Boat Depreciation Amid Increasing Prices

[LF4]

Thinking back over the last week about the Annapolis Spring Sailboat Show and a few of the conversations that I had with boat brokers and others at the show. One conversation in particular that stands out was around the price of new catamarans. The broker said that we should expect the price of similar length catamaran to move by +5% YOY looking forward. It was also mentioned that catamarans are holding their value better than they previously had...with the hurricanes damaging scores of CATs in the Caribbean.

Scouring the net also produced a few takes on boat depreciation:

Estimates suggest that a boat looses:

20% of it’s value in the first year,
15% in the second,
14% in the third, and so on

others have said

20% of it's value in the first year
7%-10% of value every year over the next five years
5%-7% from years six to ten
and 5% a year after that

I have also been watching/reading about a lot of CAT refits. Prices seem to range from $75k for a handy couple doing a lot of the work to $125k while paying for some labor, all the way to $250k to bring a boat back from hurricane damage.

Whats my point? My points is I think a lot of us are trying to find the sweet spot.

• Buy a new boat, outfitted the way you want into charter. Get the boat after 60-66 months with the features you want used.
• Buy a boat outright and suffer the financial struggles that may come with no boat income. But at least you know who is using the thing.
• Buy a bought that someone else paid for right out of its 60-66 months charter and then make the fixes and repairs that you would like.
• Buy a boat that is 6-20 years old and requires a total/partial refit. In this case you have more of a hope and pray situation with how well the boat was maintained over the years.
• Anything else I may be missing?

Yes, you can get a survey and all that jazz done by a professional, I realize this and plan to do it. Our situation is different from many and I would be happy to get into it...but I would rather make this more of a general discussion about what others have done/would do.

I also know a lot of folks would say to go with a monohull as they are less expensive...lets assume this isn't an option for this exercise.

Lets use a new Bali 4.1 as an example. If the 2019 model is selling for $625,000 right now, that means that its 2024 will be going for about $800,000 five years from now. These numbers may also imply that that same 2019 boat could be selling for $280,000 five years from now (but at what cost to refit?). You probably still come out ahead on this equation as opposed to putting a new boat into charter (even taking into account bareboat chartering for the 5 years you are not in an ownership program).

[S/V Illusion]

Not that I infer you are but anyone taking financial advice from a boat broker is nuts. They have no responsibility beyond making money for themselves. Neither do they have any insight beyond that which you have.

Doing your due diligence, as you appear to be doing, is smart but it’s still a guessing game further clouded by new, yet unknown trends, location, insurance vagaries and lots more uncertainties.

The only certainty is that buying any boat isn’t a financially sound decision.

[john61ct]

Nothing general will apply to a specific case. Especially trying to quantify, will only be statistical data, never precise, except wrt to a specific boat.

[john61ct]

Figure based on new, if you spend 10-20% on maintenance every year to keep cherry, you **might** get a third of your total "investment" (HA) back after five years.

But then you may not! do not calculate affordability on getting anything back. Boats can take years to sell, end up going for 20% of "their market value" (no such thing)

It's money spent on enjoyment, if the annual cost is more than you're comfortable with don't do it.

[Hesti]

Sound advice above.



First question is: Do you want a boat now or do you perhaps want a boat in 5 - 6 years? Nobody knows what factors will be relevant in 5 - 6 years. Perhaps you will not want a boat in 5 - 6 years for whatever reasons. Perhaps you can pick up a little used one for a song like in 2009. Perhaps conditions will be such by then, that you will never be able to buy one.



If you buy a new boat, every scratch will hurt you. If you stretch your financial limits to buy, you will always be in fear of loosing the boat or having significant damage on the boat and you may be tempted to save on maintenance and running costs. Boating on a budget, mooring on a shoestring ... If you do one of these charter deals, you may find your boat more heavily worn and not being good value for what you put in.



-> Best advice is, to buy well within your financial limits when you want a boat with enough left over for running, maintaining and repairs. Then enjoy what you got. There will always be people with bigger nicer boats, no matter how far you stretch. Some of those bigger nicer boats will see very little useage.

[LF4]

Originally Posted by Hesti

Sound advice above.



First question is: Do you want a boat now or do you perhaps want a boat in 5 - 6 years? Nobody knows what factors will be relevant in 5 - 6 years. Perhaps you will not want a boat in 5 - 6 years for whatever reasons. Perhaps you can pick up a little used one for a song like in 2009. Perhaps conditions will be such by then, that you will never be able to buy one.



If you buy a new boat, every scratch will hurt you. If you stretch your financial limits to buy, you will always be in fear of loosing the boat or having significant damage on the boat and you may be tempted to save on maintenance and running costs. Boating on a budget, mooring on a shoestring ... If you do one of these charter deals, you may find your boat more heavily worn and not being good value for what you put in.



-> Best advice is, to buy well within your financial limits when you want a boat with enough left over for running, maintaining and repairs. Then enjoy what you got. There will always be people with bigger nicer boats, no matter how far you stretch.

The plan is to live aboard a CAT in 5-6 years. We really like the FP and Bali lines (FP seems like better quality, and Bali has the better living spaces).

As for now, we have thoughts of buying a smaller, less expensive, boat and putting it into Dream Yacht Charter or a comparable company on the "guaranteed income program". We were thinking the Dufour Grand Large 412 or the Dufour 360 (just to get sailing at a much lower price up front and lower upkeep cost). At the end of the contract we would sell the boat and buy what we want to live on.

For us it isn't about having the biggest boat in the water. We just want something we can live on full time and enjoy to the fullest extent possible...without gambling our future away. We are still young 34 & 31 and have two little girls not quite 6 & 4 years old. The wife is 100% work from home, and the main breadwinner...but is tied to the region from periodic client meetings. I also have great flexibility, but do have an office in downtown Philly I need to get to a few times a week. We could probably make things work living out of Annapolis...but the closer to Philadelphia the better. We do have concerns about living on a boat through the winter in the Mid-Atlantic region. If anyone has experience or advice around that (the living on a boat during winter...specifically the water, heat, and moisture problems people talk about) we would much appreciate hearing from you.

The other question with living on a boat in the mid-atlantic, is it "worth it"? Are the destinations within reach of a daysail or a long weekend worth the trade offs?

*Note: We plan to take a multi year sabbatical at some point...so living aboard and paying the boat mortgage off while building the kitty would be pretty ideal. Still not sure if we can do that faster while NOT living aboard and just chartering flat out...or putting a boat into charter and then selling the "starter boat" to get what we really want once we offload the house.

Sooo many things to consider.

[alctel]

Also from talking to people, 'new' boats seem to have just as many problems as a decently maintained used boat. And sometimes more.

[Hesti]

Ok. Let's look at it from a risk point of view. Any "guaranteed income program" will fold if the company guaranteeing it folds. It has happened on real estate often enough, it has happened on other investments often enough. As long as the economy chucks along like it does, all will be fine, if not, there may not be a guaranteed income any more. But you will probably have to absorb the cost of the boat anyway. You take this risk.


"At the end of the contract we would sell the boat" Nobody can say today how much you will be able to get for the boat then. You take this risk.


-> Quite a lot of risk involved in the plan.




Wanting to sail and thinking about live aboard is understandable. Personally, I would seek a solution with far less risk - unless you are swimming in money and the risk is not severe to you. The future is always difficult to predict, risk that materializes can be nasty. One or two year plans have a much higher chance of working than 5 or 6 year plans.

[Capt Phil]

Originally Posted by S/V Illusion

Not that I infer you are but anyone taking financial advice from a boat broker is nuts. They have no responsibility beyond making money for themselves. Neither do they have any insight beyond that which you have.

Doing your due diligence, as you appear to be doing, is smart but it’s still a guessing game further clouded by new, yet unknown trends, location, insurance vagaries and lots more uncertainties.

The only certainty is that buying any boat isn’t a financially sound decision.

The last 3 boats that we owned we made $ on each transaction although we lived aboard all of them an did a lot of sweat equity on each one.
Phil

[hellosailor]

Anything you missed? Offhand, two big things.

One year of charter service can put as much wear on a boat as ten years of private ownership. So "one year" of a boat in charter service is not the same as one year of wear on the average private boat.

Second thing is the numbers. If you take a fast run over the depreciation numbers for each of the first ten years...you are being told that a boat has depreciated about 100% in ten years. Which must mean there are ten year old boats being sold for one dollar out there, right? (Wouldn't it be nice.(G)

I had heard that the hurricane damage to the charter fleets had caused them to literally buy out a full year's production on some cats, but that's a bump, not necessarily going to be reflected once the production catches up to the demand. Yes, cats have become much hotter than they used to be, so that will also push up used cat prices. But that hurricane damage wasn't business as usual.

[john61ct]

Buy secondhand, what you can actually afford and will use **now**.

If you still want to live aboard later on, deal with those two factors then.

Your per-year costs will always be high, unless you just keep that one cheap boat forever and live where daily costs are close to nil.

So key is getting maximum days per year out on the water to bring the dollars per day of joy down.

You may easily decide boating life's not so great, so start smaller and cheaper.

[S/V Illusion]

As someone who spent a lot of time as a small child living aboard, your concern about depreciation is among the more trivial concerns I would have as a parent now.

Living on a boat may seem like fun to millennials but to a child, it is a lonely and somewhat isolated existence. Living aboard where it is cold and snows exacerbates that situation. The meaning of “going out to play” takes on a potentially terrifying connotation when the docks are full of ice or snow, the water is cold and no one is around. Socialization with their peers becomes an effort rather than normal. The simple act of riding your bike becomes a dangerous event.

Living in a tiny ‘house’ where it’s cold, damp and moving and where there are no other kids around and simply going to school becomes arduous isn’t what most kids consider a great environment.

To be blunt, the last thing I would be thinking about as a parent of a 4 and 6 year old is my wallet. How your kids might adapt to that situation is far more important.

[thinwater]

Do you have any experience with sailboats? This is not meant to be sarcastic, but several questions make me wonder about your experience with maintenance and repair. It seems like you are only looking at ex-charter boats and assume that every boat will need a refit. In reality, maintenance is on-going with a boat and never ends. It is neither a house nor a car.

Do you like sailing? It's not clear you have done much. I like sailing a great deal... but I would rather live in a house.

If this is the case, you really are jumping in with both feet, and the realities will be hard to explain.


Good luck!

[nickfox45]

I was also at the Annapolis show and saw that Bali you mentioned. Seems like a great boat if you never left the dock or were only traveling in good weather. I left not liking the setup. Really liked the FPs though!

As someone of a similar age, relatively new to boating (a few years in only), who also dreams of one day living aboard a cat, I just don't see how the depreciation math will ever justify buying a new boat OR putting one in charter if your goal is to liveaboard in 5-6 years. There will always be boats for sale, and if you're patient you will find one that's been well-cared for. The depreciation curve is just crazy. A new boat is a luxury, not a necessity.

FWIW, I also had one of the sales guy tell me that the cost of ownership of one of these new cats 10 years from now would roughly end up equalling the cost of buying one new now. He's obviously trying to make a sale of a new boat now. But if he's not full if it, that's equally concerning!

[sailcrazy]

FWIW-we bought our boat used-20 yrs ago. Yes, we've spent some $$ on her, both upgraqding and fixing, but those were (mostly) our choice expenses. When hellosailor mentioned wear and tear on a charter boat-it was not kidding. We've been sailing here in the Caribb for the past 5 seasons, after 3+yrs in the Medd and 10+in Asia. Charter boat are built to a price point-the lowest possible to get folks to buy them-and used "HARD" with just the minimum of mx for the next 5-6 yrs. We've seen renters do stuff to their chartered boat I'd NEVER do to my own....but what the hey, in a week they're off of it and who cares! We've looked at it, and elected not only no, but hell no we're not going there. Figure out what kind of boat works best for you (ours is a mono-43'LOA) go find a good used boat, use her and enjoy her while you can. And,after some years of cruising lifestyle you want bigger/newer....then go for it. Cut the lines and go for it, now, while you (still) can-life has a way of happening, and you'll never get the time back. And price....it's whatever someone is willing to pay! Look at the adds, scour the internet, and then start looking to see what you can find.