‘Cash Equity is Going to be King’

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It’s not surprising that at least some boat dealers have been busy during the coronavirus pandemic, but many are finding the lending landscape has changed.

“Those that are getting after it are getting after it,” Jared Zimlin, business development director at Elite Recreational Finance, told Trade Only Today. “We’ve got dealers clustered together, and we’ve got one calling saying, ‘I can’t get on anything.’ And we’ll talk to him and say, ‘Really?’Because down the road a dealer got three applications filed today.”

Lockdowns have have begun to change lending terms at many banks, according to Zimlin and Jimmy Delegro, also of Elite Recreational Finance. They both spoke during a webinar last week titled “How to Get More Boat Deals Financed in Today's Economy,” which was part of the “Ask the Expert” webinar series from the Marine Retailers Association of the Americas.

“A lot of those changes are happening with each lender,” said Zimlin, who recommends dealers speak with lending representatives to see how things have changed, as well as preparing customers for the changes.

“Consumers went in prior to covid with one mindset,” Zimlin said. “If they got approved four or five years ago, maybe their credit hasn’t really changed, and they’re seeing news about low Fed rates. So they walk in with this perception of, that should be the same on a boat. I had this conversation with a customer talking about mortgages and understanding this is a recreational loan. When things get tough, the boat is the first thing that doesn’t get paid. It’s not a necessity.”

Many banks are verifying employment and requiring tax returns even for customers with high credit scores and high incomes, Delegro said.

It’s critical for dealers to do as much verification as possible, including pulling credit scores — something 80 percent of webinar participants, in an informal poll, said they were not doing.

“You’ve got to make sure you’re able to properly pull and read credit scores,” Delegro said. “I know that’s two different things. Google it, however you’ve got to do it, but you can’t be flyingblind.

“We have to make sure we understand loan to values based upon credits being pulled, and understand that banks are now in their recession plan,” Delegro added.

That means saying goodbye to long advances, people buried in trades and minimal cash down.

“Cash equity is going to be king in this situation,” he said.

Dealers should check their master dealer agreements with their lending reps to make sure they’re allowed to transact without being in person. Some require dealers to be on the premises, and changing that agreement requires lawyers and time, Delegro said.

Dealers also have to consider additional compliance. For example, computers have to lock automatically when someone walks away, people can’t leave files on desks, and extended warranties must be offered to everyone to avoid discrimination lawsuits.

But when these things are stored virtually, it can create additional issues. “From a technology standpoint, anyone can do document signing and storage online, but what dealers have to look at is the cost associated with this,” Delegro said. “It’s not necessarily just buying Adobe. It’s about who’s storing, who vaults it and who’s buying cloud space.”

That can be a big change for dealers who have traditionally used file rooms with locks and keys, Zimlin said, adding, “When you make that all electronic and you get into data storage, there’s this whole Pandora’s box that opens.”

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