Unreasonable?

[southchinasea]

I am trying to purchase a new boat from a well known production boat maker in France. All was going
swimmingly well, including finance for the full amount, less my 15% deposit. However, the finance company
(well known for marine mortgages) discovered that the yard requires a deposit, on order, as follows:-
(Incidentally an order next Monday would see delivery in December 2002)

1. 15% of the base boat price and ALL shipping costs (cradle/inland transport etc.)
2.100% of ALL options
Options ARE significant (air con/genset etc.) as we're located in a very warm climate.

The bottom line is the deposit (11 month in advance) represents 36.5% of the overall cost of the boat
and options. I would like to know if this is reasonable. The finance company thinks not. Frankly, once I had
the loan approved, I had assumed (!!!) that was the end of the story and had no reason to worry about the
mechanics of the purchase. WRONG!

Views?

 

[aztec]

ohh how i wish i was you... iv'e spent the day bailing, repairing, tidying, and wondering if it is all worth it ..... i love to hear stories like this, what it means is that other people can get real enjoyment out of using a boat without all of the agro, one day it will be me, (small promise to myself there!)

all joking aside,can you not negotiate a better deposit with the builders? they are the ones that should be supplying the goods for sale, not you funding the directors cars for the next year. all the best, and i'll think of you when my engines won't start.

regards,steve.

 

[Guest]

We bought our German boat about 3 years ago. Paid 10% of the basic boat price on order in October for a delivery in May of the next year. Then I think about 50% of what was left of the basic price in the February and then the rest of the total cost plus options, less 10% about 6 weeks later, the last 10% on delivery. Maybe if you make noises about looking for another boat, you will get a better deal.

 

[Twister_Ken]

The full cost of shipping, cradle and options up front certainly sounds like sharp business practise to me. After all, they won't be spending money on these things for months to come.

You could try offering them a flat 15% deposit, or you'll be forced to consider your purchase again.

 

[Twister_Ken]

By the way

Just a word of warning - if they are trying to squeeze as much money up-front as possible it could be they are experiencing cash-flow problems. Might be worth taking advice on how to protect your funds if they are unable to complete your boat because of trading difficulties. Sounds drastic I know, but lots have people have lost lots of money when they have suddenly found the adminstrators have been called in at their choosen boatbuilder.

 

[tomg]

Why should the finance company worry - because it has doubtless been caught out in the past. Boatbuilders go bust quite regularly and the chances of getting your boat or your money back are remote in these circumstances. I would not take the deal -it's outrageous. Go find a better deal on as good a boat. The finance company is really keen to lend you the money, and if they are hesitating I think you ought to also. When I was in the business we sometimes got buyers to put up the whole of the price before the hull was out of the mould but if there was a gap in the schedule the boat was built before we got a penny. We didn't go bust but that was pure luck - it got really close sometimes, even with a full order book. It can be hard to pass up the 'dream' but you know you probably should - or you wouldn't be asking the question. When I bought my last boat (almost 3years ago) I paid installments, in arrears, and made sure that every bit of 'my' equipment had my name and serial number on it. The builder did not go bust on me but went into liquidation just before Christmas - never would have believed it! Regards and good luck.

 

[southchinasea]

Re: By the way

Thanks Steve, Norma and Twister Ken.

Ken the yard is the very large one making French plastique so I doubt (I may be wrong) they have cash flow problems
problems but thanks for the warning re protection of funds. I was expecting something simiilar to Norma's
experience i.e. up front % of total cost then perhaps one or two payments prior to shipping. I really don't
feel I should be paying for gen sets/aircons etc. a year before I see the boat! Unfortunately I will be an
extremely small potato as far as Le factory is concerned and have a feeling it's back to the drawing board.
As per someones suggestion I faxed them and offered a flat deposit. Fngers crossed.

I would still be interested in others actual experience of new boat deposits?
Cheers

 

[southchinasea]

Interesting post Tomg thanks. As I just replied to Twister Ken they are a big production factory in
Les Herbiers (oops) supplying both the private and charter market and individuals like me who want a big
boat but can't afford the seriously good stuff. You are right, the finance company are very happy
to lend me the money and, as you know, it is a pretty good time to borrow. But, they blanched when
I told them I needed nearly 40% up front. I have already made enquiries about alternatives but have spent
so much time researching, choosing options, debating masts etc etc etc... seems a pity.
Cheers

 

[Guest]

Just a few observations here that maybe be of help
1. Theres normally only two reasons why a company would require such payments.a) They have full order book and dont really need your money, so can ask for silly terms. b) they have cashflow problems and need money. You take your pick without doing complete Dun and Bradstreet on them!
You could concider the following, Pay the basic deposit and then buy the optionals yourself and supply when required by the yard, that way they are yours and not theirs? Think of setting up a Letter of Credit through the finance company / bank so that when the yard has completed the boat and you have had it accepted by an independant surveyor to say its exactly what you ordered complete with all manuals / certificates etc then the bank MUST pay the money over. Alternatively as the other posters have said,,,grit your teeth and move on to another boat. If you make this decision I would also add one more thing, fax them telling them that they lost the order because of their unreasonable terms. Best of luck?

 

[southchinasea]

Thanks Peter. I would love to purchase optional kit only as and when the yard needs it but suspect
they won't wish to set a precedent. Too big. We'll see next week. In the mean time several emails have
been sent far and wide asking for brochures!
Regards

 

[HaraldS]

Re: By the way

I think there might be some reason for concern as asking so much money in advance and making it part of yor cash flow calculation, will create an explosive mix when a down turn happens and the backlog starts shrinking.
Don't take size of the yard as guarantee. Most of the large french yards went into trouble before, especially sinze the tax advantages on french charter boats had to be stopped some years ago. I'm not sure what the financial structure now is, but I know that Beneteau has picked up most of them, including Jeaneau, Wauquiez and Dufor.
The fact that they can plan options almost a year in advance also gives them an edge with their suppliers, and I'm sure they are not paying them before your boat is all delivered and payed for.
So asking for the money in advance can mean that it is needed for cashflow. Or they might just do it on certain types of boats to influence the mix. The mix sometimes doesn't fit their production capacity optimally.
From what I can tell this is unusual.
Try to get a bank guarantee for your deposit from them and see what the cost is.
Average for that would be about 0.15% per month.

 

[southchinasea]

Re: By the way

Thanks. I will wait and see what the reaction to my 'problem' is first. I will be surprised if business is
brisk during the current climate but who knows. Hopefully someone sensible will not want to lose the
order.
Cheers

 

[billmacfarlane]

I think they're extracting the Michael big time. I took delivery of my new boat , Swedish , in November 2001. Terms were 10% of basic boat price and factory fitted items. The rest was paid 10 days before delivery from factory. The 10% was automatically protected i.e if factory goes bust you get your money back. To put almost half the money up a year before delivery is pushing it as they won't even start on your boat until I would guess October 2002 so they make a tidy little pile with your money. I guess you've looked at the other production yards ?

 

[southchinasea]

Just going through that excercise now. The interesting response to my stroppy fax was to immediately
agree to 'flexible deposit terms' and a suggestion which is much nearer the mark. The dream may still
be alive..............Cheers

 

[tony_brighton]

I think if you shop around then you can get a much better arrangement of the payment schedule. We bought a 34' at last year's show. We had a cash amount in the bank = 22% and the rest was funded by marine mortgage. The payment schedule agreed with the agent was:

£250 deposit fully refundable at the show (no prizes for guessing the manufacturer/agent). Refund depended on acceptable trial sail and placing an order.
5% after 8 weeks non-refundable (unless they defaulted)
5% after 3 months non-refundable (unless they defaulted)
Balance of marine mortgage when the boat comes into the country (agent has to pay manufacturer then; you need to ensure the boat is in effect yours at that time).
Balance of payment on commissioning and handover.

This may not be perfect but we felt that it was a reasonable payment schedule that balanced our mortgage and cash needs with the manaufacturer/agent demands. Most of the 'extras' that were fitted by the manfuacturer were in the agreed boat price. A lot of the instrumentation and options were fitted in the UK by the agent - in effect they didn't get the cash for these until they were installed and proved to be working.

Long and short of it - we paid a 10% deposit in installments.

 

[Guest]

Either they have so much work they dont need your order or they badly need the money. When I bought the curent boat it was 10% deposit and then two or three stage payments - with a bank guarantee of a refund of my payments if they went bust in the build period.

Id advise a bank guarantee whatever happens - but especially if you go ahead on those terms.

 

[Twister_Ken]

Congratulations. nm

`

 

[JohnR]

I've got a stinkpot coming in and as far as I remember the terms were 10% down another payment when the engines were installed another when the top and bottom were stuck together and the final 65% on delivery with £10K retained until I am satisfied with the boat - sounded reasonable to me as it was a 2 year delivery period.

 

[tomg]

Great, really great! nm

nm