How to Finance a RIB
With low-interest rates continuing and COVID-19 nudging people into making the most of holidays at home, the idea of owning a RIB has become more appealing to many more people. The question of how to finance is one of the first questions asked. If you don’t have the cash there are 4 well-trodden paths to obtaining finance:
- Finance through the boat dealer
- A personal loan from a bank (secured against the boat or unsecured)
- A loan from a specialist marine loan provider, such as Promarine Finance
- A further advance or second charge on a home mortgage (not something we recommend)
Normally there will be a range of financing options with variable or fixed rates or a fixed rate with a balloon repayment at the end of the term.
What’s different about marine finance:
- If the loan is secured on your boat rather than unsecured then, assuming the boat valuation is sufficiently high, you’ll be able to borrow more over a longer-term.
- A boat survey is nearly always required for boat marine finance and the buyer always pays. Ordinarily, the boat has to be surveyed out of the water.
- The boat must have comprehensive insurance from an insurer approved by the finance company. The loan provider’s interest will be listed on the policy.
- A marine loan is an unsecured agreement between a lender and borrower. As the loan is not secured against any asset, if you fail to make repayments on the loan, then a court can appoint bailiffs to seize and sell off any assets they believe will settle the outstanding debt.
- A marine mortgage is a loan that is secured on the boat. By giving this added security lenders will normally enable you to borrow a far higher percentage to the value of the boat. If you fail to make repayments the boat will be repossessed.
- Like all finance, if you want to reduce your monthly repayments you need to either increase your deposit, increase the repayment term, or agree to an end-of-term balloon payment.
- New boats are subject to standard rate VAT. There are a few exceptions, the most common ones are where the boats are deemed to be houseboats on fixed moorings and boats that are only to be kept and used in a foreign country.
- Most brokers (like RIBs For Sale) will be happy to point you in the direction of a marine finance company.
- Marine finance is never going to be cheap. Similar to car finance, you are asking a lender to lend money on an asset that is probably depreciating in value and can be stolen or easily damaged.
Once you know roughly how much you have to spend the next steps are:
- Find the RIB you want to buy.
- Work out any other associated expenditure. The main ones will be insurance, moorings, boat storage, and maintenance.
- Look at your finance options and find out how much finance you can raise.
- Agree on the price with the seller and arrange a Sale and Purchase Agreement if relevant. The Royal Yachting Association (RYA) can provide a template for this if required.
- Arrange a third-party survey and valuation of the boat, The finance company will probably recommend a surveyor.
- Once the survey and valuation have been received agree on the final price of the boat and confirm back to the finance provider.
- The finance company will issue the marine mortgage documentation for signature and will liaise directly with the seller to review the boat’s title documentation and VAT status.
- The finance company will contact the insurer to confirm boat insurance is in place and to have the mortgage noted on the policy.
- Finally, the finance company will request final confirmation you wish to complete the purchase and release the funds to the yacht broker.
Thinking of buying a new boat?
Buying a new boat tips:
- Buying a new boat can sometimes appear cheaper than buying second-hand, but remember to include in your purchase all the extras. Carefully work out what the base price includes.
- With a new boat, you can choose the exact specification you want and you can expect a warranty.
- Safety equipment. Ordinarily, a new boat won’t include all the safety equipment so this needs to be factored into your budget.
- Make sure you understand when and how the title of the boat is transferred. Speak to the sales agent about how money paid to the agent is protected whilst the title is being transferred.
- Any requirements for stage payments? If a boat is being built for you the builder will often require staged payments. You’ll need to understand how secure your investment is during the build process.
- Ordinarily, finance companies don’t require a survey to be carried out for a new boat.
New boats should be released with 3 key documents:
- Original Builder’s Certificate from the manufacturer. The certificate will confirm the title and any identification numbers.
- Original Bill of Sale from the appointed agent. This document transfers the title in the boat from the agent to you
- Original VAT invoice from the agent or the builder addressed to you. This document will confirm all the boat details and hull identification number as well as the price excluding VAT, the price including VAT, and the VAT amount.
Thinking of buying a second-hand boat?
Buying a second hand boat tips:
- Investing in a full out of water survey to confirm the boat’s condition and valuation. The surveyor will be able to indicate what is a fair market value for the current condition of the boat. Finance companies will always require a survey. The type of survey required may vary. Normally, the yacht broker will be able to provide a list of boat surveyors or you can do your own research. Always check your surveyor is of good standing and has professional indemnity insurance.
- If you buy through a broker a key part of the process will be to sign a sale and purchase agreement. This document will list out the precise payment terms, any conditions of purchase. The Royal Yachting Association (RYA) can provide a sale and purchase template if required.
Second-hand boats should be released with 4 key documents:
- Original Builder’s Certificate from the manufacturer of the first owner. The certificate will confirm the title and any identification numbers.
- Proof of 5yrs clear title.
- Original Bill of Sale from the last owner to you.
- Original VAT invoice on the boat from new or the original customs documentation to confirm that VAT was paid.
Popular Marine Finance companies to look at are:
- Promarine Finance
- Pegasus Marine
At RIBs For Sale we have years of experience in the purchase of RIBs. Please pop in and see us or contact us by phone or email.