Marine Leasing Benefits
Now that you have decided to embrace the boating lifestyle with the purchase of your dream watercraft, you’ll need to establish the method of payment. You could pay cash or finance through a loan; however, leasing is another viable option. Leasing allows you to manage the ownership experience as you move from watercraft to watercraft every 3-5 years. In this blog, we share 4 core benefits of leasing boats.
Driving a fully warranted boat
Unlike a supercar that sits in a garage most of its life, a boat is a highly complicated piece of machinery that is left outside in what can often be a hostile environment. In a lot of cases, leases coincide with the manufacturer’s warranty. If this is the case the only expenses incurred during your lease are maintenance and upkeep of your watercraft including summarization/winterization (required in Ontario but not on the west coast), and of course fuel and insurance.
Managing cash flow and expenses
Leasing is not about achieving the cheapest monthly payments but managing your cash flow and expenses. The idea is to spread out the payments so they work within your family budget on a monthly cash flow basis. It is difficult to compare boat lease payments with boat loan payments because boat loans are often amortized over 20 years compared to a 3-5 year lease. With a boat loan, you’re always going to run into a negative equity position or be “cash negative” for the first 15 years of ownership (you’re going to owe more than that boat is worth).
For example, a 2014 Sea Ray 350 Sundancer currently sells for approximately $350,000 in today’s market. With a 25% down payment and estimated residual after 3 years, a monthly lease would be approximately $3,800. At the end of the lease, the boater has 3 options, buy the boat outright, re-lease, or trade-in with their dealer on a newer model of choice usually with positive equity. The same boat with a 20-year boat loan might have a lower monthly payment, however, it will take the owner around 15 years to build positive equity.
Ability to switch boats every 3-5 years
Boat leases are typically structured with a down-payment at inception meaning you’re often in a positive equity position allowing the freedom to buy out the lease or switch boats anytime you want penalty-free. This allows you the freedom to switch watercraft to meet your ever-evolving needs potentially developing a migration plan from a smaller yacht to the yacht of your dreams.
For example, a younger couple might currently want a go-fast Donzi boat but fast-forward a couple of years and they might have 2 children and require a wake surf boat. The full cost of buying, and then selling a boat just a few years later would be prohibitive. Leasing allows you to stay aboard the latest and greatest technology in aqua sports.
Minimal sales tax consequences
There can be significant tax benefits to leasing compared with purchasing with cash or a loan. In Canada, you don’t pay sales tax on the entire value of the boat at the time of purchase, rather you only pay the sales tax on the portion of the boat you use during your lease.
Consider, for example, a Porsche Fearless 28, with an approximate price of $200,000. If you lease it in Ontario, you would pay 13% sales tax only on the monthly payments. Buy it, and you would pay $26,000 in sales tax in full at the time of purchase. As you can see, there are many benefits to leasing a boat. At Pfaff Leasing we operate from coast to coast in Canada and we strive to make it simple for our clients to get behind the wheel of their dream watercraft. For more information about this, we encourage you to continue browsing through our website.
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