to excellent shape.
  • Tons of extra costs besides the monthly payment like storage, upkeep, insurance, cleaning etc.
  • The boat can be repossessed if payments are not made.
  • Can only cruise during the warm weather months in cooler climates.

Pros of Leasing 

  • Renters pay less money up front.
  • Not responsible for storing the boat during the off season.
  • Can try out a wide variety of boats in a shared leasing situation.
  • Boat can be returned to the marina after use to be cleaned and maintained.

Cons of Leasing

  • Shared boating comes with the risk that a craft is unavailable when the boater wants it.
  • The costs for bareboat chartering can add up with fees, bonds, insurance and a qualified captain.
  • No equity built up with payments and the lessee never owns the boat or yacht.
  • Accessories, gear and personal items have to be taken on and off the vessel with each trip.

People with a passion for pleasure boating can and should explore whether financing or leasing a boat or yacht works for them in the long run. Once a sound decision is made based on their situation, they and their families can sail away with the wind in their hair under bright sunny skies.

You can find any loan in Canada, including boat financing and leasing using Smarter Loans – Canada’s Loan Directory.