The price of a boat is not always paid in full from your own funds. A loan or a finance lease can make the purchase possible. These routes also change the timetable, the documents and the registration, which is why they need to be understood from the start.
The difference between a loan and a lease
When you buy with a loan, the boat is registered in your name. To secure what it is owed, the lender takes a mortgage over the boat. The mortgage is entered in the register and stays there until the debt is paid off.
Under a lease, the boat belongs to the leasing company for the term of the contract and you have the right to use it. The contract states how the boat is transferred to you when the term ends.
Which route suits you depends on your legal and tax position. You take that decision with your tax adviser.
The total cost
The cost of finance is considered together with the cost of running the boat. The size of the down payment and the boat's loss of value over the years belong in the calculation as well. So do the arrangement and valuation fees, compulsory insurance and the terms for early repayment, on top of the interest or the lease payments. If the finance is in a different currency from your income, think separately about how movements in the exchange rate would affect the repayments.
How the lender looks at the boat
The lender sees the boat as security for what it is owed. So it asks for a survey or a valuation report showing the boat's value, and it looks at the boat's age, flag and insurance. Lenders may have their own limits on the flags and the ages of boat they accept.
For as long as the finance runs, it is usually a condition that the insurance continues without a break and that the lender is named on the policy as loss payee. Changing the area where the boat is used, chartering it out or changing its flag may need the lender's consent.
The effect on the timetable
Approval of finance takes time, and that time is allowed for at the offer stage. If the purchase depends on finance, we state the condition plainly in the offer and the sale agreement: by when approval is to arrive, and what happens if it doesn't. A seller will not always accept such a condition, and we discuss that at the start too.
Under a lease, the buyer named in the agreement is usually the leasing company itself. Getting the names of the parties right from the first day means no documents have to be corrected later. The order in which the payment, the bill of sale and the registration of the mortgage follow one another on completion day is also agreed beforehand.
If there is a debt on the boat being sold
The boat being sold may have a loan or a lease on it as well. In that case the order in which the debt is settled, the mortgage lifted, the bill of sale signed and the boat deleted from the register is written down at the outset. We ask the seller's side for the transcript of the register, which shows whether there is a debt or a mortgage on the boat.
Questions before you decide
- In whose name will the boat be registered, and does the lender accept that structure?
- What are the lender's conditions for the boat's age, flag and area of use?
- Which documents and which report are required for approval?
- How will the finance condition be worded in the sale agreement?
- In what order will the payments and the documents follow one another on completion day?
When these questions are answered at the start, the timetable and the documents are built around the answers.
