Loan volume suggests buyers did, in fact, defer purchases because of early-spring weather problems
Marine lenders get a sneak peek into boat-buying trends because they see the loan applications before sales are made, and well before the registrations are counted into boat sales data. They felt the slow start to the season, but predict that might have been offset by a busy June.
“We’re seeing delayed patterns, and if you look at the weather, that makes sense,” says Don Parkhurst, senior vice president of marine and RV finance at SunTrust Bank. “Obviously, the bad weather is going to cut down on boat sales, and it did, but what it does is defer them into a later time period. That’s exactly what we’re seeing. This may be a record June for us, but you’ve got to understand that’s coming on the heels of the first quarter being bad. So when it all gets done, we may only be where we’re scheduled to be.”
Jared Zimlin, business development director for Priority One Financial Services, agrees the season had a slow start. “The customers are finally starting to come,” he says. “We’re seeing a lot more customers financing. The season’s been kind of slow because of all the bad weather. But when they do come in, we’re able to find financing. We’ve got people who can’t get approved, but our numbers are up in terms of the approval ratio.”
Those ratios might be more favorable because the first quarter was so tough on marine lenders. “We were below volume, and we’re having a much better second quarter,” says Parkhurst. “Usually, it starts as you come out of winter and peaks in May, then it trails off after Memorial Day. Normally by June, the kids are getting out of school, and we’re twiddling our thumbs, and that’s not the way our June has been. We’ve been tearing our hair out and working late. It’s all occurring 30 days later than it normally would.”
Whether it’s enough to offset the delay is unclear, Parkhurst says, but he doesn’t think the bulk of buyers are waiting for 2014, as some analysts speculated they might. “We see things almost ahead of time because we get those applications prior to the actual sales,” he says. “I think this busy June is going to go a long way toward making up for the bad spring.”
Data show that sales of recreational boats ended three months of declines in May, enabling the industry to avoid the disappointment of a spring selling season that did not include a single month of industrywide gains.
There is another anecdotal positive trend, Parkhurst says. “We’ve seen the middle-size boater coming back,” he says, which for SunTrust means loans in the $150,000 to $500,000 range. “That part of the market had been missing through the recession and coming out of recession. We think the way that buyer looks is, he’s a small business owner who was hurting during the recession. Now we think they’re beginning to get enough confidence and building cash positions back to where they were, and now they’re ready to go out and buy a boat. I think there should be some pent-up demand there.”
Those buyers also tend to own stocks and mutual funds, and the recovery in the Dow Jones industrial average, the Nasdaq Composite Index and Standard & Poor’s 500 index helps them “feel wealthier,” Parkhurst says. “You see that in the consumer confidence numbers. People look at their portfolios and look at their balances. That has a big impact on their spending.”
Prior to the recession, that segment had been a big part of the market. “At my company, it hurt us because that buyer was missing, so we’re glad to have that back,” he says, adding that it still hasn’t fully rebounded. The cruiser segment has been one of the most challenged in rebounding post-recession; the 31- to 40-foot cruiser category showed a decline of nine boats, at 113, in May.
Parkhurst says he has seen a shift in the types of boats baby boomers are buying in those price ranges. Many are buying trawlers and Down East-type boats, as opposed to twin-engine sport and express cruisers. “There seemed to be a theme in it — in some cases they were downsizing, going from a 45-foot or 40-foot boat to a 35-foot boat, but it was all about trying to get into a boat that was a little more fuel-efficient, like trawlers with single diesels and that kind of thing instead of a boat with two big gas-guzzling engines. It seemed like they wanted to keep boating, but they wanted to do it more efficiently and save a little money.”
This article originally appeared in the August 2013 issue.