The Answer to How much it Costs to Cruise

[chuckr]

Originally Posted by Catamoron

As I've read over the past 100 entries on this thread I keep hearing about not accounting for depreciation as a cost and that I didn't figure that into my list. But for the life of me I cannot understand how this costs me anything. Is the philosophy behind it that as time goes by my boat is becomes less valuable? If I'm wrong, I still don't understand how when a boat that's paid for looses value it costs the owner anything....or for that matter, even if its not paid for, how does a lower value effect my cost? I understand what the definition of depreciation is, so how is it that if I've got say $175k in my boat that in 5 years when I'm ready to sell it...are you saying I won't get that out of it? And even if I don't, how does that affect my monthly budget now?

I would surmise that most folks really are more interested in what is costs to live the cruising life. IE will their cash inflow exceed or equal their cash outflow and if not what adjustments must be made if they are going to cut the dock lines and for how long.

While depreciation accounting is interesting one would never ever expect the value of the boat to increase or even remain stable and truthfully depreciation accounting, given the various methods of depreciation there are available, will never tell the true value of the boat as that is a really a market place determination based on a huge variety of factors.

Most folks simply want to know what it really costs out here over some long period of time. Short term costs are fine but like they say a a point or two on a chart does not a graph make.

In addition anyone who buys a boat to go cruising and thinks they can sell it for the close to the same value is deluding themselves. While from a theoretical I agree with you from a practical standpoint I will disagree.

[a64pilot]

I'm a simpleton, to me the boats a write off, I'm not counting on it having any worth at all. Of course if I'm surprised and I can sell it for something when we are done with it, great, but I'm not counting on it. I hope actually as we age to end up selling it for what I can and putting some cash with that and getting a Trawler, but plans change of course.
I'm not sure how good an investment strategy real estate is anymore either, but I don't pretend to know what is a good investment strategy.

I'm sure if I had been smart, I'd have a whole lot more money now than I do, but my plans have been simple, live on well less than I earn, save as much as I'm allowed to in a 401K, and live on a cash basis, avoid credit. I should have enough cash to carry us into Social Security and hopefully rental income if that doesn't happen.

I've seen more than a few "smart" people lose their arse, us simpletons just seem to plod along, but we get there without any fanfare



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[a64pilot]

I don't worry about depreciation, I doubt most of us do, however inflation is another matter, that concerns me as I see it as the only way out of the debt that the US keeps digging.
But I am a simpleton, perhaps it can just continue, there will never be a margin call?


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[rwidman]

Depreciation is a real cost, whether you believe it or count it or not. You spend $100K now and get back $50K some years later the depreciation is $50K. That's basic economics and something you should have learned in school.

It's actually worse because if you chose to invest the $100K (wisely) you could have earned money on it. So at the end of the same period, instead of $50K you might have $150K. Now you see that it actually cost you $100K to own that boat for that period of time, not including any of the expenses such as dockage, maintenance, taxes and insurance.

[rwidman]

Originally Posted by Ex-Calif

.............. I personally don't think a used boat say greater than 5 years old has to depreciate. ..............

Most will. 15 - 20 years would be closer to the point where it stops depreciating and maintenance and condition take over.

[sailorboy1]

Originally Posted by chuckr

I would surmise that most folks really are more interested in what is costs to live the cruising life. IE will their cash inflow exceed or equal their cash outflow and if not what adjustments must be made if they are going to cut the dock lines and for how long.

That's the only part I really care about. Cash flow is King, if that part doesn't work out what difference does it make if you play some accounting math game?

[a64pilot]

I think I have come to what I hope are some conclusions, based only on reading everything I can get on this forum, and this is cash flow only

1. a couple if you don't count catastrophies, medical costs and trips home etc., can cruise comfortably in the US and Caribbean for about $1,500 a month on an average cruising boat and still enjoy a few small luxuries. Most if not all maintenance is done by them and done with an idea as to saving money, looking for inexpensive DIY yards etc. Oh and they anchor out a lot
Cut the luxuries and it might could be done for less, but at some point your not keeping up with the maintenance of the boat, and that will eventually have a bad ending, so you may in fact be able to go cheap for awhile, but it will catch up, and I believe with interest.

2. A couple can cruise quite comfortably, spend some time in nice Marina's, go out to eat etc. on $3,000 a month, go home some, maybe include medical insurance and costs etc. in most places, possibly avoid the real high rent areas. Most maintenance except for the high labor tasks like bottom jobs, are done by the cruiser

3. A couple can cruise almost anywhere and be very "comfortable", but still have to watch costs, on $5,000 a month, carry excellent insurance, trips home, land tour significantly, and do so in a high end boat. Most maintenance can be done by checkbook.


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[dlymn]

depreciation matters as it limits your access to wealth now and forever.
sure a really old car might sell for more than it cost but nearl every car sells for less. look at hte auto blue book for depreciation values. it's harder to predict boat prices because so few of each model is sold

operating costs are not just what I spend week by week. I buy insurance before I step on the boat but factor that cost into my weekly bill. i do this because I know I will have to prepare to buy it again next year. This is also true with the purchase of a boat. if i want to buy another boat or even a house in future, the money I lose in selling this boat will impact on my power to buy then. A figure of 10% of last years value wouldn't be too far off the mark for depreciation

[SURV69]

If depreciation is considered in, would that mean that after the write-off period, the boat is "worthless" ... all value diminished?

If so, I'd like to stand in line to get a fine 20 years old 50' yacht.

[Ex-Calif]

Originally Posted by rwidman

Most will. 15 - 20 years would be closer to the point where it stops depreciating and maintenance and condition take over.

Yeah, I won't argue that.

However it seems most people fix the boat up stellar at the beginning of the adventure and then just draw down the value due to deferred maintenance.

In the example above we start with a $52,000 boat cost. Add $500 a month for continued maintenance. another $30,000 in cost. Added up this results in about $1,300 a month "rent" and at the end you have a better chance of not losing the $25,000 in depreciation.

Of course you have to add "real" marina fees and so on to get the total "rent" number. One could be looking at $2,000 a month in rent if one got addicted to high end marinas.

[sailorboy1]

Depreciation only comes into play with how much it cost you to HAVE gone cruising. If you have $100k remaining of a $300k boat far as depreciation, but no cash, your cruise is going to grind to a stop.

[Ex-Calif]

Originally Posted by sailorboy1

Depreciation only comes into play with how much it cost you to HAVE gone cruising. If you have $100k remaining of a $300k boat far as depreciation, but no cash, your cruise is going to grind to a stop.

Or if you have $300k remaining of a $300k boat because you are spending all your cash keeping the boat nice...

Hence why so many boats come off cruise in crap shape...

And owners complain the market is soft cuz they can't get $300k for their boat. And it's all the broker's fault - LOL...

[rwidman]

Originally Posted by SURV69

If depreciation is considered in, would that mean that after the write-off period, the boat is "worthless" ... all value diminished?

If so, I'd like to stand in line to get a fine 20 years old 50' yacht.

I hope you are smarter than to believe that.

Depreciation is the difference between what you buy something for and what you eventually sell it for. It's complicated a bit by inflation but if the yacht sold new for one million dollars and sold used twenty years later for two hundred thousand dollars, the depreciation is eight hundred thousand dollars.

If the yacht was abandoned and neglected, it's value might be zero after twenty years and you could have it for that.

[SimonV]

Keep your boat for long enough and it will sell for what you paid for it new, just look at the 1970 price for a new at the time popular boat and what it is selling for now. Dollar for Dollar, don't get to deep.

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[rwidman]

Originally Posted by SimonV

Keep your boat for long enough and it will sell for what you paid for it new, just look at the 1970 price for a new at the time popular boat and what it is selling for now. Dollar for Dollar, don't get to deep.

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I doubt it. Perhaps if it's a classic but that's a little hard to determine until after the fact.