When does a boat become 'old and uneconomic'

[JumbleDuck]

Many of current generation's pensions aren't too good either, our funds never recovered after the crash in late '90s. Those of us with boats
however old and tatty need to remember there are tens of thousands out there who don't have the money to buy even a dinghy.

Good point. I'm lucky enough to have a final salary pension, but even that is going to be worse for me than colleague who are already retired. Luckily I don't have long to go.

I get a bit fed up with hearing how our generation have dropped the younger ones in the sh1t but I see a vast difference in priorities. I started off work as an apprentice motor mechanic, earning very little in the 60s. My generation (in general terms) were more frugal, scrimping and saving to get into the housing market, then spent money later in life. Now it seems, £500+ phones, expensive cars (often lease hire these days) and holidays, lots of eating out and weekends awy etc are a higher priority with many, who moan they can't afford a house. We have a poster above who couldn't afford a house in his 20s but spent the £11,500 which could have been a deposit on one, on a boat?

I agree, up to a point. If you live in an area where studio flats cost £300k+ £11.5k isn't even close to a deposit - it's not much more than legal and moving costs - and I can understand why people choose to blow it.

 

[Tranona]

The key to your examples, with which I agree, is that they all kick in on retirement. It's a comparatively small group of people who have those options: those retiring with decent pensions and/or able to make money from downsizing and without dependants to support. Even they will in many cases be thinking of saving towards future care needs rather than blowing the money on a boat.

Now it may well be that the small number of 60 - 70 year olds willing to spend £100k on a new Bavaria is what keeps the whole boat market going (as with cars, somebody has to be buying new) but for most sailors it simply is not an option.

I have made exactly the same point a number of times about the point at which people can end up with significant amounts of discretionary cash - and that it is often derived from property. However, that is not the only source - just an example. Inheritance is another. My parents (my father worked nearly all his life in a foundry) left an amount just short of the inheritance tax threshold at the time (saving me the bother as executor tackling HMRC), the majority jumping a generation and being spread among grandchildren. Like me they started with nothing.

However the age at which people have access to "nest eggs" has been lowered because of a variety of relatively recent changes such those to pensions, releasing equity from property (such as buy to lets) increased self employment and small businesses that generate capital gains on disposal, maturing endowments and particularly from tax free savings such as ISAs.

 

[GrahamM376]

I agree, up to a point. If you live in an area where studio flats cost £300k+ £11.5k isn't even close to a deposit - it's not much more than legal and moving costs - and I can understand why people choose to blow it.

I was talking to a youngish couple recently, mid 30s most likely who were bleating they couldn't afford the deposit on a house - we're not talking SE England here - he was driving an M3, she an Audi, they had a boat in the marina and say they charter abroad 2 - 3 times p.a. Obviously, anyone is entitled to spend their hard earned how they wish but, it does make me wonder about the sensibility of some people's priorities. Problem is,as you get older, there's a tendency to sound like your father - and I couldn't stand mine!

 

[Tranona]

Had you invested that £90k at a modest 3% annual return, you'd have had £136k at the end, so your "evens" would actually be a loss of £93,000. But hey, small change.

That would be exactly the same irrespective of how much money I spent on a boat. As I explained using Graham's boat as an example the overall cost of running a 37' boat PA is much the same whether it be 10 years old when bought, or new.

As it happens the Bavaria cost me nothing in depreciation (ie loss of value) as the chartering business paid for all that and more. The £43k I sold it for was almost the same as I paid for my share originally - the other half was paid by the charter manager who took all the profits except the last year when I made a small surplus under a different contract.

Of course much of these calculations are simplified. For example I borrowed against my house to buy my share in the boat on an interest only basis. The annual interest payments were roughly equal to one week's charter of the boat and as I took at least 2 weeks a year, that showed a "profit"!

Things to do with boats and money can get complicated, can't they?

 

[GrahamM376]

Things to do with boats and money can get complicated, can't they?

No, not complicated, it's an expensive hobby particularly for marina dwellers.

 

[JumbleDuck]

I have made exactly the same point a number of times about the point at which people can end up with significant amounts of discretionary cash - and that it is often derived from property. However, that is not the only source - just an example. Inheritance is another. My parents (my father worked nearly all his life in a foundry) left an amount just short of the inheritance tax threshold at the time (saving me the bother as executor tackling HMRC), the majority jumping a generation and being spread among grandchildren. Like me they started with nothing.

However the age at which people have access to "nest eggs" has been lowered because of a variety of relatively recent changes such those to pensions, releasing equity from property (such as buy to lets) increased self employment and small businesses that generate capital gains on disposal, maturing endowments and particularly from tax free savings such as ISAs.

Hey! Guess What! Not everybody gets nice big lump sum nest eggs. There are people who are Not Like You.

 

[JumbleDuck]

That would be exactly the same irrespective of how much money I spent on a boat.

Erm, no. Because if you hadn't spent the money on the boat, you could have invested it.

 

[ghostlymoron]

I too have just passed on my mother's wealth to my son's to avoid IHT on my own estate so I am returning the capital back to the next generation.
Neither of them are the slightest bit interested in boats at the moment but I wasn't at their age. They both struggles to buy a house/flat but managed it eventually.

I have made exactly the same point a number of times about the point at which people can end up with significant amounts of discretionary cash - and that it is often derived from property. However, that is not the only source - just an example. Inheritance is another. My parents (my father worked nearly all his life in a foundry) left an amount just short of the inheritance tax threshold at the time (saving me the bother as executor tackling HMRC), the majority jumping a generation and being spread among grandchildren. Like me they started with nothing.

However the age at which people have access to "nest eggs" has been lowered because of a variety of relatively recent changes such those to pensions, releasing equity from property (such as buy to lets) increased self employment and small businesses that generate capital gains on disposal, maturing endowments and particularly from tax free savings such as ISAs.

 

[Rafiki]

I know there are a lot for sale at the prices you mention, but the problem is that you never know how much they actually sell for. With cars you have a very efficient market with lots of buyers and sellers and you know second hand cars sell for maybe 90-95% of asking prices. For houses the Land Registry publish the actual transaction prices , albeit a few months in arrears. For boats knowing how much they actually sell for is very difficult, my experience both buying and selling an old boat last year is that most sellers start by advertising at £x, based on the adverts they have seen or prices they know who achieved 5 years ago, they then take a year or 18 months to sell for something in the region of 60-75% of their original asking price. Not all of course, a well presented boat with newish engine, sails, upholstery etc sell for closer to 90% of asking price.
Of course the brokers wont tell you this - at least not until you have instructed them and had no real interest for a few months.

 

[GrahamM376]

Of course the brokers wont tell you this - at least not until you have instructed them and had no real interest for a few months.

I think you are do good brokers a disservice. They know how much boats actually sell for and have no incentive to overprice them as, if they don't sell, they make no commission. If a boat is overpriced, it's usually down to the owner dreaming.

 

[superheat6k]

If shrouds had pockets no one would ever buy a boat. So IMHO a boat becomes 'Old and uneconomic' about an hour after it had stopped being 'New and uneconomic'.

If you don't spend it, your kids will only waste it, and a boat is a damn good way to prevent such wastage.

 

[DownWest]

Yesterday a friend set out early for a sail round the Islands here. Thinking 'Why do I do this' with the hassle of launching his little gaff cutter, parking the the car and trailer... Five minutes after he cast off, he was in another world and away. That is why we do it.
Some yrs ago, I had a little sailing dinghy in S. Portugal. Pure fun. Total expenditure each year, after I had modded the rig and added a foresail ( £30?) was for a new mainsheet, as I used it to hold stuff on the car trailer over the winter. Used it often and it cost near zero.
The economics of larger boats, I tend to look at from a distance, though I work on them. The current build will live at home and do coastal cruising, as marina spaces are not so common and, though cheaper than UK, not what I want to pay.

 

[Tranona]

Erm, no. Because if you hadn't spent the money on the boat, you could have invested it.

Did not explain it well. I meant the principle is the same. There is always an opportunity when you commit money to one asset rather than another. I explained this earlier when discussing the complexity of calculating opportunity cost. You have chosen the monetary measure. As it happens, the two alternatives (apart from the monetary one) when this decision was made was swapping the Morgan for a new Aero8 or the boat. Think if my health prognosis at the time had been worse I would probably have gone for the new Morgan.

At my time of life the overriding aim is to maximise the pleasure I can derive from the resources available. I do not need this cash to live on, it was earmarked for doing things I can no longer do, so why leave it invested at less than 1% or expose even more to the risks of higher return investments? All part of a balanced portfolio of assets.

 

[Tranona]

If shrouds had pockets no one would ever buy a boat. So IMHO a boat becomes 'Old and uneconomic' about an hour after it had stopped being 'New and uneconomic'.

If you don't spend it, your kids will only waste it, and a boat is a damn good way to prevent such wastage.

Could not agree more, and of course my children fully agree with me. Much prefer to waste my money rather than leave it to them to do it when I won't be able to see them - there will still be plenty left over if we manage to keep out of the clutches of care homes.

 

[JumbleDuck]

At my time of life the overriding aim is to maximise the pleasure I can derive from the resources available. I do not need this cash to live on, it was earmarked for doing things I can no longer do, so why leave it invested at less than 1% or expose even more to the risks of higher return investments? All part of a balanced portfolio of assets.

Your decision may well be right for you, but your claim that putting £100k into something and watching it shrink in value by £5k per annum instead of growing by £3k per annum is (a) exactly the same and (b) just a possible for most people as spending £20k outright and then £3k per annum is pure banana sauce (to quote P. G, Wodehouse).

However, you're back on track with the idea that the opportunity may be other expenditure rather than investment. But that's another reason why someone might choose to have, for the sake of the argument, a secondhand yacht and a second hand Citroën DS23 rather than a new boat or a new car.

 

[GrahamM376]

- there will still be plenty left over if we manage to keep out of the clutches of care homes.

Dignitas or one of the other Swiss clinics are much cheaper than care homes, around £8k buys enough nembutal either orally or intravenously + cremation fees at the time of your choice.

 

[Tranona]

Hey! Guess What! Not everybody gets nice big lump sum nest eggs. There are people who are Not Like You.

I know. There are many who are far better off financially than me. And there are many like me, and even more who could be if they made different choices earlier in their lives.

You have to put these remarks in context. This may help you understand where I am coming from. In 1988 I helped my father clear out his sister's house after her death. Her and her husband were both born in Castleford before the first world war and emigrated to NZ in the 20's but returned in the 1930s having failed to make a go of it. Uncle was a toolmaker at Fords and she was a nurse, but retired at around 50. They had no children. Her estate was worth around £200k, half of it in cash. I found the final account of my uncle's father who died in the late 1940's. Like most of the family he was a miner and his estate was around £600, most of it was his miner's death benefit. So, big leap in one generation.

Apart from being generally aware of how much better our lives were than my parent's generation, particularly from the 20's and 30's, this was the first time I realised how much had changed. This is true of all my family on both sides. All the previous generation started in real poverty, and all ended up progressing in a similar way, mainly through education, thrift and mostly staying with the same partner all their life. Fortunately the next generation is mostly going the same way.

 

[Tranona]

Your decision may well be right for you, but your claim that putting £100k into something and watching it shrink in value by £5k per annum instead of growing by £3k per annum is (a) exactly the same and (b) just a possible for most people as spending £20k outright and then £3k per annum is pure banana sauce (to quote P. G, Wodehouse).

However, you're back on track with the idea that the opportunity may be other expenditure rather than investment. But that's another reason why someone might choose to have, for the sake of the argument, a secondhand yacht and a second hand Citroën DS23 rather than a new boat or a new car.

You still have not grasped the principle. The amount involved is irrelevant. It could be £20k or £200k and the boat could be new or secondhand. All boats and cars (well, almost all - my Morgan is worth more than I paid for it new) are wasting assets so will lose value over time. Whether the loss is in terms of the fall in value of the asset itself or the loss of interest on the capital tied up in the asset is irrelevant. The only thing that matters is your judgement that the value of the benefit to you exceeds the cost.

Go back to my first post on this thread because that is exactly what I said there, and is how individuals make decisions. I described it as "man Maths" - that is they way we make the assumptions and do the sums to justify our decisions. The female equivalent might be how they justify buying a £10k Jane Birkin handbag.

The older vs new choice is equally irrelevant. The overall costs over time for comparable boats is very similar, just the timings of expenditure and the nature of it that is different. As a general model the reducing balance method of accounting for costs of an asset over time is pretty robust - taught in about week 5 of a First year accounting course. In the early years of an asset life, loss of value is dominant and later maintenance and replacement takes over.

So when Graham bought his boat at 10 years old he avoided the earlier high rate of loss in value, but accepted the higher replacement and repairs costs over the 12 years he has had the boat. My similar time with a new boat had high capital loss and low repairs, but the end result was we both spent similar amounts

 

[GrahamM376]

....when Graham bought his boat at 10 years old he avoided the earlier high rate of loss in value, but accepted the higher replacement and repairs costs over the 12 years he has had the boat. My similar time with a new boat had high capital loss and low repairs, but the end result was we both spent similar amounts

My decision for new v used wasn't based on cost though, I actually preferred (and still do) the 376 to the new boats on offer at the time, within the <£100k price range. Funnily enough, we had only gone to browse although we had already decided the 346 had to go. Saw the boat at Soton used boat show and bought it on the spot. Most of the expenditure was immediately after purchase as it was pretty basic.

 

[JumbleDuck]

The older vs new choice is equally irrelevant. The overall costs over time for comparable boats is very similar, just the timings of expenditure and the nature of it that is different.

Even if that were true, it does not support your contention that spending £100k up front and spending £20k up front and then £3k per annum are options equally available to most people. Some people, believe it or not, don't see £100k as chump change (those of working age with living parents, mainly) and can only afford a boat by buying a second hand one and spending more money steadily on maintenance.

It reminds me of a chap I know who took me to task - at some length - for wasting money on diesel for my car. Why on earth, he wanted to know, was I throwing away 12p per mile when I could, like him, spend a tiny fraction of that amount. By buying a Tesla Roadster like his. For £100k.

He honestly thought that this was an obvious and affordable option for most people, including me.