First Time Boat Buyer Tips: Some Surprising Advice

Man was born free, but everywhere he is chained to land…(apologies to Rousseau)…but it doesn’t have to be that way. There is another world out there and it is called “recreational boating.” It has been going on since man first had some spare time on his hands and a little inspiration. If you have been thinking about buying your first boat let us give you some words of encouragement and some advice.

Financial tycoon J. Pierpont Morgan, who was the owner of the largest American powerboat in his day, is widely quoted as saying if you have to ask how much it costs to run a yacht you can’t afford one. We say balderdash.

1. Don’t Be Scared Off By the Prices

Boat ownership is another world but it does not have to be one out of your price range. One of the things that we like about boating is that no matter how small your purse, somewhere there is a boat for you. It may be a small boat that is over the hill, but if it floats and the motor works, it is a place to start. And that is the key – get started.

Yes, when you compare boat prices with most anything else you buy such as a car or a house, a boat seems expensive for what you get – and it is! But it is also a lot more complex and labor-intensive to make one than it appears. With only a few exceptions, these are hand-made products where very few units must support a company’s infrastructure.

The days of heavily discounted boats are over. Non-current new boats are pretty much gone.

2. Don’t Wait For Prices to Drop Further

Thanks to the Great Recession both new and used prices have dropped about as far as they are going to go, in the opinion of many industry experts. After waiting three or four years to sell a boat, most people who have a boat they want to sell have “capitulated” by now. Used boat prices seem to have stabilized.

The overhang of “new” but non-current boats (2007 to 2010 models) that were sold at distressed prices by dealers on the verge of going out of business have pretty much sold. This spring the new boats that are for sale are in short supply by design -- to avoid over production into an uncertain market. If you don’t buy the boat on the dealer’s showroom floor, someone else will because there will not be an over-abundance of boats available. Many dealers and builders will only start new construction when a retail customer has put up a down payment.

The result is that prices have stabilized.

While it takes more than a handshake to a secure a boat loan they are available to credit-worthy buyers in greater abundance than last year.

3. Boat Loan Money Is Available

Over the last six months boat loan money seems to have become more easily available than it was a year or so ago. Some local banks are also more receptive to boat loans for good customers. Buyers’ credit scores and incomes still must meet certain criteria, and it is relatively high, but for good risks boat loans are definitely far more available.

It is the job of the dealer you are working with to get the loan for you if you do not have a source yourself. If one dealer can’t get you a loan, then switch to another brand and another dealer, one that does have access to an institution that might have less stringent credit requirements, or which might need someone with your credit characteristics to balance its portfolio of debt. Of course loans against home equity (yes it still exists for many people!) or stock portfolios are still the least costly way to finance a boat.

Even first-time boat buyers can look ahead at their boating prospects and make some basic assumptions that will pay off.

4. Think Ahead, It Usually Pays Off

Some people will suggest that your first boat be a small one, or at least be smaller than the one you may think you want. We don’t subscribe to that approach. On the contrary, we think that only ends up costing you a lot of money when you go to buy the boat you really want -- then you will have paid two sales commissions instead of one, and you will have to absorb the depreciation of two boats instead of one.

Examples of first time boaters buying a smaller boat as their second boat are almost non-existent -- virtually everyone goes bigger, and maybe some of it is because of the ill-considered advice about starting small. In fact with some people who are clearly going to love the sport, we suggest that they buy the biggest boat they can afford, thus buying their “last” boat first, and saving themselves a lot of money over the next 10 or 15 years.

We suggest that you ”think ahead.” Don’t be swayed by that flashy new boat at the show, or the silver-tongued salesperson’s winning personality, or the great deal that shouldn‘t be passed up. Ask yourself how you and your family will be using the boat in three years if all goes well. Will you be taking long cruises of a week or two? Will you be going 100 miles offshore to the canyons for fishing? Will you be entering ski competitions for your kids? Will you be entertaining clients aboard? Whatever! Write down your dreams and your realistic prospects for your boating activities, then ask yourself what kind of boat it will take to fulfill those requirements.

When you have a boat you will find that you may discover relatives that you never knew you had.

5. Involve the Whole Family in the Decision

If you are a hermit, or you are getting a boat to get away from your family, then decide on the boat completely by yourself. But most people we know like to include the whole family in their boating activities. In fact, years later many boat owners will tell you that some of their most wonderful memories of being with their children and spouse were on their boat. Both you and your children are only young once.

The process of involving your whole family in the decision making will also get “buy-in” from them. You are making them part of the decision, so they are invested in it just as you are. If little Mary is not excited about the prospect of a boat, ask her which of her friends she would like to bring along for swimming or tubing? If Johnny seems more interested in just “hanging” with his friends, ask him which boat he would like to be driving and does the helm seat fit him?

Most important, don’t forget Mom. As you well know she can make or break the whole operation. Encourage her to drive the boat. Teach her to handle the gears as you go forward for the anchoring chores. Don’t ask her to lift heavy fenders. The happier she is with the boating experience the more boating you will do.

Build operating costs into your household budget. The process will let you know how much boat you can afford.

6. Make An Operating Budget

Every boat owner should have an annual operating budget before he buys a boat, and that particularly holds true for first time buyers. Some of the items you must consider are--

* Summer docking or mooring fees.

* Winter storage fees.

* Commissioning and decommission charges.

* Insurance.

* Property tax (if boats are taxed in your state.)

* License fees for your trailer (if you have one).

* Normal boat maintenance and up-keep.

* Fuel.

There will be much talk along the dock this season about the high cost of gasoline. News readers will be talking about it every night on TV. For that reason it is good to remember that fuel is just another line item in your list of boating expenses. If fuel prices go up 25% over last year, just remember that increase is a far smaller percent of your overall annual operating budget. Depending on how many hours you run your boat and how fast, chances are that the increase in fuel prices this summer could be as low as 3% to 6% of your total budget.

If after putting down all of your expected expenses (a good dealer can tell you what they will be) your annual total is more than you can comfortably afford, look for places to scale back. For example, dry stack storage is cheaper than having a slip. Having a mooring is usually less costly than dry stack. Less money than all of the above is simply to buy a trailerable boat and store it in your garage or some other low-cost place.

Trailering your boat and storing for the winter in your own garage is probably the least expensive way to own a boat. In this case, your annual operating expense should be pretty much limited to insurance, taxes, annual maintenance and fuel.

At some point there is no more blood left in the turnip. Think twice about using the vice on your new boat dealer.

7. Don’t Squeeze Your Boat Dealer

You might be surprised about how much mail we get from people asking our advice on how to grind the boat dealer down to something “just above” his invoice. The retail automobile business has trained people to think like that. Folks, we are not talking about car dealers here!

The average new boat dealer in the U.S. only sells about 20 to 30 boats of all the brands he handles in total each year. A good car dealer can sell that many units in a Saturday afternoon. A car dealer may only make 5% to 8% over the invoice, but if his customer service scores are high, he will get that much or more rebated to him by the factory at the end of the year. So this is just a game the car dealers play. The unit sales of all boat brands are so small that it cannot and does not operate that way.

The dealer margins on many low-priced new boats are on the order of only 10% to 15%. That’s why they will only take off from the MSRP a hundred or so dollars, not thousands. Large boats that cost many hundreds of thousands of dollars may also only have a margin of 15% because the price is so high. But these dealers are not even selling 20-30 boats a year. The average dealer of large boats selling in the high six figures or more may only sell a few boats each year. After all, there were only about 2,300 inboard cruisers over 26' sold new last year in the whole U.S.!

If you are able to grind a dealer down this year and he cannot make the margin he needs, don’t be surprised when you need his help if he lets you twist in the wind.

For the second year in a row, in 2010 Galati Yacht Sales in Florida has been named the boat dealer of the year by Boating Industry Magazine. From left to right: Mike Eiffert, Fran Galati, Darren Plymale, Carmine, Mike, and Joe Galati. Good dealers like the Galatis will help a first-time buyer every step of the way.

8. First Time Boat Buyers Need A Good Dealer

First time boat buyers need the help, advice and service of a good, professional dealer. When someone buys a boat and the dealer makes a fair margin on the boat, the boat owner has a friend to rely on for help finding answers to the “unknowns” that all first-time boaters have. A new boat dealer can tell his customer everything he needs to know and even send someone along to show the ropes, so to speak.

Some boat dealers run weekend workshops or classes for their new owners. Others send an expert with a new owner for a day or two to orient the first time owner. In all cases a good dealer will answer the phone when you call or get right back to you and move heaven and earth to help you. Be forewarned that not all boat dealers are professional, knowledgeable or even helpful.

About 400 boat dealerships in the U.S. have been “certified” by the boating trade organizations. The certification means that they have taken workshop courses, have agreed to a list of principles on handling their customers, and their premises have been inspected. We are not saying that these 400 are the only good dealers, nor are we saying that all 400 are good and professional all the time, but we are saying that the probability of a first-time buyer having a satisfying boating experience when buying a boat from one of them is a lot better.

Here is a link to the list of these “certified” dealers…

Tempus fugit. Just a few years ago this fellow was a dashing, debonair bon vivant waiting for his ship to come in. He may have waited too long.

9. You’re Not Getting Any Younger

Making the decision NOT to buy a boat is easy -- because no one needs a boat. Since you don’t need a boat this year, you can put off the decision until next year, and the year after that, and after awhile you’ll be so old, or your circumstance will have changed so much, it will no longer be a decision you have the opportunity to consider. And “opportunity” is precisely what a boat is: An opportunity to enjoy the outdoors, your kids, your significant other in a completely different and beautiful environment. It is an opportunity to enter a new world, make new friends, and enjoy aspects of life that most people are not privy to because they are pathetic landlubbers.

All you need do to get help with your boating questions is to ask your dearer, your boat-owning friends, the guy across the dock, or even BoatTEST.com. All will be glad to help.

10. Ask for Help

Don’t be too proud to ask for help. When you begin boating for the first time on your own there will be a lot of “unknowns.” Just as some male automobile drivers don’t like to stop and ask for directions when they are lost or can’t find their destination, so too, are some new boaters reticent about asking what they are afraid will sound like a stupid question…or just as bad, will immediately identify them as a new boater.

First, remember that there is nothing wrong with being a new boater, everyone was a novice in the beginning. Ask for help or an answer to your question. Indeed the Internet is full of boating forums where first-time boaters can ask questions and get answers ranging from the sublime to the ridiculous. We have never met even the saltiest veteran who wasn’t happy to help a beginner.