Looking for a Boat? Lease or Buy?
|Part 3: Undeniably, the one drawback to boat leasing is a higher monthly payment.|
Leasing a boat is also good for someone who wants to customize the terms of "ownership." For example, Pitts mentions a lease agreement the company did with a British graduate student who was only going to be in the United States for one year and wanted a boat to use while here. Russo created a custom, six-month lease for him, outlining the delivery and pick-up terms by which the dealer would deliver the boat to him in Marblehead, Massachusetts, in mid-May and would pick it up in mid-October. Another customer wanted his lease payment to include everything apart from fuel costs and therefore had Russo include the taxes, warranty, and projected maintenance and slip fees into one monthly payment. So for people who only want a boat for a short period of time, want to get out after three years or so without worrying about resale value, or who don't want to reach into their pocket all the time for the added fees that go along with boating, the custom-designed lease can be a good solution.
Undeniably, the one drawback to boat leasing is a higher monthly payment. In the case of Russo Marine, a lease payment is about twice as much per month as a purchase payment would be, though the company says the end cost of purchasing versus leasing is the same. However, leases can be drawn up with zero money down (but include the first payment and a refundable security deposit equal to another month's payment), as opposed to the typical ten- to 20- percent down to purchase, which on a boat that costs $400,000 can be $80,000. State sales taxes are also factored into a purchase price but not into a lease, since the leasing agent (i.e. the dealer, bank, etc.) technically owns the boat. Massachusetts, for example, where Russo Marine is based, has a five-percent state sales tax, which works out to an additional $5,000 on a purchase of $100,000. So you could either dish out $25,000 to own or, assuming your monthly payment is around $1,500, could pay the first month's payment plus a security deposit and lay down $3,000 to lease the same boat. (See chart, previous page.) Albeit, you'll be making a higher monthly payment, but with less money down, you'll have some extra money to play around with that would otherwise be tied up.
Russo Marine offers leasing on every boat it sells, and the company says it's developed a circle of sophisticated customers interested in the concept. "Sure, the credit checks are strict, and people who lease must have a long credit line and a good credit history, but the people buying big boats are generally smart, astute business people," says Pitts. "I mean, usually the guy buying the $300,000 boat knows as much about `cost of money' and all the other credit principles as I do!"
While it's uncertain if other companies will take a (second) shot at leasing, Russo's leasing program makes boating an option for people who are not ready to buy for one reason or another. Leasing will work for some people, and it won't work for others. But after weighing the positives and negatives, and working out the finances, it's another way to encourage more people to get out on the water.
Russo Marine Phone: (781) 395-0050. www.russomarine.com.
This article originally appeared in the January 2003 issue of Power & Motoryacht magazine.