0% Financing?

Rollna01,

If you were the bank would you give up Total interest of (13,645.43) 6,870.57 vs. 20,516 over a 10 year period even if you got a $5,000 kick back. Think of the Present value of that 13,645.43 accross the number of boats sold

If SC could i hope they would not due to the fact it could Jeopardize their longeveity and the ability to produce quality boats if they subsidize their sales

a little company called Lucent Technologies subsidized a majority of sales in 1999 and 2000 with an line of credit (finance terms) pledge from its customers late 2001 and 2002 the product was not worth half of what they financed and they got the product back.

SC does not want the boats back, when they make it affordable to every Tom Dick and Harry ( no offense to anyone name TDH) or Joe smoe, and the economy burps and wallah. SC now has a bunch of moombas it doe not want.

Furniture comapnies doe this as well, 0% for 5 years, you miss a payment or not pay in full at 5years, the loan goes retroactive and reverts to 24% over the whole period. The people that can afford it get a good rate, the people that can't get screwed.

sorry off my soap box for now

jmvotto - well put.

The only reason a lender would want to get involved with this is cause they don't currently deal with a SC boat loans. A deal like this would give them a smaller margin but larger quantity.

SC wouldn't get the boats back if a third party lender was financing the boats, would they? Why would it be such a risk for SC if they weren't personally subsidizing the loan? Run this as a promotional deal for boat show season, sell more boats. Make the same margins per boat as before while kicking the extra back to the bank. Ultimately, they just want to sell more boats, don't they?

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Originally Posted by Rollna01

jmvotto - well put.

The only reason a lender would want to get involved with this is cause they don't currently deal with a SC boat loans. A deal like this would give them a smaller margin but larger quantity.

SC wouldn't get the boats back if a third party lender was financing the boats, would they? Why would it be such a risk for SC if they weren't personally subsidizing the loan? Run this as a promotional deal for boat show season, sell more boats. Make the same margins per boat as before while kicking the extra back to the bank.

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The reason why this isn't realistic is because the volume is way to low for it to make fiscal sense for the company and any financial institution. SC makes ~2,200 boats a year. Of those some people will pay cash, some people will finance through their own means, and some people won't be able to qualify for 0% deal. How many boats does that leave to take advantage of the offer?

Offering 0% financing kills the resale of used boats because its much cheaper to obtain a new one, which means your trade-in value goes down, thus making it an even riskier loan for a bank to make.

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Originally Posted by Rollna01

Ultimately, they just want to sell more boats, don't they?

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Quality, not quantity. They want to sell more boats, but not because they are whoring them out. Ask an Econ professor why Chrysler eliminating lease programs was the smartest possible thing they could do for their product, long term.

Whether Moomba gets the boat back in the event of a default is up to them. Generally, the manufacturer has some type of agreement w/ their primary lender to either buy the product back or subsidize their loss as a result of the wholesale after repo (outstanding balance is $25k, wholesale value is $20k for example). If they would want to make it at all affordable to buy the rate to 0%, they'd have to offer some type of help to the bank. If they ever wanted a relationship with the bank, their best bet would probably be to offer a 3.9% (or simalarly subsidized rate) program so that it's not too unaffordable for a customer to buy the rate to 0%. It would be like making a down payment but rather just prepaying the interest. If you ever see one car dealer offering 3.9% or some other low interest and another of the same mfg offering 0%, that's because the second one is buying the rate down instead of discounting the vehicle. It's all one big game...

The furniture store example is a little bit of an apples to oranges comparison. That's a revolving account (unsecured). The lending is different than an installment loan, which is what you get when you buy a boat or car (secured by collateral).

It's quite unlikely that a manufacturer that only makes 2200 units a year will start a relationship w/ a lender like this thread suggests. Master Craft used to do it w/ Harley-Davidson Financial, so I guess there's hope.

Why would you give something away that you already can't make enough of?

Ford and Chevy offer those incentives to move vehicles. They can't afford to have old inventory just sitting. SC doesn't have that problem. They give boat show incentives to keep their plants busy during the winter months, and so they don't get bombarded with orders in May and June.

They are manufacturers not bankers. Look where that has gotten the automakers.

Stick to what you are good at.


Dave