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3 Key Factors to Consider When Buying a Boat Thumbnail

3 Key Factors to Consider When Buying a Boat

Summer is in full swing. Folks are headed to their local beach or lake. Many of them are headed out on friend’s boats, chartering boats, or simply standing on the shore marveling at how nice it must be to own a boat. And just then, they think to themselves: “I/We should buy a boat!” The idea seems exciting but also potentially overwhelming. When it comes to purchasing a boat, there are several factors to consider. Timing is very important. The question of when to buy a boat can significantly impact the cost and value of your investment.

Market Trends: Economic conditions can greatly influence the boat market. During recessions, you might find more affordable prices as sellers are more eager to make a sale. Conversely, during economic booms, prices may increase due to higher demand. The COVID-19 pandemic created an environment in the boating market never seen before. The guidance at the time was to avoid gatherings outdoors. Boating was the perfect solution. According to a CNBC article Boat sales took off during the pandemic and now dealers can’t keep up with demand1, sales of boats, marine products and services jump to a 13-year high in 2020 to $47 billion.1 The trend continued into 2021. However, the market began to swing backwards very quickly in 2023 to a decade low with higher rate pressure affecting sales.2 Financing aside, there is quite a bit of inventory in the boat market, lending to a more “buyer’s market.” If you have the cash, this may be the time to buy from a market perspective.

Seasonal Variation: The time of year can also play a role in boat pricing. Prices often fluctuate with the change of seasons, being higher in the summer months when demand is high and lower in the off-season. Thinking about buying that boat in the idle of summer? It might be best to wait. According to Boat Trader3, waiting until the end of summer and into fall is better. Winter is the best time to buy. There are many boats shows during this time and dealers are looking to clear out inventory. You will typically find the highest prices from spring into early summer, and then dropping off from late summer into the winter months.

New vs. Used: Another factor to consider is whether to buy a new or used boat. New boats come with warranties and the latest features, but they also come with a higher price tag. They also allow for the user to customize the boat to their liking, from the factory. New boats depreciate rather quickly which is a tradeoff. The benefit to something brand new is you have a turn-key vessel, ready to be used. Used boats can be of great value, especially if they have been well-maintained. There are many on the market. Maintenance is key and many new owners soon find that labor rates can range into the 100’s of dollars per hour. In addition, many insurance companies will require a survey on a used vessel, simply to issue an insurance policy.

Securing the Deal

Once you've decided to buy a boat, if you do not have the cash on hand, you'll need to secure financing. The current rate environment can affect the cost of your loan. Rates in the current environment vary wildly from 7.99% to over 25%. There are different types of loans available, and it's important to find the one that best fits your financial situation. There are secured, unsecured, and second mortgage loans. 4 All are unique in their features and requirements, which should be discussed with the lender.

You'll also need to decide whether to buy from a private seller or a dealer. Each has its pros and cons. Dealers can provide feedback on the vessel and ensure that it is in a safe condition to be sold. It also administers and secures any warranty coverage. Going through a private seller may avoid a broker fee. A pre-purchase survey is a good idea to ensure the boat is in good condition and may very likely be required by insurance in the case of used vessels. This adds an additional cost, especially if factors are found that cause the sale to fall through.

We asked George Robinson, President and Owner of South Jersey Yacht Sales, for additional guidance, who offered these 2 tips:

  • First, consider the after-sales support and warranties provided. A good yacht purchase is backed by comprehensive support, ensuring peace of mind regarding maintenance and servicing. Before signing any contracts, it’s prudent to consult with a maritime lawyer who can help review the terms and ensure all legalities are correctly addressed, providing an additional layer of security to your investment.
  • Second, purchasing an appropriate insurance policy is essential in ensuring peace of mind and financial protection. Yacht insurance typically covers liability, damage to the vessel, and personal property on board. Make sure to shop around and compare insurance policies to find the best coverage for your specific needs.

Conclusion

In conclusion, the right time to buy a boat depends on individual circumstances as well as market factors. Market trends, the time of year, and the condition of the vessel are all important aspects of boat purchasing. By considering all these factors, you can make an informed decision and find the perfect boat for you.

Article written by James (Jay) Korzik, AIF® Managing Partner at First Light Wealth Advisors, a New Jersey registered investment adviser located in Little Falls, New Jersey. Jay is active in boating and offshore fishing and is a licensed captain.

References 

  1. https://www.cnbc.com/2021/03/19/boat-sales-took-off-during-pandemic-dealers-cant-keep-up-with-demand.html
  2. https://www.spokesman.com/stories/2023/nov/30/us-boat-sales-rose-during-covid-now-rates-are-hurt/
  3. https://www.boattrader.com/research/when-is-the-best-time-to-buy-a-boat/#h-the-best-season-to-buy-a-boat