While most people compare buying a boat to a car, the comparison is inaccurate. Boat loans might work like car loans, but that’s where the similarities end. Anyone can buy a car, but purchasing a boat requires a certain mindset. Most prospective boat owners already have car loans and mortgages, so securing a boat loan is another step.

You can buy a small boat for under $5,000 or a multi-million-dollar yacht. Either way, boats are considered luxury items unless you’re a fisherman or professional salvage diver. Those who make their living on the water need a boat. You want one. That changes the dynamics of the purchase. Compare it to buying a second home, not buying a car.

Depreciation as a factor in setting the loan term

Before researching how to apply for a loan, let’s delve into why boat loan terms are typically longer than those with car loans. One reason you can get a twenty-year loan on a boat is that lenders consider the depreciation rate. While a car loses 10% of its value the moment you drive it off the lot, boats hold their value longer.

Boats hold their value longer due to a slower depreciation rate. While you lose 10% in the first year, good maintenance and upkeep can get you 70% on a resale after ten years. Lenders consider depreciation when they offer loan terms because their risk is lower if they need to repossess and resell your boat. They also know you won’t use your boat daily, and lower mileage increases value.

After ten years, boats lose their value even slower than cars. Yours might increase in value if you upgrade some of the equipment and properly store it in the winter months, yet another selling point for the lender. Because boats hold their value for decades, 20-year loans are reasonable.

Choosing the boat that matches your lifestyle

Are you a sailor? Do you want to waterski at high speeds? Perhaps you prefer something small and quiet that you can use to troll for salmon? Everyone has a boat that matches their preferred lifestyle. Find the one that fits your style instead of trying to copy what the neighbors have. Boats should reflect the personality of their owners.

Maintaining your current lifestyle also means finding an affordable boat. Do your homework on maintenance costs, storage, and upgrades you might need to make as time passes. The sticker price of the boat is only a percentage of the cost. Make sure you can afford it all before you take out that loan. Boat ownership should be fun, not financially stressful.

The Final Step: Applying for a boat loan

Once you understand depreciation and find a boat that matches your lifestyle, it’s time to apply for a boat loan. Most lenders want to see credit scores over 700, but if yours is lower than that, don’t despair. Anyone with lower credit scores can offer a higher down payment or agree to an increased interest rate. There’s a boat loan out there that could be right for you.