Borrowing Money

Q&A: What to Know Before Buying a Boat or RV

Woman and friends smiling on boat

If you’re thinking about buying a boat or a recreational vehicle (RV), you likely have big plans for the future, whether it’s cruising, camping or everything in between. To turn those dreams into reality, it’s important to understand how the lending process for this luxury purchase works. Don Parkhurst, senior vice president of Marine & RV finance at SunTrust Bank, answers common questions about what buyers should consider.

Q: How is the financing process for a boat or RV different from something like a car?

A boat or RV is a luxury item, so it requires complex financing. There are a limited number of places where people can seek out these types of loans because you need specialized knowledge.

We look at liquidity, net worth and cash flow, which aren’t usually looked at in auto lending, for example. We’re going to ask the buyer for more information than we would for an auto loan, because we’re really trying to make sure they can afford it.

Q: Are there any fees specific to a boat or RV loan?

Our loans don’t have points and service charges, but there may be other fees charged for required documentation.

For example, for a used boat loan, there’s something called a survey, which is like a combination of an appraisal and a home inspection, only for a boat. And then for a used RV, there is an inspection. The customer pays these fees, and they can vary a lot. A boat survey can range from $500 to several thousand dollars, depending on the length of the boat.

Most boats are U.S. Coast Guard documentable vessels, which means they require a federal registration. So we’re going to require the boat be documented with the Coast Guard, and there are fees associated that can range from about $150 to $350. Some lenders (like SunTrust) can facilitate the documentation and offer this service at cost as part of the lending process, while a third-party documentation service could charge $600 to $800 for the same service.

Q: What are some additional expenses associated with owning boats or RVs that people will need to budget for?

The cost to operate and maintain a boat or RV can be far greater than what many first-time buyers expect. It’s important to understand that your investment will require more than just the upfront purchase.

Typically, it will cost about 10 percent of the original purchase price per year to own, operate and maintain one of these luxury items, including loan payments and other costs. For example, a boat comes with winterization fees and dock fees. Boats also require a lot of fuel, which can be expensive, and there’s plenty of maintenance.

And remember: The larger the vehicle, the more complex the maintenance. Some of the bigger boats and motorhomes—in addition to maintenance on all the parts that make it move—will have the same systems a house has, like a bathroom, appliances, TVs and other electronics. So there’s a lot that could need to be fixed.

Q: Can a boat or RV be considered a value investment?

These are depreciating assets, so their value will decrease over time, but they also should last a long time. A large boat can last 30 to 40 years. Some of the big RVs, or Class A motor homes, can travel up to a million miles, as opposed to a car, that will likely travel less than 200,000 miles. They’re long-lived assets. They last longer than cars. So generally speaking, if you buy a used boat or a used RV, you could be getting a better value. 

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