I though I would do a bit of educating on the finance side of the market since many deals are still finance contingent and we are seeing banks re-adjust on values downward as repo’s and short sales effect market prices.
Say a customer comes in looking to buy a boat (example a $95,000 express cruiser) and needs to obtain financing. We like to control as much of the process as possible in steering that deal towards the lending process. Writing the deal is only the first of 3 to 4 hurdles before the finish line. Once a deal is written contingent on finance the following issues need to be addressed:
Credit Score: Banks are just not touching people lower than a 695 score and when they do look at those candidates they are going to want to see low revolving credit debt as well. Scores below 695 have been getting rejected regardless of how much money is being put down or income coming in. It’s a deal stopper if a buyer has anything dragging a score to 630-675. Do you know your score? It’s amazing how many people do not and get a big surprise. With so many services like Identity Guard or FreeCreditReport.com buyers of homes, cars or boats should check this first and clear up any issues.
Liquidity: Banks are going to want to see a buyer’s ability to put 15 to 20% of the deal as a cash down payment including taxes. Again this is another place where buyers used to not have a worry but has stopped deals in their tracks. Being cash poor will hurt you. On that $95,000 boat you are going to have to be able to show $17-$20k in cash non retirement savings plus a reserve on a bank statement. Retirement accounts, 401k’s all don’t matter. Good hard cash is a must and has gotten harder to get around as BUC values below discuss.
BUC Value: This and highest hurdle should we have a buyer that is close on the two factors above. The BUC (not NADA) book values are what most marine lenders are basing how much money they will lend. It’s very easy to figure (we subscribe to it), as the bank will simple look up the boat model, engines, and year and then cut the low retail # to 85%. That is the maximum amount of cash they will loan on that specific boat.
Ex: If the $95,000 contract express cruiser is a 2003 Four Winns 328 and has a low retail BUC# of $92,700 then the bank will lend only $78,795 leaving our buyer to come up with cash to make up that difference. BUC values are adjusting lower due to short sales and repo’s and can sometimes stop a deal in its tracks not only by requiring the buyer to bring more cash but also making them feel a sense of overpaying if the bank is only willing to lend so much. A high BUC value allows us to get more creative with a cash poor buyer and those cases do occur but are becoming less frequent as values are getting readjusted.
|FOUR WINNS INC, CADILLAC, MI,|
|Model Year||2003||Hull Material||Fiberglass|
|Model||VISTA 328||Hull Configuration||Deep Vee|
|Length Overall||35′ 1″||Draft||3′ 3″|
|Length On Deck||32′ 11″||Beam||11′ 9″|
|Boat Type||Cruiser | Open||Weight||12600 lbs.|
|The information presented here is believed to be reliable but not guaranteed. For various reasons, including the subjective nature of vessel evaluations and the possibility of incomplete or inaccurate information regarding comparable vessels and sales thereof, we do not make any warranties whatsoever regarding this report, and WE EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. BUC does not provide expert witness testimony.|
The good news is that 2 years ago we were seeing buyers that had less and less knowledge of how the credit markets have tightened up. Probably 50% of the finance contingent deals were getting rejected by the banks compared to probably 25% today. It seems a lot of the marginal buyers have been taking out of the system from being rejected or educated by the media and markets. The hurdles are still there and not coming down anytime soon but money is flowing for those that can cross all 3 factors to reach the finish line.