When it comes to purchasing a boat, the list price is just the beginning. Boat dealer fees can quickly add up, turning what seemed like clear skies into a stormy financial forecast. In this straightforward guide, you’ll discover the anatomy of these fees and gain practical tips to navigate and negotiate them. Dive in to ensure your boat buying experience stays afloat financially.
Key Takeaways
- Boat purchases involve additional dealer fees which include preparation, delivery, and financing charges, some of which may be negotiable.
- Financing options for boats include dealer in-house financing, bank loans, marine lenders, and dealership OEM financing, each with their own pros, cons, and varying fees.
- Prospective boat owners must account for sales tax, registration costs, and other variables such as maintenance and insurance which add to the total cost of ownership
Navigating Boat Dealer Fees
Purchasing a boat involves more than just the sticker price. There are various dealer fees you need to be aware of to get a clear picture of the total cost. Don’t let the terminology intimidate you; understanding these fees is not as complicated as it might seem at first glance.
Dealer fees, sometimes referred to as dealer cost, cover various costs from preparing the boat for sale, its delivery to the dealership, to financing the purchase. While some of these fees are non-negotiable, others may offer room for discussion. Understanding the fees you may encounter aids in budgeting and enhances your negotiation capabilities when closing the deal.
Invoice Price vs. MSRP
First, we’ll cover the fundamentals: the invoice price and the Manufacturer’s Suggested Retail Price (MSRP). The invoice price is the amount the dealer has paid the manufacturer for the boat. It often reflects the costs of labor, materials, shipping, taxes, and the wholesaler’s profit margin.
On the other hand, the MSRP is the suggested retail price that the dealer should charge customers. It takes into account the costs associated with production and selling of a product, allowing the producer, wholesaler, and retailer to profit. While the invoice price is typically lower than the MSRP, providing room for negotiation and potential dealer profit, the final price usually falls much higher once dealership fees are considered.
Dealer Prep / Set up / Pre-Delivery Inspection Fee
Another significant component of dealership fees is the Dealer Preparation or Set-Up Fee. This fee covers the cost of making the boat ready for sale, including cleaning, adding fuel, and conducting a final inspection.
The dealer prep fee can vary significantly among dealerships, with some charging as high as $5,500 while others may charge as low as $599. This fee often becomes a point of contention for buyers, as it can represent a significant percentage of the boat’s overall purchase price and may be negotiable.
Freight and Delivery Charges
Freight and delivery charges are additional costs that are often overlooked by first-time boat buyers. These charges cover the costs incurred during the shipping and delivery of boats to dealerships from the manufacturers.
Delivery charges can be significant, with some fees reaching up to $1,650 for delivery. While this fee is typically set by the manufacturer, some dealerships may inflate it to pull a profit. This is another area where understanding the breakdown of costs can assist in negotiations.
Financing Fees
Last but not least in our list of dealership fees are financing fees. If you’re planning to finance your boat purchase, these fees should be on your radar. Financing fees are charges associated with boat loans and are often separate from the dealership’s fees.
For instance, Canadian lenders typically charge their own documentation or admin fee that is separate from the dealerships’. If you’re brokering a deal to finance a private sale with a dealership, most dealers will add a minimum 10% to the sale price to facilitate the deal with access to their lenders.
Financing Your Boat Purchase
Yet, dealership fees are merely the beginning. You also need to consider how you will finance the boat purchase. In Canada, boat purchases can be financed through dealer in-house financing, bank loans, or online and brick & mortar marine lenders.
Each of these financing options has its pros and cons. Dealer in-house financing, for example, may offer low introductory rates, albeit with conditions such as higher down payments, shorter terms, and stricter approval processes. On the other hand, bank loans and marine lenders offer more flexibility with variable loan terms and competitive rates.
Bank Loans
Bank loans are a popular option for boat financing. Major banks like Scotiabank offer boat financing options allowing for loans up to $200,000 with repayment terms that can extend up to 20 years. This flexibility can make a boat purchase more affordable for many customers.
Loan payments can be tailored to the customer’s budget with options for weekly, bi-weekly, or monthly payments. Customers also have the flexibility to pre-pay or pay off their Scotiabank boat loan at any time without a penalty. Interest rates on boat loans can be fixed or variable, influenced by factors such as the borrower’s credit history and score.
Marine Lenders & Online Brokers
Marine lenders and online brokers offer specialized financing options for new boat purchases, as well as used ones. These lenders understand the specifics of boat ownership and provide tailored solutions for boat buyers.
Most boat loans in Canada are secured loans, where the vessel itself serves as collateral. Lenders use the book value of the boat to set a cap on the loan amount. Most approvals for boat financing do not require a down payment with the top lenders in Canada, and interest rates start at 9.9% with the most reliable lenders.
Dealership OEM (Manufacturer) Financing
Finally, there’s the option of dealership OEM financing. This is a specific lending option provided by the boat company manufacturers themselves to facilitate the purchase of their boats.
Manufacturer financing can influence dealer fees, as some manufacturers may offer to lower dealer fees as an incentive to use their financing. Dealers may favor manufacturer financing as it often includes benefits such as faster sales processing and potential financial incentives from the manufacturer.
Sales Tax and Registration Costs
Having covered dealership fees and financing options, we should now address sales tax and registration costs. After all, the cost of boat ownership goes beyond just the purchase price and financing.
Registration fees are a part of the overall costs when purchasing and owning a boat. Additionally, it’s important to remember that sales tax will be charged when buying a boat through a dealership in Canada. The rate of sales tax depends on which province the boat is being delivered.
Sales Tax
Goods and Services Tax (GST) or Harmonized Sales Tax (HST) is charged whenever you are buying a boat through a dealership. The rate depends on the province where the boat is being delivered.
Apart from GST or HST, some provinces also charge Provincial Sales Tax (PST) either through the dealership itself or, if buying out of province, at the registry. So, when calculating the total cost of your boat, it’s essential to factor in these tax charges.
Registration and Licensing
Moving forward, we’ll tackle boat registration and licensing. These are mandatory processes for boat owners in Canada and come with varying costs depending on the province.
Registration is necessary for commercial vessels and pleasure craft that meet certain criteria. Everyone who operates a power-driven boat also needs proof of competency, and a Pleasure Craft Operator Card (PCOC) serves as that proof. Boat registration documents must be carried on board the vessel at all times, along with any other ownership documents.
Negotiating Fees with Boat Dealers
Armed with a better understanding of boat ownership costs, it’s time to delve into negotiation strategies. Yes, you read that right. Some aspects of your boat purchase can be negotiated.
For example, prospective buyers should:
- Explore various boat options, as they are all in the same boat when it comes to finding the right fit
- Refrain from becoming too attached to a single one to retain leverage during negotiations
- If negotiations reach a stalemate on price, respond by suggesting including additional equipment or obtaining discounts on accessories they do not want.
Concealing the method of payment, particularly if paying in cash, can afford buyers more room to negotiate, as dealers often have higher profit margins on financed deals.
Other Costs to Consider When Buying a Boat
Beyond dealership fees, financing fees, and taxes, there are other costs to consider with your boat purchase. These include maintenance and repairs, insurance, and storage. These costs can significantly impact the total cost of ownership and should be factored into your budget before you finalize your boat purchase.
We’ll delve further into these human costs now, just give us a few seconds.
Maintenance and Repairs
Boats, like any other vehicles, require regular maintenance to keep them running smoothly. Routine boat maintenance includes:
- Checking and replacing spark plugs
- Replacing the water-pump impeller
- Refilling power trim and tilt fluid
- Inspecting engine mounts and brackets
- Lubricating grease points
- And more
When negotiating the final boat price, it’s important to consider potential repair costs. For instance, simple fiberglass crack repairs can cost up to $1,000, while severe hull damage might lead to expenses up to $15,000. Being aware of these potential costs can help you negotiate a fair price for your boat.
Insurance and Storage
Insurance is another cost that boat owners need to consider. Boat insurance premiums typically range from one to three percent of the boat’s value, with an average cost of $300 to $500 per year for small vessels and up to 1% to 5% of the boat’s value for larger vessels.
Shopping around for insurance quotes is crucial to find the best possible policy tailored to the specific boat and its intended use. Also, remember to check with the boat insurance provider before completing the purchase as some boats may have specific requirements or may not qualify for insurance without additional inspections.
Summary
To sum up, purchasing a boat involves a myriad of costs beyond the sticker price. From dealership fees to financing options, sales tax, registration costs, and maintenance expenses, it’s crucial to understand these costs to make an informed buying decision. While it might seem overwhelming at first, with the right knowledge and preparation, you can navigate these costs and sail towards a smooth boat ownership experience.
Frequently Asked Questions
What is the difference between the invoice price and the MSRP?
The invoice price is what the dealer paid the manufacturer, while the MSRP is the suggested retail price for customers. In conclusion, the difference lies in the cost to the dealer versus the price for customers.
What does a dealer prep fee cover?
The dealer prep fee covers the cost of preparing the boat for sale, such as cleaning, adding fuel, and conducting a final inspection. This ensures the boat is ready for the buyer to take possession.
What are freight and delivery charges?
Freight and delivery charges refer to the costs associated with shipping and delivering boats from manufacturers to dealerships, and are usually transferred to the customer.
What financing options are available for boat purchases?
You can finance your boat purchase through dealer in-house financing, bank loans, or online and brick & mortar marine lenders. Consider comparing the rates and terms from different sources before making a decision.
What other costs should I consider when buying a boat?
In addition to the purchase price and financing fees, remember to budget for maintenance, repairs, insurance, and storage when buying a boat. These costs can add up, impacting the total ownership expenses.