Tell customers: ‘Buy and finance now’

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The possible increase in interest rates at the next Federal Reserve committee meeting Oct. 27-28 and the recent demand that the largest banks add an additional $200 million layer of capital to protect against losses got me wondering just what impact any of this news might have for marine dealers.

So, for a timely assessment, I turned to Jim Coburn, vice president and managing partner of the finance and advisory service firm, Coburn & Associates. He’s also chairman of the Michigan Boating Industries Association.

First, Coburn agrees with me that this is a very good time to encourage our customers to buy and finance their new boats. “Specifically, what I’m observing in my business, and through the banker’s organization and other associations, is that boat loan rates are very competitive and still operating at or near historic lows. Many banks and credit unions are actually desirous of growing their consumer loan portfolios. It’s positive news for boating.”

Looking forward and based on recent surveys, boat lending (in terms of a lender’s loan productivity) will continue to improve through 2016, Coburn predicts. He cites, among other reasons, an improving U.S. economy, a slow but steady increase in new boat unit sales and an improved availability of credit as measured since the beginning and end of the Great Recession.

Moreover, Coburn believes the recent Fed mandate for increased bank capital reserves won’t negatively impact dealers. That’s because it’s actually aimed at only the eight largest banks, namely Chase, Citigroup, Bank of America, Wells Fargo, State Street Bank, BNY-Mellon, Goldman Sachs and Morgan Stanley.

“None of these are bigtime retail or floorplan lenders in the recreational marine industry right now,” Coburn said. “You’ll recall Bank of America exited and is still running off dollars (although they’re still in the RV arena); Wells was into marine finance many years ago, but the others have really never been players in the national marine finance arena.”

Notable for the marine industry, however, is the expected sale of General Electric’s finance unit or a portion thereof. At the same time the Fed ordered the eight banks to increase capital, it offered a reprieve from additional intrusive regulation to GE after the company pledged to cut its assets by more than half. “We are witnessing those events now as we await GECDF’s sale of their floorplan units,” Coburn said.

Finally, the prediction of a less-than-sterling employment report at the end of the month might be more than enough to keep the Fed’s desire to hike interest rates in check until at least the December meeting. That said, our dealership sales teams shouldn’t forget to highlight for all their buying prospects that: interest rates will never be lower; they are at historic lows levels; they make the cost of borrowed money downright cheap now, and rates can only go one direction — up.

As Coburn says, it is a very good time to buy a boat.


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