You can't miss the headlines: "Fed cuts interest rate again." Banks urge you to "Refinance today!" Spam e-mails remind you that "Rates have been slashed again! Save money!"
The spiraling drop in interest rates is spurring lots of marketing spin, but what matters most for boaters is that marine lending rates are at their lowest levels in decades. So financing a new boat or refinancing an existing loan is something you should seriously consider-you'll likely find some good savings if you act quickly. "We're in a refinancing boom," says Kenneth R. Landon, CEO of Key Bank's Recreation Lending. "And we're seeing the lowest rates in probably 40 years."
What kind of numbers are we talking about? While early 2001 saw interest rates as high as 8.5 or 9 percent, you can now find fixed-rate 20-year loans for as low as 6.75 percent. Sure, the short-term federal interest rate has experienced deeper cuts (about 3 points over the same time period), but boating's smaller 1 to 2 percent drop is still a rare opportunity to snag some low monthly costs. This is especially true for new boats, as manufacturers are adding attractive incentives: Formula, for example, offers a choice of cash rebates or reduced-rate financing as low as 1 percent for two years on all its boats. And last fall, Tiara served up 0 percent financing on new boats for a full year. Look for similar deals from other builders.
But it's refinancing that's hot right now. "People tend to stick their contracts in a drawer and forget about them. But now is the perfect time to pull them out and compare them against the new rates," says Matt Bartosh, president of Offshore Financial, a marine lender. Cliff Kapel, president of an aviation maintenance company in Florida, did just that. Kapel bought his 38' Sea Ray Sundancer two years ago and financed the $200,000 balance at a rate of 8.5 percent. But last fall he snagged a rate of 6.75 percent. Monthly savings: $250.
So should you follow the lead of other boaters? "If you can save 1 percent or more, it's an automatic decision," says Landon. "And even 0.5 percent makes a phone call worthwhile." Since closing costs on boat loans remain small (count on approximately $500), a small difference in the interest rate could save you a bundle over the life of the loan.