depreciation and the "gap" with boat prices

[boatpoker]

Originally Posted by Halp

A boat is always worth what a willing buyer is willing to pay and what a willing seller will accept.

In real estate there is always more than one value: Appraised value, assessed value, sellers value, buyers value, lenders value, market value, investors value, cost value,and income value.

Each of these are determined by the motivation of the parties. When 2 or more motivations come together a sale is made.

I suggest that all of these values exist in sailboats.

I would suggest that "investors value", "cost value" and "income value" have nothing to do with boats.

I would also suggest that any difference between "appraised value" and "market value" is dishonest or incompetence on the part of the appraiser.

[valhalla360]

Originally Posted by Halp

A boat is always worth what a willing buyer is willing to pay and what a willing seller will accept.

Too many times I have seen a seller hold out for some 'formula' they believe works for them and then they have a health issue which requires the spouse to take a reduced price to stop paying dock fees, insurance, and lack of maintenance.

Or professionals run a Bucvalupro only to be sideswiped by a NADA when the buyer wants to place a loan on the boat.

If there was a formula that always worked, we all would be billionaires.

In real estate there is always more than one value: Appraised value, assessed value, sellers value, buyers value, lenders value, market value, investors value, cost value,and income value.

Each of these are determined by the motivation of the parties. When 2 or more motivations come together a sale is made.

I suggest that all of these values exist in sailboats.

You are confusing value with what people actually pay.

Individual sales will often deviate from the market value. People sometimes buy for more than it's worth and sometimes sell for less than it's worth. Also, if the boat is left to rot for a few years, the value will drop when it comes time for the proverbial widow to unload it. Widows often don't meet the standard of "willing seller". They often feel pressure to get rid of the boat so they don't act in a rational manner. They also often don't know the value, so get taken.

No, there isn't a magic formula that always works (some sellers really don't want to sell but the proverbial wife told him to put it up for sale) but you can take approaches that are to your advantage For example, when buying: Your best bet is to be willing to walk away from a deal if the seller isn't willing to give you the price you want.

No matter how good you are at wheeling and dealing, buying expensive depreciating toys is not going to make you a billionaire but you can certainly get better deals and lose less on the sale by following good practices.

Several of your defined "values" have nothing to do with sales price:
- Appraised value is often about the purpose of the appraisal which is often a low estimate for the insurance company, so they don't pay out more than the boat is worth.
- Assessed value is typically about the tax man and gets distorted by the political process. For example, in California realestate, if you don't sell, they put a 1% cap on annual increases unless it sells...
- Lenders value is similar to the insurance company. They don't want to loan $500k on a boat that sells for $100k when it's repossessed, so they want a low value assigned.
- Investor and income value has nothing to do with buying expensive toys (ie: yachts)
- Buyers/sellers value needs to be defined. If we go by the traditional willing buyer/seller, they are the same and they also equal market value. If you expect to sell a $100k boat for a million, that's not a value that's just being silly and has nothing to do with the value.

[MSgt]

When I purchased a sailing vessel it is for my use/enjoyment and in the case of my last one ['78 Irwin Citation 23] to live aboard with some modifications, I never consider 'resale value'. Personal satisfaction is the only 'value' I considered. Example: Lived aboard on the hook in Boot Key Harbor, Marathon , The Keys for over 11 1/2 years and when my wife's job required us to relocate to Iowa, on short notice I sole to a friend for 6,5k even through the recent marine survey [for USAA] valued it at 29.5k. Did I mind?--- NOT AT ALL as the way I looked at it is all the thousands I saved by not living on land there [boat was paid for]. My only regret is not keeping one of my anchors [as a keepsake] as the FLOOK was unique. I did keep the original wheel and my Ocean Kayak paddle as many good memories working Ocean Paddler's South rental at Bahia Honda and selling Ocean Kayaks - good times.

[MSAdamMary2020]

I haven't seen a one formula fits all equation yet. At the end of the day...something is only worth what someone will pay for it and no 2 boats are the same except maybe when they leave the factory. The market only dictates a base variable price like a 42' catamaran...but after that...it's all about the upkeep, the extras added, and the overall design. example "owners version vs charter" or "less heads but bigger showers" What's valuable to you is worthless to someone else. It depends on your intentions with the vessle as well. Much like a house where it's considered smarter to go for location and square footage because it's hard to change those items but you can add crown molding and granite countertops later. So don't sweat the details like electronics and seat cushions.
A broker is handy for telling you what they are selling for at this time or just watch the classifieds for 6 months or so to get a feel. Realistically...your budget is what dictates the final purchase. Good luck!

[comesatime]

Interesting topic, I have mused about this too. I like the "boats are more like airplanes than cars" analogy in this thread. Boats are much more expensive than cars and much lower volume produced. Many people are OK with spending more on a new car than pre-owned car so they can get that new car smell. I always buy 10yo cars though. Bought my low mileage, 10yo Lexus for $13k that was $60k new and it has been great. However, a new 40'+ cat goes for $500k+ with all the bells and whistles, big dough out of the reach of 99% of folks, so these new boats usually need charter income to be within reach. There is good demand though for 10yo cats because with market values around $350k, it is within reach of a lot more people. So bottom line, you can buy a 10yo car for less than what fair depreciation is because more folks want and can afford that new car smell while demand for a popular 10yo cat is a little high versus depreciation because so few can afford to shell out $500k+ for a new one. Lastly, sailboats are largely built outside of the US so currency fluctuations can play a big role in bending the depreciation curve in USD and as a consumer discretionary, the business cycle can really hit supply and demand.

[barnakiel]

Depreciation of leased assets is always the same for the same group of assets. At times the regulator gives you more than one option to reflect different use cases of the same asset class.


Leased boats (e.g. in a charter company) are just like any other asset - car or space rocket. At a given point, they have a given depreciated book value.


They are no rules that would stop a company from selling off such an asset at any price. Simply when the sale price is much higher that the book value the company will book an 'extraordinary profit' (or some similar accounting stuff, ask your accountant on the specifics).


(BTW There are actually two kinds of leasing - and only in one of them you are free to sell off, in the other one the asset is not yours when the leasing period is over.)



Example: Benneteau 54 Salon, leased by a Mediterranean Charter Company. Value new USD 500k, depreciated book value at the end of year 5 - 150k. Now a mad Australian pops up and wants badly to buy it. The Charter company asks 250 and gets it.


End of story.


Where is the gap?


b.

[Mickeyrouse]

Originally Posted by Ibetitsthisway

- there is one alberg 30 in yachtworld for 35000 usd from 1965. thats what i meant .. LOL.

One robin doth not a spring make (another quote...sorta)

It will be interesting to know how long the A30 (great boat, I had one) stays on the market, what subsequent price reductions are made, and what the final sale terms (if any) are negotiated. Like owner finance, delivery, modifications to sweeten the deal, lessons, warranty, etc. etc. these will almost be unique. This could be Dad’s boat that he and Mom sailed all over the Chesapeake, taught the kids and grandkids how to sail and fish on, etc. Or not.
I agree that the yacht market is so thin that applying large volume auto depreciation models is unworkable. Our boat came from a production run of 203 units over 30 years. One can only imagine the age, condition, upgrade and gear (and emotion) variability for that small number of boats. And the incredible price range on re-sale.
I believe the real estate model of depreciation is much more relevant, wherein one seeks to evaluate similar but nonetheless unique properties. An asset’s value is only what a willing buyer and willing seller agree to on a specific item at a given point in time. Absent willing parties to trade, a distress condition exists, thus not indicative of “ market.”

[barnakiel]

Originally Posted by Mickeyrouse

(...) I agree that the yacht market is so thin that applying large volume auto depreciation models is unworkable.(...)

It is only thin in Alberg 30 area, it is very thick in Med style ex charter boats area ...


Charter comapnies work to a basic depreciation model, just like any other mass market business (e.g. car rentals).



b.

[Nomad57]

Originally Posted by boatpoker

An older article but still pertinent.
Boat Values ... A Crap Shoot

Boatpoker,


Thank you, so much.


Regards,


Nomad

[Ibetitsthisway]

Originally Posted by barnakiel

Depreciation of leased assets is always the same for the same group of assets. At times the regulator gives you more than one option to reflect different use cases of the same asset class.


Leased boats (e.g. in a charter company) are just like any other asset - car or space rocket. At a given point, they have a given depreciated book value.


They are no rules that would stop a company from selling off such an asset at any price. Simply when the sale price is much higher that the book value the company will book an 'extraordinary profit' (or some similar accounting stuff, ask your accountant on the specifics).


(BTW There are actually two kinds of leasing - and only in one of them you are free to sell off, in the other one the asset is not yours when the leasing period is over.)



Example: Benneteau 54 Salon, leased by a Mediterranean Charter Company. Value new USD 500k, depreciated book value at the end of year 5 - 150k. Now a mad Australian pops up and wants badly to buy it. The Charter company asks 250 and gets it.


End of story.


Where is the gap?


b.

Yep... nice Story. And cause of those starkes sellers are waiting for the mad guys who badly want their boat. Lol

The Costa time delay in waiting is part of the gap

By the way... we are not Talking financial Standard depreciation.
We are talking a depreciation model made for the boat market.
In this case the model would suggest a price of 229k.
Pretty on point with 250 id say

His Desperation cost Himmel 21k 9%.
Not a 100k.!

[Ibetitsthisway]

Very Sorry for the chaotic wording.
Bad spellcheck on german mobile in a Hurry.

[aqfishing]

Greetings.

We bought a Leopard 444 with Sunsail.

They paid us back 45% over the 5 years.

After 5 year we got back 58% of the original purchase price on a trade in on a new 40.

Sunsail are selling the same year 444’s with a $50-70 000 mark up. There are plenty showing sale pending.

If they get on the lower end of their mark up our yacht would have lost 30% over 5 years. Not bad me thinks. Most cars lose 30% when you drive it off the showroom floor!

HOWEVER! We did get a really good deal on our 444 as they were about to launch the 45 a year later. Also our yacht had arrived at the base and was still unsold.(it had yet to do a charter so was brand new).

We looked at Lagoons with DYC. The 52 was roughly a $1m with very good spec. You could pay 35% with a 25% balloon after 5 years. Finding a 5 year old 52 for $600k does not seem too possible looking at advertised yachts. So if you wanting a 5 year old boat in 5 years time and have just over half the cash now, could be worth a look.

[Lake-Effect]

Originally Posted by Ibetitsthisway

Are some actors in this market not telling the truth to protect it, or is it simply a very very inefficient market?

Boats aren't commodities. They're indulgences. They vary wildly in condition, equipment, number of a given model available at any one time. The reasons for selling also vary: estate sale, divorce/financial need, boredom or ageing out, upsizing, change in life plans, moving... and the individual owners vary even more .


Only advice I have is to figure out what boat type and model you want, get a feel for the average selling price, set your budget, then prepare to wait for a year or more for a boat to come up that meets your wish list for condition, equipment and price. Don't be afraid to make lower but reasonable offers. You never know.