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Old 23-01-2020, 23:23   #1
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New cat depreciation after 2 years

I am budgeting to lose 20%. What do others think?

Because of price my first choice is the Astrea 42 at about 525K.

Will I lose a different percentage on a Nautiech Open 46? Which is about 650 (I have not as seriously priced it so that is more of a guess)

Owners version, no charter.

(Air and generator would add 40-45K to each boat)
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Old 24-01-2020, 01:12   #2
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Re: New cat depreciation after 2 years

Gday BB,
just to be curious how did you come to a figure of 20%. I would have thought looking at the second hand market will give you a fairly close guide to depreciation. Always remember its not a fixed percentange and there can be many variables in the market such as demand etc



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Old 24-01-2020, 05:19   #3
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Re: New cat depreciation after 2 years

You will certainly take a big hit when buying new, but Ive not seen any definitive analysis of the actuals. As pointed out, I think there will be a LOT of variables involved. Would be interesting if someone would take a shot at this analysis.

Something to consider is that the used catamaran market is quite good right now. An added bonus is that you can find well outfitted boats. If your plan is long range cruising you will spend a significant amount outfitting a new boat...so you get the outfitting hit plus the depreciation. Assuming 20% in that price range likely puts you in the $150K+ loss range within 2 years because you will never get the outfitting $s back.

Note that most boats tend to reach a depreciation "floor"...they tend to stabalize at the same valuation level even when decades old.
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Old 24-01-2020, 06:44   #4
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Re: New cat depreciation after 2 years

Isn't it more important to realise that you are buying something to consume, not an investment. Unless you already have a plan to sell it at a specified time in a certain condition depreciation is neither here nor there.
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Old 24-01-2020, 08:01   #5
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Re: New cat depreciation after 2 years

I do not think you will see 20% depreciation unless there is a huge recession and nothing is selling, but that shouldn't be your plan to keep it such a short timeframe...thus making the number irrelevant.

Depreciation though is something I calculate into the cost of cruising along with the cost to exit/sell after you are done. If I purchase a cat with a great high quality cat, with great resale (Privilege 510 for example) and keep it for six years to go explore the world on I would expect the costs to look like this: (barring some major economic headwinds that are not normal)

Purchase price out the door duty paid: $1,600,000
Depreciation at 8%: $1,050,000 ending value
Sales expense @ 10% = $900k-$950,000 back in my pocket at the end.

This does not include maintain the boat in bristol condition, but I think it is reasonable to assume that I will "consume" $100k + of capital to have the privilege (pun intended) of cruising on a new luxury boat spec'd exactly to our tastes. The longer you own it I do believe the depreciation would tail off, but this is the rough calculation I use in my head for ownership of a depreciating asset.

That being said, you can't take it with you, so if you can afford it and it provides happiness and not a sense of angst over dollars flying out the window then go for it. Just have the boat be a reasonable percentage of your net worth and understand your cashflow requirements for enjoying the experience along the way.
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Old 24-01-2020, 10:08   #6
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Re: New cat depreciation after 2 years

Is there something magic about a two year timeframe? Moorings regularly provides a pretty accurate 4 or 5 year depreciation in the form of telling potential owners approximately what market value will be at the time the contract ends. That would be a pretty good data point.
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Old 24-01-2020, 10:08   #7
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Re: New cat depreciation after 2 years

of course many variables. i made a spreadsheet that allowed me to make various assumptions and a best, worst, and most likely scenario. from what i can tell about the used market for our 2014 Leopard 44 owner's version, I am expecting around 5% per year for the first 3-5 years. although we continue to add/upgrade so that is somewhat of an offset.
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Old 24-01-2020, 10:14   #8
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Re: New cat depreciation after 2 years

Like everything, it depends on the state of the market and the particular model.

When we bought our 4-year-old Antares 44i, it was about the same price as a new, with new ones not delivering for 2-3 years out. Now, with improved production and supply of used, a 4-year-old model trades about half the price of new.

My gut tells me, unless there is a market anomaly, a 20% depreciation value is way too small. For that difference, i think a lot of people would buy new.

(Separate discussion, but we found a lot of benefit to buying a couple-year-old boat. The amount of warranty work and breaking in required to get the boat working is sure nice to avoid!)
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Old 24-01-2020, 10:23   #9
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Re: New cat depreciation after 2 years

Quote:
Originally Posted by brackebusch View Post
I am budgeting to lose 20%. What do others think?

Because of price my first choice is the Astrea 42 at about 525K.

Will I lose a different percentage on a Nautiech Open 46? Which is about 650 (I have not as seriously priced it so that is more of a guess)

Owners version, no charter.

(Air and generator would add 40-45K to each boat)
Some great feedback on this topic, as I am going through a new boat purchase too. I think your forgetting that the manufactures are upping there prices about 5% per year. FP raised it 10% in 1 year for a 2020 build. Demand and the economy is still strong.
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Old 24-01-2020, 10:38   #10
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Re: New cat depreciation after 2 years

Quote:
Originally Posted by AZUS View Post
....


My gut tells me, unless there is a market anomaly, a 20% depreciation value is way too small. For that difference, i think a lot of people would buy new.

(Separate discussion, but we found a lot of benefit to buying a couple-year-old boat. The amount of warranty work and breaking in required to get the boat working is sure nice to avoid!)
I'd expect a 20% depreciation to really be a best case scenario. Obviously, it's the used boat market which will dictate price upon sale, but once the decision to sell is made - every month of slip fees and carrying costs is straight from the net bottom line. How many months will it take to find a buyer? How many months will you need to hold out for that price? It's a risky calculation, IMHO.
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Old 24-01-2020, 11:19   #11
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Re: New cat depreciation after 2 years

As a swag 20% seems reasonable as a two year guess . Why two years?
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Old 24-01-2020, 11:37   #12
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Re: New cat depreciation after 2 years

Quote:
Originally Posted by Jackz View Post
of course many variables. i made a spreadsheet that allowed me to make various assumptions and a best, worst, and most likely scenario. from what i can tell about the used market for our 2014 Leopard 44 owner's version, I am expecting around 5% per year for the first 3-5 years. although we continue to add/upgrade so that is somewhat of an offset.
You mean an offset vs depreciation?

If so, not likely, you will lose all the money you spend on the boat during ownership whether for upgrades or maintanance. Having it well outfitted and in good condition just makes it easier to sell and keeps its market value near the upper end for that make/model/year of boat...Ive never seen any amount spent actually increase boat value above market averages.
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Old 24-01-2020, 11:38   #13
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Re: New cat depreciation after 2 years

If I were evaluating this question I'd want to know the builder's backlog for the specific model(s) in question. If you get someone that really wants that boat, and the backlog is such that they can't get a new one for three years that may present a different picture for the sale of your two-year-old boat than if a buyer can get a new one in 3-6 months.
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Old 24-01-2020, 11:50   #14
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Re: New cat depreciation after 2 years

Next year or so, my youngest will move out. I have spent my entire life raising kids, it has been great, but it would be also fun to mix things up a little. I figure it is time for a 2 year sabbatical. Sell the house which is my retirement. lose 20% plus living expenses, build memories with my wife, and restart life at a slower pace. I can't afford a boat long term. Note I can't really afford to retire either.
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Old 24-01-2020, 12:01   #15
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Re: New cat depreciation after 2 years

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Originally Posted by brackebusch View Post
Next year or so, my youngest will move out. I have spent my entire life raising kids, it has been great, but it would be also fun to mix things up a little. I figure it is time for a 2 year sabbatical. Sell the house which is my retirement. lose 20% plus living expenses, build memories with my wife, and restart life at a slower pace. I can't afford a boat long term. Note I can't really afford to retire either.
Forget the 20%. Are you sure you are not getting the cart before the horse?
Just a question, it's your life.
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