Looking for a Boat? Lease or Buy?
|Part 2: Russo expanded the leasing line to include larger, more expensive models.|
While this is an ideal problem for a salesperson to have, many companies have tried leasing, but most have failed. The main reason is that there is no wholesale market for offloading boats at the end of a lease, as there is with a car, says a representative from Sea Ray, which tried leasing briefly in the 1990's and gave up on the plan shortly thereafter. In addition, says the representative, companies have a certain "brand promise" to live up to, which is difficult if the boat came from a lease where the user knew little about important maintenance concerns, like winterizing. Lewis Dorgan, a general manager of Surfside 3 Marina in New York with more than 35 years' experience in the industry, also points out that banks are reluctant to get involved in leasing because there is no easy way for them to determine what a particular boat's residual value will be three years down the road or how much money will be required as a down payment to make the lease work.
But Russo Marine did a few things differently, and has been successful in an area other companies have not. Its entry into leasing began with entry-level boat packages, like that of a Boston Whaler, which could be offered for a tax-included monthly payment of $199 to be paid over three years, thereby opening up the boating market to more people, according to the company. After a year, when it was clear offering leasing was profitable for the company, Russo expanded the leasing line to include larger, more expensive models from Carver, Robalo, Egg Harbor, and Chaparral. Russo's lease terms do not limit hourly usage like automotive leases limit mileage. In addition, Russo created its own leasing company to back the lease so that it didn't have to borrow money from an outside lender.
The most important thing Russo says it did, though, which manufacturers that tried leasing struggled with, was look over sales records to determine a realistic residual value of the vessel. This way the customer knows what the purchase price will be at the end of the lease (since the residuals are assigned at the beginning of the lease, according to Pitts) should he/she choose to buy. If he/she does not, the dealer will own the boat at a figure that allows him a fair profit on the resale of the vessel.
This article originally appeared in the January 2003 issue of Power & Motoryacht magazine.