A Calculated Investment
Financing a boat requires more than signing on the dotted line.
By David Kuczkir – Updated by Steve Davis and Bonnie Schultz
A boat is a huge investment that pays dividends in the form of recreational bliss and memorable times spent outdoors with family and friends. But purchasing one is a complicated, multi-party, contractual process, and the decision shouldn’t be taken lightly. Doing your due diligence is the key and ensures an enjoyable and rewarding experience from the get-go, so here are a few of the ins and outs of buying a boat.
How Will You Use It?
Step one is knowing what type of boat best fits your lifestyle. If fishing is your passion, look at center consoles and skiffs, or that large sportfisherman. If you enjoy wakeboarding and skiing, then shop ski boats. If you have kids, consider a boat with an enclosed cabin. Will you sail? Will you primarily use it for cocktail cruises around the lake? Is coastal cruising in your plans?
Be Sensible and Budget
If you neglect to budget for the upkeep, you’ll quickly realize there’s truth to those witty B.O.A.T. acronyms like “Bankruptcy on a Trailer” or “Bring on Another Thousand.”
My buddy was recently in the market for his first boat. During his years-long search, he picked my brain dozens of times about many different makes and models. Last winter, he claimed he was ready to pull the trigger on a 35 Regal Sport Coupe.
He had the financial means to buy the Regal but didn’t give much thought to the upkeep cost. In my homeport, Charleston, South Carolina, in-water dock rental is about $18.50 per foot per month, or $7,800 a year. Add $3,000 for insurance. The watercraft tax is an expense that can sneak up on you. The tax in my state is 10.5 percent. For perspective, the annual tax on a $150,000 boat is about $5,000. Ouch! States like Florida and New Jersey have maximum tax caps of $18,000 and $20,000, respectively, regardless of the boat’s price and size.
Already, the upkeep is upward of $15,000, and I haven’t mentioned other costs such as fuel (marinas typically charge $1 or more per gallon than that at gas stations), annual engine maintenance, haul-out fees, bottom cleaning, repairs, etc.
Then there’s depreciation. “Any new boat depreciates immediately the minute it’s sold,” says Ed James, a broker at Ashley Yachts in Charleston. “In the first year, depreciation can be as much as twenty percent of its value.”
That explains why many boaters buy used. If you’re purchasing used, hire a local surveyor, a professional who meticulously inspects a vessel from bow to stern. You’ll pay about $25 per foot, but it’s worth the peace of mind. Unlike new, a used boat usually doesn’t have warranties.
Enlist Help
If you’re in the market for a boat like the Regal, James offers sage advice. “Hire a broker. But take the time to meet with several to find one you like. Then let the broker lead the search to find you your boat.” He asks buyers to fight the urge to shop online. “What happens is they’ll research boats, find a few they like, then make calls. They don’t realize that the person they’re dealing with is the seller’s broker who’s working to get the best deal for the seller.”
The Finance of Things
When financing, James recommends using a marine finance company like Sterling Associates or Trident Funding. They specialize in boat loans only and can usually offer better rates than a local bank. As for discounts on insurance, take a boater’s safety course. The U.S. Coast Guard Auxiliary offers a wide range of courses for the novice, seasoned, and every boater in between.
My buddy? I was his wingman on that momentous day when he got a great deal on his first boat. As the salesman finalized the paperwork, we stood at the helm, drank beer, and discussed the joy in store for him and his family for many years to come.