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Can you lease a boat, and what will the insurance require?
Short answer
A boat can be leased, mainly by companies and the self employed. The finance house stays the owner and will almost always require hull cover, its interest noted on the policy and a sum insured that reflects the full value.
Leasing a boat works much like leasing a car. A finance house buys the boat, you use it for a monthly payment over a fixed term and at the end you hand it back or take it over at the residual value. In the UK it is offered mainly to companies and the self employed, for a company yacht, a charter boat or a workboat; private buyers usually choose marine finance or hire purchase instead. Whether leasing beats buying outright depends on your tax and VAT position, which is a question for your accountant, not the dealer.
Leasing changes one basic thing for the insurance: the finance house owns the boat, not you. It wants to be sure its boat is replaced after a loss, so it will almost always require hull cover, adequate third party liability and its interest noted on the policy as loss payee, so that a total loss settlement goes to the finance house. It usually requires that confirmation before handover. Tell the insurer or broker at the outset that the boat is leased, and give the name of the finance house and the agreement number.
The sum insured matters particularly with a lease. If it is below the figure the lease agreement uses, a balance remains with you after a total loss even though the insurer has paid. Set it at the full replacement value and look at whether the wording settles on an agreed value or on market value, which falls with the age of the boat and widens the gap towards the end of the term. If you intend to charter the boat out commercially, that has to be in the policy, and in UK waters the boat may also need coding under the MCA rules.
Yacht leasing for sailing boats, motor yachts and catamarans
Finance houses that lease boats generally look at the same things whatever the type: the price, the age, the builder, how easy the boat would be to sell again and what it will be used for. Sailing yachts, motor yachts and catamarans from established yards are the usual case. Older boats, one off builds and houseboats are harder to lease, because the finance house has to be confident it could sell the boat if the agreement ends early. Ask before you choose the boat, not after.
Catamaran leasing often comes bundled with a charter management programme, in which the boat goes into a charter fleet for some years and the charter income contributes to the payments. That is a different arrangement from a straightforward lease and raises its own questions about use, wear and insurance, which the page on charter management covers. Read who carries the risk if the charter company runs into difficulty before you sign.
Ex-lease yachts and taking over a boat lease
At the end of a lease or a charter programme many boats come back to the market as ex-lease yachts. They can be good value, but a boat that has spent years in heavy use needs a proper survey before purchase: rigging, engine hours, sails, osmosis and repairs after earlier damage. Ask for the maintenance records and any survey reports from the leasing period, because those papers show how the boat was looked after.
Taking over someone else's boat lease is sometimes possible, but always needs the consent of the finance house, which will check the new lessee as it would a new customer. For the insurance it means a new policyholder: the existing policy does not simply pass across, the noted interest of the finance house has to be confirmed again and the sum insured should be checked against the figure still outstanding.
French leasing for yachts in plain terms
French leasing is a model from France in which a boat is bought through a leasing arrangement, often combined with charter use, and the tax treatment of the payments depends on how the arrangement is structured and where the owner and the boat are based. The details change with the rules in each country and with the individual case, so it is a question for a tax adviser who knows marine leasing, not for the dealer and not for this page.
For the insurance the basic points stay the same as with any lease. The finance house owns the boat and will want hull cover and its interest noted. If the boat is chartered out, that use has to be declared and accepted in the policy. And if the boat is registered or kept in another country, check that the policy wording covers the waters and the use the arrangement actually involves.
Boat leasing calculator: the figures behind the monthly rate
Online leasing calculators combine a small number of inputs: the purchase price, any deposit, the term, the residual value at the end and the interest rate the finance house charges. A higher residual lowers the monthly payment but leaves a larger sum to pay or refinance at the end. Comparing offers on the monthly figure alone hides that, so compare the total of all payments plus the residual.
None of these calculators include the running costs that come with any boat: berth, insurance, maintenance, antifouling, winter storage and the survey the finance house may ask for. Add those to the monthly figure before deciding, because they continue whether the boat is leased, financed or bought outright.
Worth remembering
Finance house
stays the owner and wants security
Lessee
arranges hull cover, liability and the full value
No noted interest, no handover.
Questions
What owners ask us about this
Can a private individual lease a boat?
Boat leasing is offered mainly to companies and the self employed. Private buyers usually use marine finance or hire purchase. Whether leasing is open to you is for the finance house to say.
What insurance will the finance house require?
Almost always hull cover with its interest noted on the policy, plus adequate third party liability. It usually wants confirmation of that before the boat is handed over.
What happens after a total loss of a leased boat?
The settlement goes to the finance house as loss payee. If the sum insured is too low, a balance remains with you, so insure the full value.
Can I take over someone else's boat lease?
Sometimes, with the consent of the finance house, which checks the new lessee like a new customer. The insurance has to be arranged in the new name, with the finance house's interest noted again.
What is an ex-lease yacht?
A boat returned at the end of a lease or a charter programme and sold on. It can be good value, but have it surveyed and ask for the maintenance records from the leasing period.
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