Given today’s tight economy and GE Money’s exit from the marine lending market, some financial experts think the average person will have a harder time borrowing money to buy a boat. And that may mean bad news for boat dealers.
GE Money, a national player with multifaceted operations, was an indirect lender, meaning the company developed relationships with dealerships that sent customers to GE Money for loan approval.
“The dealerships are the ones who are going to be affected the most,” said Karen Trostle of Sterling Acceptance Corp., an Annapolis, Md.,-based marine lender. In the past when companies have pulled out of the marine finance business, another company has stepped up to fill the void,” Trostle said. But that may not be the case today because lenders are tightening their credit requirements.
GE Money’s sales finance unit discontinued consumer finance programs in the marine and RV markets this spring, saying it was the “right operational adjustment” for this economic environment. “GE Money has been challenged to continue to deliver a strong level of return in the marine space,” the company said in a statement.
“They were a big player,” said Don Parkhurst, senior vice president at SunTrust Bank, of GE Money. “I think the reason that the industry may be feeling it as much as they are is GE Money tended to buy the weaker, more marginal type borrower.” Plenty of marine loans can be had, and interest rates have risen only moderately, remaining relatively low historically,” Parkhurst said. SunTrust’s rates are in the mid-to-upper 6 percent range. “To get that kind of rate though, credit must be nearly perfect,” said Proteau. Banks, he said, are “a little big gun-shy” right now.
Although the marine industry hasn’t faced anything of the magnitude of the housing crisis, banks and lenders will tighten up everywhere to compensate for losses in other areas, Parkhurst said.
“It’s not just GE pulling out,” Parkhurst said. “I think you’ve seen creditors tightening their standards, especially since last fall.”
Proteau speculates the more marginal borrower has already been priced out of the market. “At the end of a cycle like this, my guess is those lower-credit borrowers weren’t in the market anyway — they’re trying to hold onto their house,” Proteau said. “This isn’t something that just snuck up, it’s been going on for a while. It went a whole lot farther south than the banks thought it would.”
See the July issue of Soundings Trade Only for more on this story.