Most builders of custom motoryachts require a significant down payment at contract signing, and then continuous progress payments every few months as the boat’s construction moves along until the final payment usually about 10%, is due upon sea trial and acceptance. One of the reasons that Hargrave yachts are so popular right now is a little detail no one talks much about – the company has created the best payment program in the industry! To assist owners trying to manage their cash flow over the next year or two, Hargrave only requires 30% of the contracted price before work is begun and then does not ask for another dime until the boat has been sea trialed, accepted and is ready for delivery. That means that on a $3.0 million yacht project, $2.1 million is deferred to the very end of the contract when the boat is sea trialed and accepted.
|This beautiful 92’ Hargrave was built to the owner’s specs and is cruising eastern Australia and as far south as Tasmania. Now, 30% down, the balance on delivery.|
We asked Hargrave CEO Mike Joyce why his company had created
such an unusual and buyer-friendly program. He told us the new program was created
to meet the needs of owners who did not want to let go of cash right now. “Cash
is king right now,” said Joyce, “and the stock market is offering once-in-a-lifetime
bargains which some people are smart to take advantage of. Other customers want
to wait until ‘times get better.’”
Hargrave CEO Mike Joyce (l) with Mike Murphy, Jr., the happy owner of a Hargrave.
“Our new program addresses the economic needs of the first buyer by letting him start his yacht and not have to wrap up a lot of cash while the time is right to play the market,” said Joyce. “On the other hand the same program gives emotional comfort to buyers who want to ‘wait until things are better’ without being exposed to the inflation risk that is bound to occur when things are better.”
“We had several owners who were ready to make the decision to order a new Hargrave but did not want to miss the buying opportunities in the stock market,” Joyce said. “One owner said he would turn his cash over probably 5-6 times before the boat was completed.”
Hargrave -- which can accelerate or push back delivery dates to match each owner’s requirements -- is also agreeing to guarantee 2011 deliveries at today’s pricing even including electronics, tenders, and other major components. That means that the buyer locks in a price today in a deflationary time, and gets delivery in what may be an inflationary time (and pay off with cheaper dollars!)
Hargrave’s presence at boat shows last winter increased in size, and in Miami was larger than most others with 16 different motoryachts on display.
Inflation is Coming
Most economic observers today are unclear about when the U.S. economy will recover – late 2009, 2010, 2011 or when? – but they seem much more sure about what will happen when recovery does occur – inflation! When that happens new boat prices will go up right along with everything else. And chances are that boat prices will move up faster than inflation due to the fact that fewer units are predicted to be built so infrastructure costs will have to be spread over fewer units.
70% Delayed is Just Part of Your Protection
Hargrave Yacht’s payment program is simple and has a lot to recommend it besides the fact that 70% of the payment is delayed. Buyers will have time to liquidate other assets in a stronger market at time of delivery or even make the money while the boat is being built.
One of the sad facts of yacht building that you rarely if ever read about in the yachting magazines, is that from time-to-time yacht builders go out of business. In such cases the buyer might lose everything he has paid, often finding that his payments really went to complete someone else’s boat. More than a few owners have ended up taking over the boat yard just to get their partially completed yacht finished.
Jack Hargrave, who passed away in 1997, designed over 7,000 boats and is the man most responsible for the look of the modern American motoryacht.
This is where the experience, reputation, and building savvy of Hargrave come into play. Hargrave has one of its own representatives at the yard full time overseeing the boats it is building and looking after every customer’s interests.
Long Building Relationship
Hargrave boats are built at the Kha Shing yard in Kaohsiung, Taiwan. Kha Shing has been in business since 1977, has built over 1500 power yachts and is currently the largest builder of motoryachts in Taiwan.
Because Hargrave requires only 30% down, a buyer’s exposure to a yard’s potential bankruptcy is limited, and in fact, the financial strength of the yard is so strong that the buyer can purchase a cross guarantee from the builder’s bank due to the financial strength of the stockholders. “I think people would be astounded to know how few builders in the world can meet that financial “stress test” even in the best of times,” said Hargrave CEO Mike Joyce.
Hargrave has been working with Kha Shing for over 15 years without incident, and has great confidence in its building partner. Unlike many boat yards around the world which are owned by one or two dynamic entrepreneurs, Kha Shing is actually owned by a large group of wealthy individuals with financial holdings in diverse industries throughout Taiwan.
Full-beam master in a 92’ Hargrave with door to the head on the left and walk-in closet on the right. Sky Lounge/helm (right) maximizes usable deck space.
A Good Deal Gets Better
It may sound too good to be true, but we can attest to the fact that with Hargrave’s unusual payment program and a delayed building schedule, it is possible to take delivery and immediately turn around and sell the boat for more than what was paid, simply because of the rising cost of boat building and inflation. Looked at another way, any profit made could be seen as a percent of the 30% down payment, instead of a percent of the whole amount. In effect, the Kha Shing yard is financing 70% of Hargrave’s customer’s purchase for the length of the building time – without interest!
It sounds too good to be true, but we can attest that it is true.
All of these factors: initial price, current deflationary times, the low down payment, yard interest-free financing, and the strong possibility of inflationary times later and rising boat prices, make buying a new motoryacht from Hargrave Custom Yachts a sound financial decision. It is also the best (and maybe only) way to get a yacht built to your specific needs at production-boat prices or less.
For more information about the financial details of a Hargrave sales transaction, don’t hesitate to call Mike DiCondina, President, or Pete Colagiovanni, VP of Sales, at 1-800-551-9590 and 1-954-463-0555 or email Hargrave Custom Yachts at firstname.lastname@example.org.
See video reviews of Hargrave yachts --