NADA, BUC and Boat List Price Differences?

[seacurves]

I am seeing a sizeable difference between NADA, BUC and boat list price. I have also heard that banks are using NADA for boat loan values as of very recently. Certainly the condition of the specific boat matters and the additional equipment it may or may not have, but I am unable to get anywhere close to the NADA numbers and even BUC seems off a boat's list price beyond these explainable differences. Any advise on this topic?

My assumption is that boats will see some serious deflation if bank loans remain seriously below boat list price by the banks using the NADA numbers. Any comments on this assumption?

[hatteras]

I am a loan officer at a bank and we use NADA loan value.

[cal40john]

Book value I saw for Cal 40s was $17000. A couple of years ago they sold for $40,0000 to $80,000.

At least in Seattle last time I bought a Honda car you would never be able to buy one for anywhere near what book said they were worth. Maybe you can only get a loan for book value, but my experience with book value in a big city is that it has nothing to do with what the market demands.

Maybe things have drastically changed in the last two years.

John

[hatteras]

Wow Thats crazy, I'd buy it for $17,000. Every state has different values. We would have to go by the NADA value. If it is a large yacht or commercial vessel we would have a marine survey done and then loan 80% of the appraised value or purchase price; which ever is lower.

[Pblais]

Any advise on this topic?

Don't buy a boat you can't afford and don't pay more than it's worth. Should your bank not agree then you might have failed to see something. You generally need more than the purchase price to make ready a boat suitable. The bank won't loan that extra money.

[seacurves]

Thanks for all the rapid feedback!

BTW, I have no intention of buying a boat I can't afford, that is not the point. If banks are unwilling to lend beyond a certain price point (i.e. NADA or BUC) it does bring into question of over-paying in a market with high potential for deflationary pressure. I can imagine no boat owner wants to hear this but for those of us looking to purchase this is a dimension worth taking into account. In effect, are banks establishing through their lending practices what boats are worth? Certainly worth asking on this side of a purchase...

[Ex-Calif]

Don't over analyse IMHO. Banks are establishing what they will loan people, not what boats are worth.

My opinion is that behind every "industry number" there is a human or two and at least half of them are below average in intelligence.

Certainly the inability to arrange suffucient financing may drive downward pressure in boat prices over the long term but then it is up to the seller to decide whether to wait it out or not.

The other thing about boat price indices is that the variation in the value of the exact same boat types is huge based on condition. And with a relatively small sample size the prices are just guesses as far as I can tell.

[sailorboy1]

From my buying experience this past year it seems all the price guides give values much lower than the asking prices, not just NADA. And in the end you get another "value" from th survey, which who really knows how it is determined.

But I would have to agree that the low prices in the various guides are going to push down prices as sellers are forced to either sit on their boats forever or accept the new lower price. Kind of just like the recent housing market.

[Pblais]

Banks are establishing what they will loan people, not what boats are worth.

Huge difference. If a bank uses a guide, they are not setting prices even indirectly. The ability to finance has little to do with actual value. Insurance companies have more to do with boat value than banks. Once you get the loan you will need a surveyor to set a value for your insurance policy. Even on an agreed value policy you don't set the value yourself. Surveyors use guides as do most appraisers. They also are professionals that study the market daily and so are allowed to render an opinion.

Should most buyers receive any information that might make them "think" the price is high it can be a factor, but it may also not be based on reality. If it is raining and you don't like the dock the boat is tied to it may move the price. The market is not as precise as much as anyone may want to believe.

Guide values are based on actual sales of what people actually paid. That list does not include all sales and the computation of a single value is not to say all boats are average.

If you are buying and tell the seller that NADA boat values are down this year and they need to lower the asking price, they may smile. If a banker won't loan as much as your offer to purchase then you can't afford the boat or the ability to finance it 100%. Banks don't care what you pay for a boat they only need to assess the risk of the loan. That assessment includes guide values but it's not the only issue in the risk of a loan. the loan may span a long period and over that period they need to feel the risk is managed. If the loan to value over the period of the loan looks favorable then the risk that you'll skip is reduced.

Should the guide price be high you may not feel so bad until you get your insurance premium. The same forces that effect the boat loan effect the agreed value on the the insurance policy. There is often a gap. As a rule of thumb most boat owners are sure their boat is worth more than average.

[colemj]

NADA, BUC etc base their estimates on sold prices (but I don't know their source for these data). This only works when the number of boats in the survey are very high. Jet skis, pontoon boats, inland bow riders, etc are probably estimated well, but larger boats are not.

For example, when we were buying our boat (Manta catamaran) the BUC value for a 1-year old Manta was $185,000. These boats sold new at the time for $350,000. That's a big depreciation over one year. As I mentioned, I don't know how these book values are obtained for most boats. In the above example, a 1-year old Manta had never been on the market, so there were no actual data. At that time, the number of Mantas on the market over the past 3 years were in single digits - of one hand. I had access to the soldboats.com data base at the time and could see what was actually paid for boats, which was much more than the BUC values.

Ordinary banks might not give in on using guide books, but marine lenders know the market and use more reasonable methods for estimating value.

Mark

[seacurves]

Thanks for all the help. Minimally it looks like one needs a lot of facts, including NADA and BUC when purchasing a boat. Got it.

[Pblais]

Minimally it looks like one needs a lot of facts, including NADA and BUC when purchasing a boat. Got it.

The one piece of information you need is the "other boat" you could buy if you don't get your offer worked out. You should never have to negotiate more than the other boat. Every deal needs a bridesmaid. You are not buying all the boats for sale. You only want the "one" you pick. Banks are stuck. They need to finance a lot of them and they don't really want to own them. They can't see boats like you do and don't expect them to do so.

What you pay won't move the market even a little bit. Get the best boat and deal you can by knowing the alternative deal. There are places you won't travel to or boats you just are not interested in. You shape the your own market by how you look for boats. Casting a wide net for a variety of boats is your best insurance of getting the best deal for you.

[David M]

I think one needs to consider that with boats, there is a much much smaller sample size from which to build statistics with boat sales than with cars sales. Therefore the accuracy with NADA and BUC is going to be much less precise than with the KBB for example.

Also, boats are modified far more after they leave the factory than are cars which makes the price statistics for boats even less accurate.

The third large variable is how they are treated by the owner. This variable makes the pricing statistics even less accurate. Cars can be abused as well of course, but boat abuse or lack of maintenance is easier to hide.

Its almost more accurate to read Tarot cards. You might be able to get a very rough idea of price at best.

[denverd0n]

Originally Posted by Don Lucas

Kind of just like the recent housing market.

The big difference is that extremely few people buy a house without some bank financing. As a result, what the bank is willing to lend has a huge impact on housing prices. On the other hand, a lot of people buy boats without any financing. As a result, what banks are willing to finance has a pretty minimal impact on boat prices.

[Not Sure]

Don't forget that your actual purchase price is going to be used by the insurer to set the value of the vessel for insurance purposes. So if you shop around and haggle for the best deal, keep in mind that you've now set the bar low for the replacement value of that particular vessel....in other words, you shoot yourself in the foot for insurance purposes. Dammed if you do, and damned if you don't, apparently.