New vs. 1-2 year Old Boats - Currency Effects

[BlueBuddha]

Hi all, here is something I don't fully understand. I have recent price lists for various cats (e.g., Helia 44, Lagoon 450), which include all the add on options. Regardless of what options I add to a hypothetical total price, and even if I add all options, the total price, once converted from Euros to US$ at the current rate, is the same and often much less, than the "asking" price for some 1-3 year old boats in the market (same or equivalent boats e.g., L440).

I assume that a key factor is that the USD has increased in value against the Euro pretty dramatically in 2014, which reduces the price of new French boats for US buyers. I assume that owners of used boats trying to sell them list their boats based on the depreciation from what they paid not accounting for the currency fluctuation.

So currency fluctuations play a major, and mostly unpredictable, factor in determining the actual final price of new and used boats (for US buyers buying European Boats I mean). This makes predicting the depreciation of a new boat almost impossible since a huge % of the selling price is determined by changes in currency rates. For example, if you are lucky and buy when the USD is strong to the Euro and sell when it is weakest, you could sell a few years old boat for close to what you paid for given that new boats will cost a lot lot more than you paid due to the weak USD. However, if you happen to buy when the USD is weak and try to sell when the USD is strong, then your depreciation may be huge since new boats will cost much less than what you paid (which is happening now to those trying to sell their 2-3 year old boats).

Did I miss anything or does this make sense?

and now that I think about it, since it is impossible to predict currency fluctuations all you can do is buy when you are ready to buy and hope that when you want to sell the dollar is not at an all time high

[a64pilot]

People can ask anything they want, you need to find out what the sales prices have been, may be a considerable difference

[BlueBuddha]

Originally Posted by a64pilot

People can ask anything they want, you need to find out what the sales prices have been, may be a considerable difference

Yes, I assume most of those used boats with asking prices at or above new boat prices will sell for significantly less, which is likely a huge depreciation (more than "normal") given how much they likely paid for the new boat when the USD was weak against the Euro.

I'm new to all this and it did not occur to me how much currency fluctuations could impact new and use boat prices until I began looking into it.

[Paul L]

If you wanted a fixed exchange rate and you knew when you would be selling, then you could by a currency futures contract that would lock in an exchange rate. Can't see it being very practical.
As to the current pricing differences, if the boat is for sale in Europe then it is probably priced in euros -- so it hasn't really changed anything if it was purchased in euros. Exchange rates eventually level out, but in the process offer some interesting deals. Look at how many Aussies went to the US and Europe over the past years to buy boats while the Aussie dollar was on top. Just about flooded the Aussie boat market with new imports.

[sailorboy1]

I doubt that a new boat even with options installed are as fit out as a 2 year old boat as far as accessories etc.

But it seems to me that if you could really get the sales price of a new boat with options that you would be a position to negotiate the price of a used boat. And anyone with a 1-2 year boat that that already want to get rid of probably have some motivation to do so.

[BlueBuddha]

Originally Posted by Paul L

...
As to the current pricing differences, if the boat is for sale in Europe then it is probably priced in euros -- so it hasn't really changed anything if it was purchased in euros. Exchange rates eventually level out, but in the process offer some interesting deals. ....

Good point. The used boats I was referring to were mostly in the Caribbean priced in USD. You are right if they were priced in Euros and were bought in Euros then nothing would have changed and the price of the used boat should reflect just the usual depreciation (assuming the seller accepts the concept of depreciation, which many do not ).

[Suijin]

Don't forget that on average, brokered boats sell for @ 75% of the asking price. A better gauge would be if you could get a list of the actual selling price of those boats over the last six months, which a broker could get for you as they can get that data off YachtWorld.com.

[goboatingnow]

it should be pointed out that one effect of the recent recession is that many boats were sold at good deals, often making the effective retail at or close to the retail from a few years ago. This is not a new issue and is not particularly related to currency issues.

Also many sellers seems to feel that their boats appreciated in value, without they themselves looking at the current practical retail value of a similar replacement boat.

[monte]

correct BB. Other key factors are 10% brokers commission added to used sales price, as well as tax paid status, up to 20%VAT on top of the list price, as well as delivery to US waters price at up to 40K. It all adds up!

[Brob2]

Originally Posted by BlueBuddha

and now that I think about it, since it is impossible to predict currency fluctuations all you can do is buy when you are ready to buy and hope that when you want to sell the dollar is not at an all time high

I take the contrary position that it is better to lock in the amount you are going to spend, or a portion thereof, unless of course you are flush enough for currency fluctuations to be irrelevant to your purchase decision.

I chose to purchase a forward exchange contract when I purchased my last boat and thought it the prudent decision for my situation. I'm a former banker so that may colour my perception for better or worse, but I still consider it the appropriate call.

[monte]

Brob, I think you are talking about a contract from when you placed the order, to when delivery took place. Bb is talking about the difference from buying to selling which may be years later.
For what it's worth I had an exchange contract for our first boat and ended up 10k worse off as the dollar appreciated. The last boat I didn't and ended up 20k worse off...

[Barra]

FX fluctuations are often overlooked by boat buyers and sellers BB (until there is a pretty significant one like we are seeing with the USD right now but the key is it has to be sustained for quite some time to affect the slower moving used boat market)

Same thing happened with the AUD past few years and this is now unwinding so looking at what happened here is a good guide I reckon. Basically the strong AUD took around 12 to 18 months to hit the used boat market here. For most of that time new imported boats were cheaper than near new used boats priced in AUD. The local boats just sat on the market for a year or more (or those that were selling to replace took the swings and roundabouts hit), new boat dealers had a good time and plenty of Aussies bought used boats in Europe or the US and brought em home often at a profit even if only a paper one. Local boat builders moved offshore or folded in ironically what where good times economically. (look out Alpha)

But a few years down the track the currency goes the other way and now used boats in AUD prices are more than competitive again locally with the only change to the asking price being another years depreciation. Thats our modern interconnected world at work for ya.

Yes as was said you can take out a Forward Rate Agreement on the exchange rate and play the FX that way rather than actually buy the boat but on all but shorter term contracts the holding costs are prohibitive.

Youve got a window of opportunity vs the Euro or anything else right now so either look for the USD boat seller who's selling to replace his boat with an import or buy new or used from Europe yourself. The rest of the USD boat market will probably be slower to move and the USD could be going back the other way by then so dont sit on your hands thats my advice.

Good luck

[Brob2]

Originally Posted by monte

Brob, I think you are talking about a contract from when you placed the order, to when delivery took place. Bb is talking about the difference from buying to selling which may be years later.

Oops, missed that relatively obvious point.

Originally Posted by monte

For what it's worth I had an exchange contract for our first boat and ended up 10k worse off as the dollar appreciated. The last boat I didn't and ended up 20k worse off...

You're not helping enough little old ladies to cross the street.

[BlueBuddha]

Originally Posted by Barra

FX fluctuations are often overlooked by boat buyers and sellers BB (until there is a pretty significant one like we are seeing with the USD right now but the key is it has to be sustained for quite some time to affect the slower moving used boat market)

Same thing happened with the AUD past few years and this is now unwinding so looking at what happened here is a good guide I reckon. Basically the strong AUD took around 12 to 18 months to hit the used boat market here. For most of that time new imported boats were cheaper than near new used boats priced in AUD. The local boats just sat on the market for a year or more (or those that were selling to replace took the swings and roundabouts hit), new boat dealers had a good time and plenty of Aussies bought used boats in Europe or the US and brought em home often at a profit even if only a paper one. Local boat builders moved offshore or folded in ironically what where good times economically. (look out Alpha)

But a few years down the track the currency goes the other way and now used boats in AUD prices are more than competitive again locally with the only change to the asking price being another years depreciation. Thats our modern interconnected world at work for ya.

Yes as was said you can take out a Forward Rate Agreement on the exchange rate and play the FX that way rather than actually buy the boat but on all but shorter term contracts the holding costs are prohibitive.

Youve got a window of opportunity vs the Euro or anything else right now so either look for the USD boat seller who's selling to replace his boat with an import or buy new or used from Europe yourself. The rest of the USD boat market will probably be slower to move and the USD could be going back the other way by then so dont sit on your hands thats my advice.

Good luck

Thanks, this is a nice summary/example of what I was thinking!

[TacomaSailor]

I do not know a thing about currency exchange but I do know what happened with my boat.

I purchased her new at a very good price, with every know factory option (she had been a demo boat for two boat shows) shortly before the factory raised the new boat price 20%. I then put many very expensive options on the boat in the first six months that I owned her. The dealer cost for those options was almost 30% of my purchase price.

At the end of a year I was offered 25% more for the boat than I paid the dealer for the new boat. That amount was slightly more than a currently new factory boat and was offered by someone that wanted a fully outfitted boat ready to sail away on a long distance cruise. He wanted a boat that was fully outfitted and tested by some long cruises over the period of months.

I did decline to sell the boat because I had put hundreds of hours of labor into those modifications.

Your discussion about currency exchange is interesting but is there a simpler answer?