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Old 28-06-2021, 14:41   #1
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Charter Schemes

I periodically revisit the economics behind buying a sailing catamaran in a charter scheme but I can never get the math to work for me.

There are a lot of folks for whom this works so maybe they can let me know how.

Typically, I find that the residual value of the catamaran at the end of the 5 year contract is roughly the fair market value. In other words, I can buy the catamaran on the open market at the same price it would cost me to pay it off so no savings there.

It seems like the USD 200k down payment is essentially prepaying 5 years worth of charter time. However, when I dig into the amount of charter time I would actually get to use, it is only about 2 weeks per year. High season seems very long and you are only guaranteed 2 weeks in advance. There is a potential to get more high season usage on short notice, but even the charter company admitted that as a practical matter, not a lot of short notice high season slots ever come available. Plus the low season time isnít very attractive, why fly all the way to a sailing destination for crappy weather? So USD 200k for 10 weeks charter usage is a lot more than what I would pay as a non-owner.

Am I missing something?
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Old 28-06-2021, 15:34   #2
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Re: Charter Schemes

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Am I missing something?
You're missing the charter company's skill at selling a dream for their own profit.
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Old 28-06-2021, 17:04   #3
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Re: Charter Schemes

Have a look at the high season dates.
You may find they are aligned to things like school holidays.
You can often get great sailing weather on the shoulder seasons when you can access your boat more reliably.

That may affect your calculations.
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Old 29-06-2021, 07:52   #4
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Re: Charter Schemes

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Am I missing something?
Probably not. From everyone I have talked to, and all the reading that I have done, the charter programs seem to only work well for those who can take full advantage of the owners time, and get full benefit from the tax advantages. In other words, you need to have a lot of free time, and a pretty substantial earned income.
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Old 29-06-2021, 09:11   #5
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Re: Charter Schemes

As others have said, it works best for those with the time. We have a friend on our pier who has his 4th boat with the Moorings. It works well for him, as he uses his time. Might also look at some of the other offerings, like those from BVI Yacht Charters. They have a very different program - you own the boat and run the boat as a business. But again, you have to be very involved.
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Old 29-06-2021, 09:27   #6
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Re: Charter Schemes

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I can buy the catamaran on the open market at the same price it would cost me to pay it off so no savings there.
Buying a used 5 yr old cat from a private owner will more than likely be very different than buying a 5yr old ex-charter vessel.

Private boats tend to be owners layouts, while charters tend to be the 4 stateroom layout with extra heads.

Private boats will have significantly better electronics, anchor and other gear.

Ex-charter will be heavily used. A charter guest isn't nearly as careful as an owner and family. Charter companies are less apt to fix cosmetic dings, cracks and scratches.
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Old 29-06-2021, 11:05   #7
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Re: Charter Schemes

You're missing that folks need to justify to their spouse or even themselves that they're not spending enough to buy several Ferraris on a mere toy but instead "investing", which sounds much wiser and more respectable. It's all about telling stories to justify something one otherwise would feel guilty about doing (even if they have no reason to).

They pencil out to break even at best if you ignore the massive counterparty risk you're exposing yourself to. Just take a look at DYC over COVID.
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Old 29-06-2021, 11:22   #8
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Re: Charter Schemes

Without looking at the numbers, from a practical standpoint, if there was a financial benefit to owning the vessel, the charter companies would not need outside owners to be involved. If there is no significant upside for the company in ownership, you can bet there is even less for you.
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Old 01-07-2021, 08:15   #9
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Re: Charter Schemes

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Without looking at the numbers, from a practical standpoint, if there was a financial benefit to owning the vessel, the charter companies would not need outside owners to be involved.
False logic. "Business" finance is not the same as personal finance.

I used to work for a company that bought office furniture and leased it to companies to use. According to your logic, a company like that could not exist, because it would never make sense to employ a third-party to provide equipment that you could buy for yourself. But they did, they do, and they make a pretty good profit at it. In fact, the majority of office furniture in place around the U.S. is not owned by the company that is using it, but is leased from a third-party.

Sure, from a logical perspective, it does not make sense. But our tax laws, and the accounting practices related to them, are not logical. That is why it DOES, in fact, make a great deal of sense.
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Old 01-07-2021, 08:49   #10
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Re: Charter Schemes

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False logic. "Business" finance is not the same as personal finance.

I used to work for a company that bought office furniture and leased it to companies to use. According to your logic, a company like that could not exist, because it would never make sense to employ a third-party to provide equipment that you could buy for yourself. But they did, they do, and they make a pretty good profit at it. In fact, the majority of office furniture in place around the U.S. is not owned by the company that is using it, but is leased from a third-party.

Sure, from a logical perspective, it does not make sense. But our tax laws, and the accounting practices related to them, are not logical. That is why it DOES, in fact, make a great deal of sense.
Your example is apples and oranges; companies love leases because lease and rental payments are 100% writeoff as soon as incurred, instead of upfront capital expense and commitment to assets that can only be depreciated over time, and eventually need to be disposed of. Your company figured out how to meet this need, and still make a profit itself.

Clearly it's much better financially for a charter company to have someone else cough up for a new boat, and the company just has to run it for 5 years. Whether it's also a net win for an owner depends on their finances, their freedom to make full use of owner time, and their ability to also act like a "company" in gaining all the writeoffs. And how badly they want a well-used cat in 5 years' time.
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Old 01-07-2021, 08:58   #11
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Re: Charter Schemes

I have looked at the moorings time share pretty extensively. For me, it really boils down to how much time you can spend on the boat. If you have alot of free time, then you can use pretty much all your points and do some nice sailing in desirable locations for a reasonable fee. If you are only going to be able to use the boat two weeks in the high season, then it is not a good deal.
However, if you only book (in advance) the shoulder seasons and use the "last minute" bookings, then you can get alot of sailing for not alot of money. Probably works best for retired person who like to spend time in the carribean.
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Old 01-07-2021, 09:01   #12
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Re: Charter Schemes

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Originally Posted by denverd0n View Post
False logic. "Business" finance is not the same as personal finance.

I used to work for a company that bought office furniture and leased it to companies to use. According to your logic, a company like that could not exist, because it would never make sense to employ a third-party to provide equipment that you could buy for yourself. But they did, they do, and they make a pretty good profit at it. In fact, the majority of office furniture in place around the U.S. is not owned by the company that is using it, but is leased from a third-party.

Sure, from a logical perspective, it does not make sense. But our tax laws, and the accounting practices related to them, are not logical. That is why it DOES, in fact, make a great deal of sense.
Turns out plenty of us here run businesses, some of them finance businesses, so we're not replying from a place of ignorance on "business finance". And the poster you're replying to is entirely correct. The charter model has massive counterparty risk to boat buyers which means that from a "business finance" perspective no professional financing firm would touch it with a 10' pole given the tiny returns it provides. In fact it's telling that private equity firms which normally provide this type of capital own several of the charter companies, but don't spend a dime of their money on the actual boats themselves.
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Old 01-07-2021, 09:02   #13
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Re: Charter Schemes

Iíve never found any of these charter schemes make sense. Boats are wasting assets , end of story.
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Old 01-07-2021, 12:50   #14
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Re: Charter Schemes

I think I have been misunderstood. I am not saying that it makes financial sense from the boat owners perspective to get into these charter deals. In fact, as I mentioned above, I only think it can make sense for the boat owner in extremely limited, and specific circumstances.


What I am saying is that the logic that says "it cannot possibly make sense, because if it did the company would just own all of the assets themselves" is flawed. There are plenty of circumstances where it makes a great deal of sense for a company not to own their own capital assets. And plenty of circumstances where owning the asset and leasing it to a company can ALSO make sense.


This particular example may not be one of them, but that does not mean that the entire concept is inherently flawed. It is not.
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Old 01-07-2021, 23:42   #15
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Charter Schemes

The concept worked largely for two reasons

(1) for a private company sourcing capital is much harder to find then simply meeting monthly payment obligations. Loans and or finance can mean personal guarantees etc . Hence the attractiveness for a company.

2) a private company wonít be too concerned about lack of assets on its balance sheet

3) a drawback is it canít ( usually ) offset depreciation against profits. Though that depends on how the charter asset is owned.


The issue is that the benefits to the owner of the boat are very nebulous. If you factor in depreciation you can find it actually doesnít make a lot of sense at all.
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