By Ross McLellan,
Director of ORCAP Project Finance (part of Oracle Capital Group)
The recession brought about a predictable drop in the number of yacht sales around the world. Now that the economy is showing tentative signs of growth, interest is also picking up in the yacht market.
Unfortunately, it is still a long way from returning to what it used to be. The reality is that, post-recession, it is more difficult to secure financing to purchase a yacht. But don’t be discouraged! With some planning and the right information, you can still secure your dream vessel.
First and foremost, it’s advisable to have your financing in place before you shop for your yacht. This way you can focus on getting the best price. If the financing terms are up front, there is one less thing to negotiate at the point of purchase.
The biggest post-recession change is that lenders are now far more vigilant. Credit applications that might have been given a cursory once-over before the economic downturn are now looked at closely. Application forms now often require you to list (amongst other information), employment details; income, asset and liability statements as well as bank, rent or mortgage payments; investment and retirement accounts; real estate holdings; vehicles and yachts; secured and unsecured loans and credit card debt.
Applicants must also be responsible for the provision of the proof of income such as current payslips and/or tax returns — and lenders today expect an applicant’s debt-to-income ratio to be around 35% to 40%. Better quality borrower and income-verification processes are in place, again to decrease the risk for the lender and ensure that the borrower has the discretionary income to afford a yacht.
Furthermore, if you are purchasing a yacht, it is vital that you can prove a consistently good relationship with the bank – in other words, a good credit history. This will enhance your status as being reliable when obtaining a loan. It will also strengthen your position in any future dealing with the bank.
Negotiating tips
- Get your financing first. It’s advisable to have your financing in place before you shop for your yacht. This way you can focus on getting the best price.
- Be flexible on features. Be prepared to compromise, but only on the extra features that are not included on your need list.
- Ask questions. Be sure to understand what the seller has to offer and have them explain all figures presented to you.
- Be prepared to wait. Selling as well as buying a yacht is a big commitment, so have some patience with the seller.
- Get it in writing. Have the seller give you a quote with the price, terms, and options that are included in the deal.
