Does the Charter Biz work like Trucking?

[lostsheep]

So, from what I gather, some of these charter boat companies must operate similar to the trucking companies that lease on drivers. (like the one I'm leased to).
The Corp. usually has few or no real assets, ( in my case they pretty much lease everything, down to the staplers, I think) and 'hire' on owner-operators with equipment to do the grunt work. Of course they take a percentage of the bid for providing the matchmaking service between truck and shipper/receiver. They also ding the trucker for any extras that they offer, and make $$ from that.

Sounds good, for all, except that often the fees the trucker gives up become quite heavy. The percentage the Corp takes is usually around 25% of the gross accepted bid. The driver then pays for most everything else, fuel, insurance, repairs, tolls, taxes, permits, truck and trailer payment and licensing, etc. Couple that in with what we call 'double-brokering', which is where the Corp or it's agents glean the freight from public posted load services, then re-post the same load for less money on the Corp service board, and skim off an additional 5-25% that the shipping customer is actually bid to pay to have his load moved. Then, the trucker, hauls the load (not knowing it's already been dinged for an additional X percent) at a rate that is nearly 25-50% of what the load actually paid.

So, the customer lists a load he needs moved at $3 per mile. The first broker nabs it and whacks it for 10% (30cpm) making it now pay $2.70per mile. The Corp nabs it, and whacks it for 25% (68cpm-rounded up) making it pay $2.02pm. Fuel is at $3.90gl, a truck gets 6mpg,so that's .65 for fuel. Leaving $1.37 mi. The typical maintenance fund is around 10% (13 cents), leaving $1.25cpm. A truck tractor payment on a used $60K tractor is around $1600mo. based on a 10K miles a month=.16cpm, and a trailer payment will add another 6 pennies to that, for 22cents. Now we're down to about $1.23 cents per mile. My plates and permits cost $1650 a year, divided by an 80K mile year= 2 cents, insurance runs about the same, so 4 cents.
Now at $1.19 cpm. Tires are $530 ea, last year I went through 6, that's 4cpm, now $1.15 cpm.
And so it goes. On, and on.
What a rat race!!
I spent 288 days living in my truck,eating frozen/canned food or splurging and eating at a greasy spoon. Baking in the summer, freezing in the winter. Using a rest stop or truck stop bathroom and shower. Living in 46sq feet of space.So I could make $30 grand.

Typically most truckers that are leased owner-operators, make less than the company driver counterparts. I grossed somewhere in the area of $146K, but after repairs, fuel, taxes, insurance etc. I brought to the house less than $33K.

Now, I'm not sure how the charter biz works, but if it follows the example of the American trucking industry, I'm steering well clear when I get my own boat!!!

Anyone wanna buy a nice truck and trailer????

[David M]

The boat charter business is not as complex as what you describe for trucks.

[dagreenberg68]

Thank goodness I just dropped my CDL A. I had no idea.... and really think that there are more then one way to make that scenario work. I was at one point thinking of buying my own rig and thought against it not because of what you described (would be happy as long as I was making money and was working consistently) its certainly a life style. It sounds like you need to do something other then drive a truck.
I have been looking into starting a charter myself..... though if your concerned about people making money making you money you might as well find a hammock and watch the woman play in the water.

[Vasco]

The main thing about charter companies is that they do not own any boats. They sell and manage boats. In fact some companies may make more in selling boats than chartering them. For the first tier companies you have to buy a boat from them, at their price. Now you will hear from those that have bought that this is a good deal. My question is if it's such a good deal why don't the charter companies cut out the middleman and own the boats themselves?

[sailorboy1]

I have always wondering why if putting YOUR boat into charter with a charter company is such a good deal for the boat owner, why wouldn't the charter company buy their own boats!

[Lagoon4us]

Sunsail for example, put a boat into charter in Tortola, use your weeks at any place that Sunsail operates in the world, it works for some who wish to use the advantage it brings.

It is a way to ownership with tax deductibility, it's not a 'get rich quick' scheme.

[David M]

The reason they don't buy their own boats is that they cannot cover the cost of depreciation on a new boat. If a private owner takes that big hit then it can work for the charter company. The only thing that depreciates faster than a new boat is fresh fish.

[lostsheep]

Originally Posted by Vasco

The main thing about charter companies is that they do not own any boats. They sell and manage boats. In fact some companies may make more in selling boats than chartering them. For the first tier companies you have to buy a boat from them, at their price. Now you will hear from those that have bought that this is a good deal. My question is if it's such a good deal why don't the charter companies cut out the middleman and own the boats themselves?

This is just like the lease trucking companies. They have no assets, the driver takes the risks. If the SHF, they can close the doors, re-open in a week or two under a slightly differnt name, retain their mediocre customer base and resume business. Meanwhile the driver gets to enjoy bankruptcy, fines and possibly incarceration due to the myriad of bizzarro laws that nobody can completely comply with. It's basically a nearly risk-free business model.
Here's a somewhat comedic look at one of the largest carriers out here, from Wallstrip:
Landstar System, Inc. (LSTR) - YouTube

[sailorboy1]

Originally Posted by David M

The reason they don't buy their own boats is that they cannot cover the cost of depreciation on a new boat. If a private owner takes that big hit then it can work for the charter company. The only thing that depreciates faster than a new boat is fresh fish.

That's the thing I don't really understand. The owner gets to buy a brand new boat at the charter company's pricing and then the charter company gets to depreciate it for them. Yet somehow it is suppose to be a good deal for owner who just wants a boat in 5 years.

You could buy a 5 year old boat in New England where the original owner paid for the depreciation, only used it 5 months/yr, mainly only on the weekend, and which has a lot less wear and tear.

[DotDun]

Originally Posted by Don Lucas

That's the thing I don't really understand. The owner gets to buy a brand new boat at the charter company's pricing and then the charter company gets to depreciate it for them. Yet somehow it is suppose to be a good deal for owner who just wants a boat in 5 years.

You could buy a 5 year old boat in New England where the original owner paid for the depreciation, only used it 5 months/yr, mainly only on the weekend, and which has a lot less wear and tear.

Buying a used boat to someone who has never owned a boat is very scary.

"Wow, my new boat won't even seem like it's been used 'cause it'll be professionally maintained!"

[sailorboy1]

Originally Posted by DotDun

Buying a used boat to someone who has never owned a boat is very scary.

"Wow, my new boat won't even seem like it's been used 'cause it'll be professionally maintained!"

I would think that if you have never owned a boat that it would be even more scary to buy a brand new one and pay all that depreciation when you don't even know what you really want in a boat.


So I would think they would want to say; wow this boat has been really been taken good care of by the original owner who obviously knew what they were doing.

[DotDun]

Originally Posted by Don Lucas

I would think that if you have never owned a boat that it would be even more scary to buy a brand new one and pay all that depreciation when you don't even know what you really want in a boat.


So I would think they would want to say; wow this boat has been really been taken good care of by the original owner who obviously knew what they were doing.

You have to remember, the owner gets unlimited time using his own boat plus a substantial amount of time using any boat in the charter company's fleet anywhere in the world, all at a very reduced rate (usually charter company costs, whatever that is). So there are perks. I would guess that reality is most owners don't use these perks near as much as they dreamed when signing the contract.

So, instant gratification using a multitude of different boats, and they get full ownership at 5 years. Some companies are guaranteeing no out of pocket, except downpayment, for 5 years. But if you grill 'em, they only state this with a 20 year mortgage on the boat. When I ask them who's going to make the payments from year 6-20, they start talking to the next person that just came aboard at the boat show.

New buyers simply don't understand what full ownership of a 5 year old boat coming out of charter entails.

I'm not saying it's bad! I didn't go that route as I could afford my boat, so I didn't see any value in it for me. I'm sure for some, it works out just fine.

[sailorboy1]

Maybe for me the problem is that I don't see the sense in buying a brand new boat to start with! I think it is always best to buy a newer used boat (but not necessarily an ex-charter used boat unless the price makes up for more than the extra wear and tear depreciation)!

[Vasco]

Originally Posted by DotDun

You have to remember, the owner gets unlimited time using his own boat plus a substantial amount of time using any boat in the charter company's fleet anywhere in the world, all at a very reduced rate (usually charter company costs, whatever that is). So there are perks. I would guess that reality is most owners don't use these perks near as much as they dreamed when signing the contract.

So, instant gratification using a multitude of different boats, and they get full ownership at 5 years. Some companies are guaranteeing no out of pocket, except downpayment, for 5 years. But if you grill 'em, they only state this with a 20 year mortgage on the boat. When I ask them who's going to make the payments from year 6-20, they start talking to the next person that just came aboard at the boat show. t
New buyers simply don't understand what full ownership of a 5 year old boat coming out of charter entails.

I'm not saying it's bad! I didn't go that route as I could afford my boat, so I didn't see any value in it for me. I'm sure for some, it works out just fine.

I think if the owner uses the boat for more than x weeks the income tax people will not allow whatever scheme the owner buys the boat under. Many of these deals are structured to allow for deduction from other income. I know in Canada most of these deals became less desirable when the tax people stopped the capital cost allowance many years ago where one could depreciate the asset over three years, if my fading memory serves me right.

[Woodsy]

Originally Posted by David M

The only thing that depreciates faster than a new boat is fresh fish.

Another one for the joke thread!