Buying a boat is easier than you think once you understand the process and the resources that can help you along the way. Here are some tips for your journey to boat ownership.
1. Identify the boat that’s right for you.
That could be sailboat, watersports boat, distance cruising yacht, a multihull, or a fishing center console. Consider what you want to do with the boat and how much time, money and skills you’ll need. If you get this right, you’re half-way to buying the boat of your dreams.
2. Create a budget.
The price of the boat is just the beginning of the cost of ownership. You’ll also need a budget for moorage and that could be on a trailer in your garage or in an expensive slip at a marina. You’ll need to factor in any financing and insurance costs and get an estimate for the necessary annual maintenance. This will drive the decision whether to buy large or small and new or pre-owned. The total cost of boat ownership can sometimes be 20% or more of the initial purchase price. Don’t forget to factor in depreciation which will impact the asset’s value on resale.
3. Find a broker or dealer.
The relationship with whomever sells you the boat will be key because they can also help you find marine lenders and insurers and guide you through the process from identifying must-have boat features to swimming through the paperwork. Brokers generally deal in pre-owned vessels while dealers sell new boat models. Dealers work on margin while brokers take a 10% commission that is paid by the seller, not the buyer. Look for accredited brokers via the Yacht Brokers Association of America (YBAA).
4. Get the best price.
When purchasing a new boat, current pricing and information are usually easily found online. You can bargain for a better price but be reasonable in order to form a good relationship with a dealer whose help you’ll need with future repairs, warranty work or even resale. For a better bargain, consider buying in the off-season or from last year’s stock. The latest models with lots of upgrades and customization will be expensive.
When buying a pre-owned vessel, pricing is less readily available and is based on the age, condition, location and brand of the boat. Brokers have access to pricing resources including NADAguides and BUCnet that are like Kelly Blue Book valuations for boats so lean on your resources to help establish a reasonable price.
5. Get pre-approved for a loan.
In a seller’s market, you’ll want to make yourself an attractive buyer, especially if you’re seeking a loan. Check your credit score which should be 700 or better in most cases. Also check your debt/equity ratio (too many loans make you look overextended so strive for a 2:1 ratio), and liquidity after the down payment (you should have 12 months of payments readily available.) Home ownership (for collateral) also helps. Gather the necessary documents for pre-approval including bank statements, two years of tax returns, a real estate schedule, and proof of employment. Pre-approved buyers generally receive preferential treatment. Expect a down payment requirement of 10-25% of the price.
6. Arrange for a test drive.
A dealer should be able to offer a “test drive” so you can experience the boat first-hand before purchasing. For a pre-owned vessel, that’s trickier. If you’re buying directly from an owner, you’ll need to arrange a test with them. If you’re purchasing via a broker, you’ll need to make an offer before a “sea trial”. If you’re still interested after the sea trial, you should arrange a survey (to make sure the vessel and its propulsion system is sound). A survey can be expensive and is paid for by the buyer even if the sale doesn’t go through. Your broker will have a list of marine surveyors to help.
7. Get help with the paperwork.
Mired in archaic processes and a flood of onerous paperwork, the boat purchasing process isn’t like buying a car or a house but it has components of both. A good dealer/broker can guide you and ensure that all aspects of the transaction are properly completed. This will include management of the initial offer, licensing and registration, documentation and titling, maritime liens, state sales tax and federal user’s fee, import/export taxes, and final closing documents.
Keep the following in mind: Plans to live aboard are generally frowned upon by lenders, insurers and marinas. Also, certain kinds of boats may qualify for a tax deduction, and in some cases, family trust or LLC ownership schemes may be possible.
8. Manage your expectations.
Each party in the transaction needs to manage its expectations which can be difficult if things are taken personally. More than houses or cars, boats elicit strong emotions. Don’t get your mindset mixed up with your heart set. Stay the course and make sound financial decisions and be prepared to walk away.
Boat dealers and brokers have a vested interest in selling a boat and have relationships in the marine industry with lenders, insurers, surveyors, processors and repair facilities. Lean on these great free resources to help you on your path to boat ownership.