Trade-in and Depreciation

[Deleted User YDKXO]

just wanting to get some info on trade-in deals and depreciation on new boats.
Let's say one has just bought a new 50-60 foot sunseeker, fairline or princess.
what would be the typical conditions when going for an upgrade with the same brand within 18 months of purchase....

Take no notice of the carpers. They're just green with envy and still trying to shake off their New Year hangovers There are 2 answers to this. If you are trading up with the same manufacturer, they will try to structure the deal such that it appears you are losing little or no money on the p/x but you won't get any discount on the new boat. This is just to fool you that their boats don't depreciate but this way of buying boats just delays the depreciation until the day you trade down or move to another manufacturer. The real answer is somewhat different because of course boats depreciate just like any other plant and machinery. The accepted wisdom in the industry is that new boats lose their VAT plus a further 5-10% per year. I am sure that there will be someone along in a minute to challenge that and it is certainly true that some boats will do better than that and some worse. But just by way of example, if you look in last month's MBY, you will see a report on secondhand Fairline Targa 47's and you will see that secondhand asking prices for 2-3yr old models are about 30% lower than the list prices at the time they were new. Of course this doesn't take account of any discount negotiated at the time of purchase but neither does it take account of actual secondhand selling prices (which are invariably less than asking prices) nor broker's selling fees but it gives you a fair idea of the real depreciation of a new boat.
You can try to minimise depreciation to some extent. First, buy a popular boat from a well known and well respected manufacturer and certainly Sunseeker, Princess and Fairline fit that bill. Second, buy a boat that is early in it's model cycle such that, when you come to sell it, it is still in production and, as well as secondhand buyers, it will attract new buyers who don't want to wait for a new boat to be built. Just be aware of one issue though. If the Eurozone implodes in the next couple of years and the Euro takes a dive, there will be an awful lot of cheap Euro denominated secondhand boats for sale that will depress prices of Sterling denominated secondhand boats

 

[Nick_H]

It seems a perfectly reasonable question to me, albeit a difficult one to answer, and I don't understand the initial sceptical responses.

As others have said, if you're upgrading (ie. to a bigger more expensive boat), then on the face of it you may get the full price paid for the first boat set against the new boat. In reality though, the maths isn't as simple as that, because it ignores the deal you could have done on the bigger boat as a 100% cash buyer.

The real depreciation you'll suffer on boat 1 will be hidden (rather than deferred) in the deal on boat 2, and will vary with lots of factors, the most significant ones being the saleability of the boat you're trading in, and how good a deal you struck when you bought it.

I'll stick my head above the parapet and guess at a figure of 10-20% real depreciation in the first year, assuming you got a healthy discount when you bought, although at least one well known forumite has made a profit on the sale of a boat he bought new.

Having said that, i've never actually bought a new boat, so what do I know!

 

[oGaryo]

I reckon Cornerswell has finally dumped his girlfriend from 2007, decided to bite the bullet and buy his Sunseeker and InTouch1 is his Egyptian mate helping the fella make the right choice consulting the brains in this forum before doing so..

you watch, next question will be "what size car port does my mate need for me to park my Farrari in his boat so we can sail over to blighty and 'av a word with those unwelcoming YBW lot face to face"

Google's a dangerous tool

posts 202 and 207 explain all

 

[PowerToSail.com]

Some people are missing the point!

It sounds to me exactly the sort of question that someone who is considering buying a first boat in the 60' range would ask if thought he might want to change his boat once he had got a season or two's use under his belt. There's been at least one person on here who started at that sort of level and changed boats that quickly.

I'm pretty surprised and disappointed at the replies but no doubt someone that can provide an informed answer will be along shortly, as opposed to those who just want to alienate a new poster to a public forum.

As an aside, why does the question need to be from a real situation anyway? Why are you assuming it's actually someone buying their first boat? Could be a broker, student, freelance journalist doing some research, anything...

There are two main criteria for the part exchange to be considered for the vendor, which are price and convenience. It is not always easy to sell a boat privately; hence the proliferation of brokers, and the price you achieve after an aggressive buyer and a broker have had a go at the sales price has to be considered when thinking about a part exchange valuation. I was reading a statistic recently albeit for bigger boats that the average time a boat stayed on the market was a staggering 300 days! So for the convenience of only owning one boat at a time and not having to negotiate a retail sale on your existing boat; a trade in maybe the best way forward. Alternatively you could ask the dealer/manufacturer for a 'fall back' valuation on your boat which may because of a lead time of some months allow you time to sell your existing boat first. If you have confidence in the integrity of the dealer/manufacturer, and depending upon the percentage of value of the sale of your existing boat then maybe a price to change to can be negotiated with a further payment of £/€ when your existing boat is sold. Boats should not stay on the market for 300 days but often do because of a vendor’s or in some cases the broker’s unrealistic initial valuation. Buyers in my experience will often not even bother enquiring about a boat if the asking price is unrealistic. In summary I would suggest that you look at the price to change and ensure that you are buying the boat and not the deal.

 

[intouch1]

thank you gent. it's comforting to know that i am heading in the right direction with my dealer.

makes sense to me to tarde-in the boat at a few % less than having it sit in the water while trying to find a buyer myself.

seems it is fair with my dealer asking for a 3% fee to cover his trade-in expenses until she sells....should that prove to take a while.

as for all the funny comments on here and me being considered a newbie here, i really dont get all the sarcasm. forums exist for the reason of exchanging ideas and experiences....be it on how to change a light-bulb or buy a new jet....anyway, to each his own and i am glad some folks actually took the time and made the effort of guiding me in the right direction.

cheers to all and happy boating....

 

[Deleted User YDKXO]

makes sense to me to tarde-in the boat at a few % less than having it sit in the water while trying to find a buyer myself.

seems it is fair with my dealer asking for a 3% fee to cover his trade-in expenses until she sells....should that prove to take a while.

as for all the funny comments on here and me being considered a newbie here, i really dont get all the sarcasm. forums exist for the reason of exchanging ideas and experiences....be it on how to change a light-bulb or buy a new jet....anyway, to each his own and i am glad some folks actually took the time and made the effort of guiding me in the right direction.

Your definition of a 'few' % is different to mine. A 28% hit to own a boat for 18 months seems like an awful lot of money to throw away although IMHO it is a realistic view of its likely depreciation. Seems like the dealer has been burnt in the past and is trying to be more sensible. I hope and trust that you will still get a substantial discount on the new boat price in 18months time?
I dont know what the value of the boat is but it might make more financial sense to charter for 12-18months and then buy? At least you don't get hit with the berthing and maintenance charges and it gives you a chance to try out a few different boats

 

[intouch1]

Your definition of a 'few' % is different to mine. A 28% hit to own a boat for 18 months seems like an awful lot of money to throw away although IMHO it is a realistic view of its likely depreciation. Seems like the dealer has been burnt in the past and is trying to be more sensible. I hope and trust that you will still get a substantial discount on the new boat price in 18months time?
I dont know what the value of the boat is but it might make more financial sense to charter for 12-18months and then buy? At least you don't get hit with the berthing and maintenance charges and it gives you a chance to try out a few different boats

Deleted User, 28% surely is a lot of money. but looking at it the other way, that is the way the game is played. 15% for the first year and 10% for the second year. it's the price to pay for buying new.

they will extend 12% on the list price of the new boat and 5% on the added options.

this is the worst case scenario that we are intending on including in the contract.
should either i or the dealer manage to find a buyer about the time, the new boat is scheduled to leave the factory, i will be credited the full amount the boat is sold for less a 2-3% comission to the dealer.

btw, i have purposefully neither disclosed dealer nor brand of boat as i have promised my dealer to keep our negotiations confidential.
i am very happy with the quality of boat i currently have and after-sales service is as good as can be.

the main reason for the upgrade is crew accomodation and amore seaworthy hull/displacement.

 

[intouch1]

i live by the sea and am out every weekend. so chartering is not really an option.

i would surely keep using my current boat until the new one is ready to leave that factory.
scheduled delivery time is april/may 2013 and i would then have some aftermarket work done which would take another 8-10 weeks + shipping.
so realistically speaking she would arrive at her new berth around september 2013. which would roughly be 22 months since recieving my first boat.

i have also discussed with my dealer that we need to find a future proof formula should there be more future upgrades.
no one can afford to take a 20-30% hit every couple of years.

 

[benjenbav]

thank you for the replies. both, the sensible ones and the less so...

and yes, this is my scenario. just received my sportscruiser 2 months ago and am considering upgrading. while it might seem a bit early to some, taking into account the slot availability etc. it would leave for a good 15-18 months use on my current boat.

my dealer wants to go 15% depreciation on the first year and 10% on the second. furthermore he is asking for a 3% handling fee for trade-in.

seems a bit harsh to me.

The reasonableness or otherwise of this offer would seem to depend - in part, anyway - on the discount you are being offered on the upgrade. As ever, it's the price to change which is going to determine whether you are getting a decent deal.

Best of luck.

 

[MYAG]

It seems a perfectly reasonable question to me, albeit a difficult one to answer, and I don't understand the initial sceptical responses.

As others have said, if you're upgrading (ie. to a bigger more expensive boat), then on the face of it you may get the full price paid for the first boat set against the new boat. In reality though, the maths isn't as simple as that, because it ignores the deal you could have done on the bigger boat as a 100% cash buyer.

The real depreciation you'll suffer on boat 1 will be hidden (rather than deferred) in the deal on boat 2, and will vary with lots of factors, the most significant ones being the saleability of the boat you're trading in, and how good a deal you struck when you bought it.

I'll stick my head above the parapet and guess at a figure of 10-20% real depreciation in the first year, assuming you got a healthy discount when you bought, although at least one well known forumite has made a profit on the sale of a boat he bought new.

Having said that, i've never actually bought a new boat, so what do I know!

Yup, I agree with pretty much all of the above.

My own experience (having bought all my boats as new) has shown the hit on depreciation really depends on how well you negotiated the buying price in the first place and that in turn relates to how well you might price the old boat for a reasonaby quick sale thereafter, presuming you chose a decent spec etc. The cash in your hand will allow you to drive a better deal as a "cash buyer" again for the new boat and so the cycle continues. Alot can depend on how much that particular manufacturer increased prices for your model during your ownership of course. No problem with that at Sunseeker, they go mad every year! It helps to get out of a model before production of it ceases of course, which I have always managed to do and will certainly be looking to change again by the end of next season, possibly before for the right deal.......

 

[[2068]]

....anyway, to each his own and i am glad some folks actually took the time and made the effort of guiding me in the right direction.

Apologies for the initially unhelpful response, but the the original question was lacking in detail & background that would have helped cut to the chase faster.

 

[rubberduck]

Just find a boat you really like next time & keep it. Don't look at what it costs or how much you will loose in depreciation as you may be found hanging from the yard arm. Well thats what I done anyway.

 

[Pinnacle]

It helps to get out of a model before production of it ceases of course, which I have always managed to do and will certainly be looking to change again by the end of next season, possibly before for the right deal.......

Oooooohhhhhhhhh....................does this have a makings of two new ab fab boat-in-build threads from you and jfm on your next boats???

 

[Nautical]

My two pennies worth.

There is no such thing as a free lunch as they say, if you are chopping in and out of a yacht every year to 18 months it is gonna cost somewhere along the line. Builder has to make a profit and dealer has to make a profit, the only place profit is going to come from is you afraid. Builders and dealers do not work on the "charity" principle. The numbers maybe smaller these days as everyone fights for what little new build business there is but you will still lose money along the way.

If you get the age ole trick of getting your money back on a PX for a bigger model you will be paying top whack for the new boat, great while you stay with the one brand but the minute you try and get out of that brand and into another its going to hurt.

There are odd occassions when a deal can be in your favour for example where you are contracted into a show and media use clause of your yacht, a builder might shave a deal to the bones to have access to your yacht when he needs it but you will not be a liberty to renage on this at will just because it doesn't suit your holidays or use of the yacht, can be a bit of a bind and you have the hassle of a zillion people trapsing all over your boat every few months and arguments about what was damaged before the show and what was done during the show etc.

Which ever way you add the numbers, over time either during the swop in and out period or at the end or your relationship with a particular builder, you will loose the VAT straight off and anything between 5%-10% per year thereafter.

Only advise I could offer is go for a reputable builder and pick the most popular model in the line up, haggle to death as a cash buyer on the first buy, forget adding every single option off the list, its nice but won't add anything to the secondhand price, pick the salient items, genset, air con, passerelle, reasonable electronics suite etc, forget £10k in underwater lightshow or mega expensive AV etc. Sell again at a realistic number and start the process of cash buying again on the next one.

Alternatively if it suits your needs go for a custom build direct with a smallish builder with a good longstanding history, might take a year to build but by the time you have taken delivery the replacement value will have gone up 5%-10%, when you go to sell there will be few if any for sale and assuming it is a premium product and well respected you could in theory get close to what you paid.

 

[Searush]

I have a wood burner in my lounge, I could burn a few suitcases of old Tenners if you are stuck for a way to get rid of them.