Does Red Diesel Issue = Rapid Diesel Vessel Depreciation

[Cobra8]

Sorry guys if this changes the thread slightly but it seems linked somehow.

I’m in the process of making a large purchase, well large to me.. A Sealine 240 / 24,, I’ve viewed 3 vessels so far 2 were 1996 models one priced at £24,000 (Petrol) and the other priced at £32,000 (Diesel).

My question is this although I would like a Diesel for cheaper running costs the Issues over the Red Diesel prices for next year must surely impact on the valuation of Diesel Engine vessels now so by next year if the government get there own way then Diesel Engine vessel price will drop like a stone making them a risky buy this year.

Can anyone please advise,, any assistance would be gratefully appreciated…

 

[Frontier]

I am in the same position, just about to buy and wondering if I am chucking £10k+ into the ocean.

The only comfort I could find in favour of diesel was the fact that it is more available. I have been told many marinas dont have petrol, and many that do dont have it on the fuel pontoon. I didnt want to be carying it in cans from the back of the yard.

I believe the cruising range should be further so I guess if the price ends up the same there is that. But ultimately there seems to be so much more support for diesel boats, and diesel engines are good work-horses in a marine environment, I decided to take the risk.

I am really hoping the Red D remains though, or I will hardly ever be able to go out.

Send an email to your MP telling him/her you expect their full support in retaining Red D, its quick and easy to do.
You can get their address here

http://www.locata.co.uk/commons/


There is always chip fat I suppose !!! /forums/images/graemlins/wink.gif

Not much help to you really, but good luck!

 

[Cobra8]

Thanks for the response,, interesting that some Marinas don’t have Petrol hope that’s not becoming a trend as I’ve heard LPG is also becoming scares having failed to meet peoples expectation.
I reckon your right about the Diesel being more robust in a marine environment and of course the increased cruising range must be considered although in my case £8000 extra for the same vessel just because it has a Diesel Engine buys an awful lot of petrol.

 

[Frontier]

The info on marinas not having petrol is just what I have heard from brokers, I dont know from experience. Could be they were trying to put me off petrol.

When looking at various marina's litrature I did notice some didnt have petrol, so felt there was an element of truth in it. maybe the guys who actully have boats can comment.

I did think about waiting until after December, but if red diesel is retained, there could be quite a lot of people who had been waiting to see what happens suddenly looking for boats, and we could see price increases. bloody hard to know isnt it ! /forums/images/graemlins/confused.gif

 

[Joe_Cole]

FWIW, in the West Country at least, it's true that many Marina's and harbours don't have petrol. Frequently the only way to get the stuff is to go and find a garage. When you can get petrol it costs up to £1.25 a litre!

 

[TrueBlue]

[ QUOTE ]

I did think about waiting until after December, but if red diesel is retained,

[/ QUOTE ]

Note: derogation does not end until after December 2006 unless I've missed a possible government statement.

It may even be that any increase may be phased?

Anyway Diesel engines are more efficient than Petrol - despite the fuel cost, as well as being much safer - that's why marinas don't sell it... IMHO

 

[gjgm]

depends where you are... but at present there may be few petrol outlets as there isnt so much demand vs all the legislative hassle of having vast amount of explosive fuel about. could be offset if the whole tax issue swings. Course, diesels will still be more efficient.not £10k more efficient perhaps! Depending on the size of your boat. But for sure, dont buy a boat that you cant refuel for miles and miles.

 

[Robih]

Phil,

I think there is a significant risk of vessel depreciation if red diesel gets binned. I sold out of the motor boat a year ago because I didn't want to stand in for a £30k loss. I've heard that the mobo market is soft at present; part of which is due to folks standing back and watching what happens. With diesel prices having gone up significantly anyway the increase due to binning red diesel will be less of a shock when/if it happens. But I see what you mean about not going out very often - I worked out that my previoius mobo (Targa 39) would now be costing £1.60/mile - which is ok around the solent but a cruise over to Brittany (say 400 miles = £650) gets a bit rich.

rob

 

[Cobra8]

Hi Rob

I just wish I could find an honest broker that could tell the truth and indicate to me my best options; unfortunately they all seem to be so desperate to sell anything they will change their story on the fuel issue almost immediately in favour of whichever vessel fuel type your looking at.
I’m not quite in the same league as a mobo (Targa 39) but I do have £35k to spend, interesting that a Broker in Hamble Point Marina dropped from £38k to £30k when I started to walk away. They either have a massive profit margin or they are prepared at this time of year to take a loss.

I think it’s a massive profit margin…

 

[Robih]

Phil,

To be honest I think there's quite a number of folk very sensitive to what might happen in the motor boat market over the next 24 months and some are bailing out and prepared to accept a loss now in anticipation of the market going worse for a while. My view is that mobo values will fall until the reduction in capital cost is sufficient to make the total cost of boat ownership equal (under white diesel) as to what it has been under red diesel.

I reckon that the average annual consumption of diesel for a £100k leisure sea going mobo might be 800 galls. That equates to a red diesel cost of £1,800 and probably twice that under white diesel, say £3,600. Given a cost of capital of 8% on the additional annual fuel cost that's a capital cost reduction required of £22.5k to bring back financial equilibrium. That's where I got my theory that I expect to see a 20% to 25% reduction in capital values to reflect this required adjustment. It is possible to already see this discount factored in to petrol boats - so the market evidence is already there.

If you accept this then I reckon that a boat's sale price might go:

Asking price, say 100k
Normal negotiating adjustment, 10% - 10k
Therefore normal sale achieved price 90k
Red/white diesel adjustment 20% -18k
Maket adjusted value post white diesel 72k

So, this would suggest a total discount (asking price to contract price) of 28% which interestingly is very close to the discount that you have been offered (27%). So, maybe the £30k price that you've seen now is about the right number - the key thng is that folks doing deals over the next 24 months need to achieve this level of discount to wash out the diesel disadvantage on to the existing owner. Not nice, but necessary.

rob

 

[rickp]

If what you're suggesting is true, presumably boats are significantly cheaper already in countries where the derogation has already gone? Are boats in spain (for instance) significantly cheaper than here because of the total cost of ownership issue you highlight?

Rick

 

[Robih]

Fair point, but I think there is evidence at present that boats sell for more in the uk than they do in the Med. I've heard of people bringing boats back to the UK for sale to realise a higher price.

The theory can only have general applicability, there will always be people who have sufficient disposable income to ignore the "total cost of ownership"; indeed my neighbour in the marina has just purchased a Princess 58 and I doubt he is concerned at the £3k refuel cost!

rob

 

[Andrew_Fanner]

Unfortunately your argument still panders to the idea of the well heeled with £100K plus boats where the cost of fuel is never a large proportion of the total cost of ownership. The people who would be totally shafted are those in smaller, cheaper boats who use them a fair bit. Make the boat value £20K and 600 gallons annual usage and look at the change. That is why the drogation needs to stay. The big boats will just move a bit less, the smaller ones may not move at all...

And lots of those smaller boats are owned by poor folk who work every hour God sends to be able to afford them at all, they don't have time to sail anywhere very much.

 

[Robih]

No, I don't think my argument panders to the well heeled rich boater at all. The £100k example is simply a "stick in the sand"; a point around which one can illustrate the theory. The theory itself is directly applicable to lower value craft - as illustrated by the pricing of Phil's £30k craft and the "whole craft discount" of 28%.

Generally the correlation of fuel cost to capital cost, though not perfect, is reasonable. I've had a £40k nimbus 30 footer and a £130k targa 39 - the latter used a good deal more fuel than the former - hence the broad applicability of the theory in the impact on the owners wallet.

Agreed that the disposal income of the well heeled boater will be greater than the folk at the bottom end - but don't forget that the well heeled also have mortgages of £500k, maybe marine mortgages of £200k, they have school fees and expensive cars etcetera. People tend to live to their means and whilst their boating budget will be greater then many people's it again will be proportionate to boat value.

rob

rob

 

[AdeOlly]

Hi
Have just been through this myself. Had a V8 petrol before that cost a fortune to run but was cheap to buy. It was also very unreliable, which was my main reason for changing. I bought a diesel (S24/KAD32) on ther basis that:
a) Diesels are much more reliable than petrols - important in a single engined boat. Remember your life may one day depend on that reliability!!
b) Petrol is easy to get on the south coast, but try getting the stuff in France... or the west country.
c) As with cars, a good diesel will always do more MPG than petrol. I'm getting nearly 5nmpg... /forums/images/graemlins/smile.gif
d) Diesel is safer.. never liked the idea of 200l of petrol under the helm going through a carb!

I am prepared to accept that I may lose some value if/when red goes, but figure that it won't be a huge amount of the value of my boat (£36k) in comparison to all the other costs I have to pay. I think the other advantages of diesel will always make them more desirable than an equivalent petrol, IMHO, and I wouldn't go back to petrol.

Now is a good time of year to buy with the end of the season only a few weeks ago - any dealer with lots of stock will be keen to do a deal.

 

[tiger_tim]

Phil,at boatmatch we charge 3% to the seller when sold, and publish our full brokerage rate in all of our ads...Give us a call,and we'll try to give you some advice on the motor boat market as we see it.In our opinion pricing is more related to condition than fuel costs.........Tim Robinson...Director Boatmatch.com

 

[Cobra8]

Rob
Thanks for that,, interesting calculation and I guess when dealing with Broker’s Stock and not Broker’s selling on behalf of owners is about right for a couple of mobo’s I’ve seen recently anyway.
I suppose I am trying to predict the future really, it’s my first boat that I will have sole ownership of which obviously means all financial responsibilities are entirely mine.
I would like to think that in about 2 or 3 years I could sell it and get something bigger perhaps, so in order to do that I am trying to limit my losses this time around.

Alternately I just want get out on the water and after listening to you guy’s and seeing for myself some instabilities within the market concerning mobo’s, unless a good deal comes up between now and xmas I think I’ll start looking at what I can get in the Yachting world for 35k. It may be a short term solution for me and they all seem to have Diesel engine fitted so should be easier sell, which means in 2yrs sell it and get a Diesel mobo.

Phil

 

[Cobra8]

Hi
I’ve no doubt that Diesel is the future and as I won’t to sell the Boat in about 2 or 3 years time to get something bigger its what I should be looking for I know.

But in the present climate with this Red Diesel Issue hanging over us I just cannot bring my self to spend so much extra money just because it’s a Diesel. I mean we are talking 6k to 8k difference for the same boat; I could almost buy a Petrol Sealine 24 Vessel and fit a brand new Diesel replacement engine, its ridiculous. With regard to Petrol Reliability problems could it be Injection versions are more reliable then Carbs.

It’s a no win situation really financially,, because if Diesel vessels reduce in value closing the gap between Petrol & Diesel then no one will won’t to buy Petrol vessels,, when they can get a Diesel for a bit more,, so Petrol Vessels will get even cheaper because no one will won’t them...
Oh my God when will all end…

 

[apollo]

Not sure I agree with this.

Comparing UK with Holland where white diesel is the norm albeit cheaper (but not that much) than we will end up paying, the average boat prices (at least for the kind of boat I am looking at) are higher than the UK.

Therefore not sure there will be such a big swing as you suggest.

Also variables like the real juice guzzlers maybe depreciate more /forums/images/graemlins/crazy.gif and the displacement boats hardly any effect /forums/images/graemlins/laugh.gif.

I think the whole thing is unknown and not sure that "theories" achieve anything other than scaremongering.

 

[Robih]

Agree entirely that the whole subject is a black art - as is all economics! (As G Brown is finding out with tax revenues falling way behind prediction) Nevertheless I think some thinking on the subject is helpful as at least it is a framework around which to have a discussion. I'm sure I'm not exactly right with my theory; it's just my best assessment of the situation and the post that started this was asking for opinions.

I think that you are absolutely correct with your displacement boat theory. I'd be very happy buying a Linssen or the suchlike - I think demand will increase for displacement boats. In fact when I sold out of my Targa I did seriously consider a displacement mobo but decided to try sail. I personally think the medium term future of leisure motorboating is in displacement boats as the fuel consumption rate is so much more sensible. I expect that is why dutch mobo's are holding their price?

rob