Shopping For A Yacht Is Old Right For You

Shopping for a Yacht:
Is Old Right for You?


Growing up, you dream of owning a car and zipping along the highway with music at full blast and the wind in your hair. As you grow older and start earning your own money, you spend months scrimping on your salary just so you can buy the car you've always dreamed of.

Then, just when you think that you are satisfied with the car that you currently own, a new model comes out from your favorite manufacturer and off you go tightening the belt again.

When we are young, we sincerely like to change cars as fast and easy as we change clothes. But sadly, that is not possible. We come to realize just how impossible that is by the time we have come to own three or four of them. Hey, it's not cheap to buy a new car like every few months or so!

The same goes with buying a yacht. Only when it comes to yachts, and boats in general, things take on a more serious note.

When you're new to boat buying, one of the first questions that you will be facing is whether to buy a new boat or a used one. Most people believe that buying a brand new boat is the more prudent choice, rationalizing that used boats are usually laden with breakdowns and problems while new boats are free of all that.

However, any decent sailor knows that new boats are hardly trouble-free. In fact, if you ask anyone who has outfitted boats for years, they'll tell you right then that owning a new boat is not always the wiser choice.

What's more, once you factor in the cost of a brand new boat into the picture, you'll realize just why.

Financing a new boat could take over ten or twelve years. In some cases, it may even take as much as fifteen years. That is, unless you can afford to pay the entire purchase price right then and there in cash.

However, the great misfortune is that almost the entire population simply cannot afford to do that. It's either paying for the boat in installments or taking out a loan with your house as collateral.

Now, consider the fact that the average length of boat ownership is only about four years. Imagine the kind of sinking feeling you get when you find yourself writing a check to the bank after finding out with consternation that you owe more than what the boat is worth after resale.

Of course, this is not always the case with everyone. Some people do get lucky with such an investment and get more bang for the buck. But if you are not one for taking high risks with little to no hope of gain, then you might find it more palatable to chew on something a little more filling.


A Financial Decision

Buying a yacht is mostly a financial decision. Sure, you might like the idea of watching the hull of your very own boat cut a path in the sea foam waters, but before you get to that part, you have to get passed a lot of financial hurdles in your way to your dream.

A lot of yachtsmen are facing the same dilemma as you: to buy new or old? But even more of them are discovering that there is great value to be had in a used boat. This is particularly true if you consider the older ones – the ones that have reached passed the point of shiny, latest trend and style, smooth engine and fabulous interior, and have arrived at "old but still running good."

So why choose old over brand new? Here's why:

* Cost Differential

One of the greatest advantages of buying a used boat as opposed to a new one is the tremendous gap between these two investments, cost-wise.

A new boat could cost you about $800,000, but, like a car fresh out of the dealership, it loses value the moment you bring it out of the shipyard.

An $800,000-yacht could have a resale value, ranging from $250,000 to $300,000 in twelve years. That's how long you have just to pay for the financing. After that, reselling is not even worth salt when you are looking at a whopping difference of half a million dollars.

Now, putting that argument aside, let's look at the other end of the spectrum. Purchasing an old boat means refurbishment. That is, just because you decided to buy a used boat does not mean that money is the least of your concerns. As a matter of fact, whether you are buying an old or new boat, it's all the same; it involves a considerable amount of money.

The only difference is that you pay less for a used boat. But take heed: what little money you may be able to save from the purchase price may end up being spent on refurbishing the old boat.


It Figures

Yes, refurbishing an old yacht will cost you some, and not just money but time and effort as well.

It involves making a lot of important decisions, finding the right people and drawing up plans for the work. It involves financial controls and supervision. It involves asking the right questions, giving the right answer and doing it the right way. One slip and it falls down.

Now, all of that will cost your time, of course. Even if you do supervision by phone, that still means you'll be spending day hours seeing to the whole thing.

Refurbishing a used boat is a major project. And as with all major projects, it will interfere with your daily routine.

If the cost of refurbishment plus the purchase price is less than the cost of a new yacht, don't stop there just yet. Don't immediately trust anything that looks good on paper.

First, compare the difference with how much you value your time. And if you still end up on top and love doing this kind of things besides, then maybe this is the right project for you.


How much does refurbishment cost?

When it comes to planning a budget for refurbishment, always keep this in mind: the price is only part of the cost.

That means, if you want to feel good about your recently purchased used boat, you want it to have a little bit of its old shine back, not to mention reliability, which necessarily means that you will have to spend an additional amount, exclusive of the purchase price.

That's just how it goes when purchasing used. You can't expect an old boat you purchased for $175,000 to run reliably with little more than $15,000 to get it back into shape. Not when the boat's replacement cost is $750,000. And if you can't afford more than $15,000 for refurbishment, then you really can't afford the boat anyway.

Many buyers grossly underestimate the cost of refurbishment. It's a mistake that you should try to avoid. But how?

It's simple really. Just think of the cost of refurbishment in terms of what a new boat would cost. Since the main reason for your choosing used instead of new is the difference in cost, then that should be a sizeable factor in your budget assessment.

Remember that there is a reason why a boat, with fifteen years under the belt, is being sold for $175,000 or less, when it should be selling for $750,000. It lost $575,000's worth of its value in wear and tear.

Now, if you want to recover some of that value lost and bring the boat back to shape, then it is going to take a sizeable portion of $575,000 to do just that. Exactly what percentage that sizeable portions represents depends on the condition of the boat.

If it is in average condition, then you are looking at 50%. If it is in poor condition, then you might have to consider spending at least 75% of the difference.

However, these figures only answer for machinery, engine, interiors and various other systems. If you are thinking of other jobs, such as repainting, major renovations and any other additions you can think of, there is the very likely possibility of spending even more.

In the end, it is striking a balance between the purchase price and the cost of replacement. And much of that likewise depends on how far you want to go in order to get your boat in tiptop shape.


But what about the resale value?

If you think that buying a yacht is an investment, then think again. If that is your reason for getting into this gig in the first place, then you might want to take a step back and reassess your motives. Because if that is really the case, then you are going to be very sad when it is time for you to resell and find that you won't recover the costs.

You buy a boat for your own pleasure, not for the investment. You refurbish and fit it because you want to, not for future resale value. The simple fact is that what value the boat has lost since you bought it, you won't recover it years later. Not with a new boat, and certainly not with a used one.

Of course, if you are smart, you will probably get more than what you paid for. If you are lucky and only have to do minor refurbishments, then you are sure to get even more. But it's not much and not enough to call this an investment.


Who do you turn to for refurbishment?

The next factor to consider when buying a used boat is who should provide the refurbishing job.

Most buyers would simply go with a typical boatyard, thinking that there is no other alternative. However, refurbishment by major yachting centers can be more cost-prohibitive than cost-wise. Consider the boatyard prices carefully and weigh it in with the rest of the figures.

Alternatively, you can also try the many small contractors that populate most yachting centers. These people are usually very good at their jobs and quote reasonable prices for their services.

This is a good choice but it will cost you more of your personal time as you spend it looking for and negotiating with a variety of contractors.

What's more, you will probably need to personally supervise them in order to make sure that they are doing exactly the kind of work you expect from this arrangement.

Now, if you simply do not have the time, you can solve the problem by hiring a project manager. There is certainly no shortage of this kind of people. But be careful in choosing the person to manage this project for you: you want someone who is not only qualified but reliable as well.


A Budget and a Plan

All the above sections are meant to help you arrive at a decision. But assuming that you already made that decision, what is it that you really need?

A budget and a plan.

Every major project needs a budget and a plan. The better the plan is, the better for everybody – better for you, better for the contractors, and just better – as things go smoothly.

While the plan gives you an idea of what to expect, the budget provides the structure within which you can weave your expectations around. With a budget, you can't stray too far from the plan. And with a plan, you'll have an idea of what the budget is going to be.

When purchasing a boat, whether old or new, you need both. You need them even before you make the purchase. And you need them even more after making your first payment and starting to mull over the figures involved in refurbishment.

And when you do get to that point, consider this single piece of advice: do not sacrifice fundamentals for aesthetics.

Cost