Boat value and financial Crises

[lagoon100]

Hello

Do you think the Prices for Catamarans 43' to 50' 1995 and newer in the range of 300'000$ to 500'000$ will drop a lot due to the financial Crises in the next 12 months?

Best Regrads
Lagoon100

[Sandero]

If the economy shrinks... eventually all prices will drop. People with less cash won't be buying and retailers will have to lower profit margins and manufacturers will have to be more efficient and make their products more competitive and so on.

Even in business such as high end products which seem immune to the downturn will see the middle end compete for THEIR business with lower priced products. This will attract contractors who want to eek out a better profit and hence there will be downward pressure even for luxury items.

Lots of value in real estate was illusory, as it is in "financial instruments" and shares. Items with "inflated value" and less "underlying value" will deflate the most, while items with lots of real value - materials, labor and so forth have less of a way to shrink, but they will shrink too.

People off loading luxury items which they can no longer afford will exert downward pressure on all prices including the NEW market for those items.

[Pblais]

I checked my crystal ball and looked long and deep but all I saw was a wine stain on the table under the crystal. Predictions are generally worth less than you pay for them.

As a rule these boats don't sell quick at any time. The cost of new boats is not going to come down either. There are not a lot of them on the market. The general boating market has layered out into two groups. There are folks that can't buy anything and the folks that could by anything they want and don't need to care. Some of those that don't have to care are not going to buy either. The small group in the middle has always been there and they come and go like the market. They can afford a boat when things are good and not when they go bad. Since selling a large boat takes a while the folks that are forced to sell will probably be repossessed after losing everything they own while attempting to sell a boat they can't afford either. The folks that take the boat want to get something back and have to wait for the price to some extent. I don't see dirt cheap boats for a very very long time if ever.

The odds are we will see a few boat companies go belly up thus shrinking the supply and increase demand in a very small market that probably is now a tad smaller than last year. The intensive process of building boats and the large number of suppliers domestic and international required will not prove well for boat building. The full weight of the credit crisis has yet to be revealed.

I'm sure there will be people pressed to sell a boat cheaper than they want to but you might not find them.

If you have enough cash there may be some decent deals but if you have that much cash you probably don't need to care. You are only going to buy one boat out of all of them. It really does not matter unless you don't have the money.

[Curmudgeon]

Even in bad times the rich always have money, so I doubt if the price of high-end boats (new or late model used) will come down very much. But the price of production boats will likely plummet, particularly used boats.

[Vasco]

Originally Posted by Curmudgeon

Even in bad times the rich always have money, so I doubt if the price of high-end boats (new or late model used) will come down very much. But the price of production boats will likely plummet, particularly used boats.

I don't think the price of production boats will plummet. It's not like real estate where the value has been grossly inflated by a crazy market. There is a real cost to producing boats and the profit margin is not that great. What might happen is that some manufacturers will go out of business like in the late eighties and early nineties. There was a significant downturn in the boat business then and prices remained fairly stable. As for used boats, in that downturn the prices showed little downward effect and, in some cases, held their price much better due to the fact that the manufacturer wasn't in business anymore. Of course you might get the odd bargain from overextended owners who have to liquidate but that happens all the time especially in cases where there's a marriage break-up. Don't hold your breath if you're waiting for those great deals to come along.

[CaptHead]

I know it is always "what the market will bare" when pricing a used boat and all appraisals are done with respect to history of recent sales. Nobody has a crystal ball and that is why we negotiate the price when we buy big ticket items.

The seller drops the price when either he has to sell or no offers are coming to him. In todays market, everybody is looking for a bargain. I saw two boats recently sell for $2,000 and they were sport fisher twin screw boats, one has diesels and is 38'. Ask anybody and they will say 40K for that boat.

This is a prime example of a seller wanting out now and a buyer ready to buy with cash in hand.

Never say this can't happen. Just look for bargains and be ready to buy with cash.

[Pblais]

There is a real cost to producing boats and the profit margin is not that great. What might happen is that some manufacturers will go out of business like in the late eighties and early nineties.

Rick I think this is the case. The companies can wait just a little bit but the cost of building a boat is already high and none of them are getting really rich. The supply chain and vendors require a lot of credit as well. It would be easy to see falling prices if a $200,000 boat only did cost $50,000 to build.

Used boats sold by individuals are subject to some price cutting but I don't see boats that were selling for say 80,000 to be selling for 40,000. Used boats take a while to sell and no one expects them to sell in a week even in good times. If a boat went up for sale last June they still have not reached the point where an average boat would be sold by now in a decent economy. A lot of 40,000 boats that sell for 2,000 are worth what was paid. I had a neighbor that was attracted to them. Sort of like the "free horse".

There always have been "deals" based on specific situations and there may be more of them now but it's not going to move the whole market. If the price of boats seriously drops it won't be without a larger drop in wages and a collapse of credit that effect the buyers more than sellers. Those are just the forces to drive the companies under. We should expect to lose one or two before the spring in Europe and/or the US.

[Charlie]

I've heard a few stories and I'm trying to think of where that people were taking considerably less than asking price. Like 50%. If you want to take the time to make low ball offers on a catamaran you can try. I've heard odds of getting a lowball accepted are 1 in 20. Good luck with it and make sure that you have the stomach for making such offers b/c you are not going to get a good feeling from the seller if you do get a low ball accepted. Prices are down from two years ago.

[CaptHead]

Just a word to the wise. Have cash or the financing secured beforehand. Boat financing today is very tough and they look for verifiable assets and income.

[btrayfors]

One factor to consider in the used market is the overall abundance of used boats on the market -- power and sail -- but the relative paucity of good used boats, i.e., those which have been cared for and maintained/upgraded to a high standard.

One finds on the used market these days a great profusion of boats which have been neglected, badly maintained, damaged, and/or trashed beyond belief.

I believe that good used boats are very likely to maintain their value, due to their relative scarcity on the market and to the incredibly high cost of well-made new boats -- a price which as others have noted is unlikely to fall much if at all.

Bill

[Vasco]

Bill, you're quite right. There's a lot of very poorly maintained boats out there. It's a real education when you finally start inspecting used boats and not just looking at brokers' ads. Anyone who has gone through this can attest to it. From my friends' experiences it takes about a year of constant searching to find a good used boat. I have accompanied them many times only to be severely disappointed when we see the "immaculately maintained one owner boat."

[decktapper]

I have been looking at boats for some time, and reading everything I can find on the subject. I read in an industry report that the market for boats bottoms out 18 months after the market for houses bottoms out.
Has the market for houses bottomed out yet?
It appears that boats have finally started to fall.
But then I never thought Osoma would become president.

[MarkJ]

Originally Posted by Vasco

What might happen is that some manufacturers will go out of business

Yes, I think you are pretty well spot on. And its a good thing that some companies will go bust in this industry as well as others... The companies with fat or rippin the customer off will get hosed out the door.

We need this sort of shake-up every decade or so as it enables the good companies to survive and the driftwood to be burned on the shore.



Mark

[GordMay]

Originally Posted by MarkJ

Yes, I think you are pretty well spot on. And its a good thing that some companies will go bust in this industry as well as others... The companies with fat or rippin the customer off will get hosed out the door.

We need this sort of shake-up every decade or so as it enables the good companies to survive and the driftwood to be burned on the shore.

That’s pretty tough love, Mark - a little like saying that mankind needs a good plague or war, every now and then, to hose out the gene pool.

[Sandero]

If the economy deflates everything deflates, but perhaps not at the same rate. Even at the very top end there will be pressure and competition because of a shrinking demand and "excess" capacity.

I work in a very very high end business. We have not seen a drop off yet, but we are seeing the people we do business with, be more aggressive and want lower prices.

In our "industry" the upper middle which was quite luxurious is losing its customers base because their spending was driven by credit and future increased earnings. Businesses serving this segment are working at no profit just to keep their doors open, and many are closing up, freeing workers to compete in the top end of the market. I suspect the same thing will happen to material suppliers as the back off of demand ripples through the entire economy.

This will apply to everything except things like eye glasses, but certainly to boats, cars and so on. As a rising tide raises all ships, all falling one takes them lower.