Buying quality reduces the cost of boat ownership
May 29, 2011 6:38 PM | Tagged as Ownership

Getting the most out of your boat purchase

If you are a longtime boat owner, you know that owning a boat can be a costly affair. Making decisions that keep not only the cost of your initial purchase, but also the long-term cost of ownership, well within your financial means is one of the critical factors of keeping the pleasure in boating. It is very hard to enjoy your boat when it becomes an unexpected drain on your financial resources. The following are some important points that should carefully be considered that will help you achieve maximum enjoyment from your purchase. 

Initial Cost
One of the most important considerations is keeping the total cost of your purchase well within your financial means. One of the considerations often overlooked when purchasing a new boat is what the vessel will be worth a few years later in the event that you suddenly need to liquidate. We all know that the moment we drive a new car out of the dealership, it immediately looses 25% or more of its value. And although the immediate depreciation rate of most new boats is not quite so bad, the owner of a newer vessel is going to take a serious hit in the event that he has to suddenly sell. There's a good reason why banks want a 20% down payment on financing. One of the worst positions you can be in is to have to liquidate and finding that your liability is more than your equity. We call this being "upside down". Bank repossessions have hit an all-time high and the majority of these are younger, first-time buyers.

Quality -vs- Quantity
We seem to be living in an age when price and quantity are more important to consumers than quality. First time buyers in particular are often more interested in finding the largest size vessel for the least cost. This is a mistake.  The effects of  water, sunlight, ice and snow, rain and the rough conditions of oceans, lakes, and rivers take a toll on boats. In other words, boats float in a rather hostile environment, a factor that should make getting the best quality for the money a primary consideration.

Increasingly, boat builders are succumbing to marketing fads, sacrificing quality for appearance, style over safety and function. More and more builders turn to designers of fashion in an effort to snare the inexperienced into keeping up with the Joneses with the latest stylistic offerings. Succumbing to style over substance can be a costly mistake when, a few years later, when the trendy design is out of style and all that showroom glitz and gloss turns to rot and rust under the effects of the harsh marine environment.

There is no more instructive exercise than by taking a tour through a marina or boat yard and observing what boats look like after they're a few years old. Their age can be easily determined from the hull number on the stern. Take a look at how those glittering showroom finishes are holding up in the real world. Has the gelcoat turned chalky after only a few years? And what about those fancy graphics? Is the paint fading or is the taped-on feature striping peeling? How about molded plastic parts: are there numerous plastics that are cracked, chipped or broken? Look out for plastic trim and particularly window moldings. Are they painted and is the metal under the paint starting to corrode? Look at the hardware. Is it quality stainless steel, or cheap cast aluminum or "pot metal" parts that are corroding badly? Is some of the hardware painted and the paint starting to come off?

And what about styles du jour, the marine equivalent of the bubble car? Are you willing to invest good, hard-earned money on a brief fashion statement that, in a few years, will leave you holding the bag because the style is passé when you go to sell?  Is the open cockpit the equivalent of leaving the 1972 Cadillac convertible outside with the top down, an upholstered lounge sitting out in the rain, salt and sun? How is all that vinyl covered plywood and plastic going to look a few years hence?

This is one of the best ways that I know of to find out how any particular builder's models will hold up over time. Remember that inferior materials such as molded plastics, vinyls, plywood, decals, cast aluminum and other painted metals can rapidly degrade, and once degraded cannot be restored. Poorly constructed boats are a lot like particle board furniture: once it deteriorates, there's no bringing it back. The costly investment turns into a painful loss. Remember that the reason why quality boats like Chaparral, Cobalt, Caravelle or Sea Ray cost a little more is because of the quality materials that go into their construction. There's a good reason why they don't put interiors on the exterior! A 10 year old Chaparral can still be easily resold because its quality components have not turned to dust. If you want to avoid taking a big hit on resale, remember that the glitz and glitter today is less important than how your purchase will look at the time you go to sell.

When we track the depreciation curve for many of the most popular builder's models by determining the net annual loss in resale value, we find that the higher the vessel quality, the sooner the depreciation curve will flatten out. That means that higher quality boats proportionately loose less value than lower quality vessels. For the above mentioned builders, the flattening out usually starts around five years, so that by the time a vessel is 6 years old, the annual loss of value is only a few percentage points.

A general rule of thumb is that a new boat purchase works out better for the owner who keeps a boat longer than the average four years, or at least through the bottoming out of the depreciation curve. Obviously, the longer a boat is owned, the less the annual cost becomes. However, that doesn't help much as far as residual value is concerned unless we consider the original cost versus anticipated resale value. Once we do this, we understand that what they told us was really true: paying a litttle more for a boat from a quility manufacturere will be a better buy in the long run.

Older Vessels
While used boats can represent good value, this is true only up to a point. The problem with some boats once they get beyond 10-12 years is deferred maintenance. It is an unfortunate fact of life that many boat owners cut a lot of corners when making repairs, additions or improvements. This is particularly true when it comes to mechanical, electrical and plumbing. While the interior may be beautiful, major systems may have been ignored. Repairs are often done to a much lower standard than the original, so that by the time a decade has gone by, there may be a lot of substandard maintenance and jury-rigging.

On older boats, these problems can accumulate to the point where it is no longer economically viable to restore the vessel when considering the cost of refurbishment versus market value. Nothing can take the pleasure out of boating faster than to get in over one's head financially by underestimating restoration and maintenance costs. When experienced boaters make reference to repairs always costing double what they think it will, they're not kidding or exaggerating. Estimating marine repairs is extremely difficult, even for professionals. And nowhere is the statement, "You get what you pay for," more true than in the marine business.

Be wary of vessel's with excessive amounts of deferred maintenance or jury-rigging. Hire a reputable marine mechanic to do an inspection of any used boat you are looking to purchase and ask for an estimate for repairs. If they can't do it, or are having a hard time estimating, chances are that you'll have a hard time paying when the bill comes due.

Cost of Ownership
In addition to purchase price, interest and depreciation, the cost of ownership includes maintenance and repairs, something owners rarely consider. For new boats, maintenance is low for the first three to five years or so. But after that time, costs start increasing significantly. Regardless of type, major machinery will often require major repairs in years 5-7. There's a reason why warranties expire when they do, and that's because that's when the breakdowns begin to happen. If you buy a new 20' bowrider and sell it after 3-4 years, annual maintenance is likely to average around 4%. The longer you own it, the more it will increase as things wear out and breakdown. The first big hit usually comes when an engine or drive goes bad.  Obviously, if you own the vessel this long, suddenly the annual average takes a big leap. If you're buying used, then you have to be prepared for this, whether it's an unexpected blister repair job, or some other problem that's not covered by insurance. Of course, with a used boat, hopefully that $2,500 you saved off the new price more than makes up for the "big bill."

The point is that in compiling averages, over time we know that costs can be reduced to annual percentages for which an owner should be prepared. A new boat owner should expect those costs to average in the 2% to 4% range if you buy quality and 6% to 10% if you buy "junk". If you're getting into a used boat with considerable deferred maintenance, that annual average can increase dramatically, especially when serious problems gang up on you all at once.

Get an Inspection

Most marine technicians universally recommend used boat inspections because they often turn up  many defects. Not only can the technician tell you a lot about the quality of the boat you're buying, but he can help you get those problems fixed before you take delivery and head off  problems before they ruin a good boating day.

In Summary:

  • Make quality a major consideration. Don't try to get the largest vessel that your budget will allow. Better to take a step down in size and a step up in quality.
  • Calculate the full cost of ownership, including depreciation, interest, insurance, dockage, fuel and repairs. Figure maintenance as an annual percentage over the period of ownership.
  • Look beyond glamorous interiors, luxurious upholstery and racy designs: the beauty may only be skin deep.
  • Once you've decided on several possibilities, take a tour of a marina or boat yard and see how the products of those builders hold up over the years. Talk to marina and boat owners and see what they have to say.
  • Consult a technician before you buy used. Have an inspection done on any used watercraft.
  • Take the time to find the best marine technician and service dealership in your area. When you find someone that does a good job, reward them with loyalty and recommendations to your friends who are involved with boating.

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