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MARKET FOCUS SECTION { CONSUMER FINANCING } April 2014 | Boating Industry | 43 www.BoatingIndustry.com money was probably a lot higher than what it should been," Bryant said. Now lenders are doing their own research and approving loans based on the valuations they've discovered. "They're looking very closely at valu- ation," Ward said. "Should any negative equity exist, it does need to be paid off or solved for. Market value is reviewed very, very closely and is a factor in how much money the bank will lend against a specific piece of collateral. It is weighted more heav- ily in today's environment." RATES AND CUSTOMERS Though lenders are learning more about buy- ers and their boats before loaning money, they are still offering low interest rates. "Rates still remain stable; they haven't re- ally gone up much since bottoming out prob- ably a year and a half ago," Bryant said. Many lenders are offering prime customers APRs in the mid- to high-4 percent range. Bry- ant, who remembers the 20-plus percent rates in 1980s, says consumers will consider financ- ing as long as rates remain under 10 percent. "Ever since the crash of 2008, there hasn't been a rate issue as an impediment at all," he added. Though subprime buyers don't receive the interest rate offers that their prime counter- parts do, they are being financed at a steady rate. While prime lenders are looking for credit scores in the high-600s, those operating in the subprime space will approve loans on lower credit scores, however the rates and down payments are higher. "Blue Water Finance successfully places loans with credit scores from 525 to the per- fect score of 850," Ward said. "Prime lenders provide the most competitive market rates and terms to customers with better credit profiles. Subprime lenders lend money to credit chal- lenged customers today, which allows the cus- tomer to begin enjoying the new boat while repairing their credit profile." Lenders see value in the subprime arena, especially as many consumers lost points in their credit scores only because of a layoff or other financial hit. A lot of those customers are now back on their feet and looking to build positive payment history. "It's just people who have imperfections in their credit profile due to a situation, not necessarily habitual, and those customers — 35 percent of the market — really need [lenders'] attention, and it pays off," Armstrong said. "It pays off for the dealers, the manufacturers; ev- erybody benefits, and those customers do, too. We have seen where they appreciate the time it takes, and it does take time." About three years ago, Priority One cre- ated a Specialty Finance Department to focus on subprime customers. That department has seen the most growth since its inception, and it has bigger goals for 2014 and beyond. Because it was created to help subprime customers get approved for loans and rebuild their credit, Pri- ority One is already seeing repeat customers returning because the company was willing to work with customers with a few hiccups on their credit profile. "What we found is those customers are loyal," Armstrong said. "If you can take the time with them and walk them through the process and make their finance experience pleasant and streamlined, and you have an open dialogue with them, they are loyal and will come back to that dealership. We are see- ing repeat [buyers] because they're looking to improve their credit, so they're looking to have this next purchase put them on the path for success and to make their credit process easier next time, so that's kind of what we've found that's really helped us." Armstrong said making a recreational pur- chase, such as a boat, using a loan is ideal for consumers looking to rebuild credit. "This is a great way for you to be able to establish a good payment history and to pay it on time every month and to keep that loan for a couple years so that a bank sees you as a viable option," she said. NEW LENDERS IN THE MARKET Though the number of lenders that are offer- ing consumer financing to boat buyers has re- mained relatively unchanged over the past few years, there are new entrants, presenting fresh opportunities to the industry. "During the recession, a number of na- tional and regional lenders left the business. With marine loan performance returning to pre-recession levels, those that remained in the business are enjoying the recovery. In ad- dition, a few new lenders have come in, which is great for our overall business and the in- dustry," Ward said, adding that Blue Water Finance has recently added three new lenders to their organization. Drawing lenders in is the market's history, which has traditionally been positive, except during the recession. Lending in the marine market often means banks gain access to cus- tomers with higher net worths to whom banks can offer more products. With new lenders coming in to pick up the slack where former lenders left, the industry overall is seeing the benefits, as banks need to pick up loans in order to make money. "The banks are competitive. They do have to offer competitive rates; they understand that they need to get the business. That's kind of the nice thing; there's just enough where they're competing against each other," Armstrong said. All of this combined proves that the lending situation for the marine industry is heading in a positive direction, a benefit to all involved. "Boat lending is available," Bryant said. "There are a lot of lenders that are very eager to make loans. Certainly they're going to be careful about granting the credit and approv- ing the loan, but they certainly want to put the money out for boats. That's as true now as it was a few years ago." "We are seeing repeat [buyers] because they're looking to improve their credit, so they're looking to have this next purchase put them on the path for success…" — Nicole Armstrong, vice president of sales and marketing, Priority One P42x43-BI14APR-MarketFocus.indd 43 3/13/14 4:46 PM