Reasons Why You Should Buy a Boat and the Financial Side

Why buy a boat – owning a boat can be a deeply rewarding experience for many reasons. Firstly, it provides a unique avenue for recreational enjoyment. Whether you’re interested in fishing, water skiing, wakeboarding, diving, or simply spending quality time on the water with family and friends, a boat offers countless opportunities for fun and leisure. The ability to escape the daily grind and relax on the water can significantly reduce stress and improve mental well-being, offering a peaceful retreat that few other activities can match.

Physical activity is another benefit of boating. Activities like sailing, rowing, or even maintaining the boat can provide a good workout, contributing to your overall health and fitness. Moreover, owning a boat can teach valuable skills such as navigation, weather interpretation, and mechanical maintenance, which can be both practical and personally satisfying.

From a financial perspective, buying a boat requires careful consideration of several factors. The initial cost of purchasing a boat varies widely depending on the type, size, and condition of the vessel. New boats generally come with warranties and the latest features, but they are more expensive than used ones. Used boats, while cheaper, might require more maintenance and repairs. Beyond the purchase price, other costs to consider include insurance, storage, docking fees, maintenance, fuel, and potential repairs. It’s also important to factor in the depreciation of the boat’s value over time.

However, a boat can also present financial opportunities. If you’re not using your boat all the time, renting it out can generate additional income. There are various platforms available that make it easy to rent out your boat to responsible and vetted individuals. Additionally, boats can sometimes be a tax-deductible asset if used for business purposes, such as charter services or corporate entertaining.

Financing options for buying a boat are also available. Many lenders offer boat loans with various terms and interest rates, making it feasible for buyers with different financial situations. It’s essential to compare these options to find the best deal that aligns with your financial capacity.

And finally, buying a boat can enrich your lifestyle with numerous recreational, social, and personal benefits. While the financial investment is significant, careful planning and consideration of all associated costs and potential income opportunities can make boat ownership a viable and rewarding endeavor.

Why Buy a Boat, Anyway

For fun, for enjoyment. Sailing is unique in that it is fun in and of itself – you don’t have to get anywhere in particular to enjoy it. Just going out and sailing around for a few hours and returning to the same mooring or slip is enjoyable and relaxing.

Beyond this, there are many levels of adventure to sailing – from the adventure of visiting nearby harbors to the adventure of going far offshore to distant islands or even to other countries.

There is also the aspect of competitive racing, which is a rapidly expanding part of boating. Finally, there is the grand tradition of yachting, in which a boat is viewed as a quasi-artistic entity and is owned for the beauty of its appearance, finish, and joinery as much as for anything else.

Naturally, no one of these elements is purely manifest in any boat. Most boats are a mix of various proportions of speed for racing, comfort for cruising, and beautiful interior finish for aesthetic appeal. Today, racing boats are approaching the point at which speed is preeminent, and this requirement is being met by sacrifice of other values, principally those that relate to aesthetics and comfort.

In many areas of the world, competition is so keen that the boats are being honed to an ever finer degree. The interiors of «hot» racing boats are stripped to Spartan basics. Berths become canvas stretchers racked one on top of the other, outboard near the point of maximum beam in the interests of optimum weight placement (when the boat tacks, the off-watch is expected to shift to the windward berths). Heads, or toilets, are left completely out in the open, with no concession to even a minimum privacy that might be provided by a curtain. Galleys are vestigal. There is often no table: meals are regarded as a waste of time. The main thing is speed – keeping the boat moving down the course at all times.

These boats are a case of function dominating form and they are really just a logical result of the demands of racing. On a racing boat, a beautiful interior is, in fact, a waste: it is expensive and the money is better spent on more sails or more powerful winches.

The above remarks are not intended in any way to deprecate racing boats or to say that racing boats are not suitable for, say, general sailing or family cruising. Quite to the contrary, a boat with a good race record can often be a very satisfactory cruiser. Cruising is, after all, an activity, something you do with a boat, not the boat itself.

Quite often these days, in fact, a racer and cruiser will have identical hulls and rigs. Their differences will be in the way the interiors are finished and in the number and type of winches, sails, and other gear that is carried.

So, if you are buying a boat for the fun of sailing, don’t be put off by a fin keel and spade rudder. That alone doesn’t disqualify the boat as a cruiser. If the design is good and she is strong, she may be an absolute dream under sail and be just the thing for you. Even if you are not planning to race, look at this type of boat. Some have very nice, aesthetically pleasing interiors and comfortable cockpits and are strong enough to cross an ocean.

The converse of these remarks is also true. There are on the market supposedly strictly cruising designs that are cranky under sail and not built well enough to get out of protected waters. Selecting a boat is a case of getting your priorities in order and deciding what aspects of a sailboat are most important to you. Here are several things to consider for each of the three categories:

1. Racing: At the very highest levels, this may mean a one-off, custom design with the concomitant high investment, depreciation, and expense. At a slightly lower level, it is possible to equip a stock, production racer/cruiser and campaign her with good results. The expense is still high, but depreciation is a great deal less because the boat will find a much broader secondary market when she is no longer competitive.
2. Coastal and protected-water cruising: The well-equipped stock boat mentioned above is a good choice because she will sail well in the typically light-to-moderate winds of summer and does not have to carry the vast amounts of gear and stores required of the ocean voyager. Expense is the lowest of any type and depreciation will be practically nil if the boat is kept for three to four years.
3. Ocean voyaging: The prime criterion here is strength, almost before hull shape or rig. Next in importance is carrying capacity, which the boat must have to be truly independent of the shore. This boat doesn’t necessarily have to be super heavy, but she will probably have to be heavier than an inshore cruiser. As a result, she is likely to be sluggish in light-to-moderate winds.

At this point you might want to skip to article «Instant Naval Architecture», which is about boat architecture. Read it and study the pictures before you proceed.

Another pleasant aspect of boat ownership that very few people seem to think about is that a boat is one of the few things you can truly own. At some point there comes a time when she is paid for and is yours.

Unlike real estate, there are no annual taxes that must be paid, regardless of whether or not the mortgage is paid off. For if you pay off the mortgage on a house, the annual taxes mean you are still basically renting the land. Not so with a boat: once she’s paid for, she’s yours. And, if it ever comes to it, she can be a very cheap home that will let you wander the world as well.

The Financial Side

J. P. Morgan is reputed to have said that if you have to ask how much a boat is going to cost, you can’t afford it. Well, this may have been true in the grand days when a yacht was at least ioo feet long and as much a work of art as anything else. As works of art, they cost stupendous amounts of money to create and equally grand amounts to maintain.

But today’s sailboats are made from much less exotic and costly materials. The general maintenance required is basically scrubbing, painting, and waxing. Today’s boats are much, much smaller and, relative to the income of their owners, probably take up no more of a percentage of that income than J. P.’s yachts did of his. If you can spare 10 to 15 percent of your income per year, you can very probably own a decent-sized sailboat.

About four thousand people in the United States buy new cruising sailboats in the 26- to 40-foot range each year; probably three times that number buy used boats in this same size range. If you have an income of $30 000 or so a year, you can, in all probability, be one of them. And many people who own boats manage on a great deal less income than that.

Having said all this, it is still a fact that cruising sailboats are expensive as sin. To be more accurate, they require a large capital investment. You may well wonder why it is you can buy a car with three thousand moving parts for $6 000 when a 22-foot sailboat with maybe one hundred moving parts costs around $12 000.

Read also: Self-Survey Criteria for the Basic Boat

The fundamental reason is that cars are produced in vast quantities. Boats, on the other hand, are produced in dribs and drabs. A large sailboat manufacturer, for example, produces only six hundred boats per year and has a total sales volume of only about $20 million. This is small potatoes compared to General Motors or Ford, with their sales in the millions of units and billions of dollars. Since boat production costs have to be spread over very few units, the price of each unit is necessarily high.

The positive side to this is that, because sailboats are basically very simple and built of very durable materials, there is very little to wear out. Consequently, they last a long time. Sails on a cruising boat, for instance, can be expected to be serviceable for ten years or more, given reasonable care. This means that depreciation is very low and, in fact, is offset to a large extent by inflation.

To take an example, suppose you buy a new 30-footer this year for a total investment of $50 000. You keep it for three years and then decide to sell it or trade it in for a larger boat. What is your boat worth?

Well, it is worth what the market is willing to pay for it and the market process works something like this: three years have passed and the price of a new boat like yours is now $60 000. Your boat is in top shape, shiny and sparkling. A used-boat buyer has the choice of buying your boat or a new one. What does the dollar saving have to be in order for him to buy your boat?

In part, it will depend on how much a given amount of money is worth to him. But he’ll almost certainly buy your boat for $45 000, thereby saving $15 000. He’ll probably pay $50 000 if it is exceptionally appealing. For more than that, he’ll probably opt for the new boat.

You can see that, unless you consider things like present value and discounted cash flow, you can come out pretty reasonably on the capital investment side of owning a boat. If you do consider those things, you’re probably still too absorbed by the money game to enjoy boating anyway. So let it mellow for a few years more; then take another look.

Now, what about the expense side of boat owning? That is, the money that has to be laid out to cover the operating costs, which are the irrecoverable dollars involved in boat owning. These are the cash expenditures for things like slip or mooring space, winter 10 storage, bottom paint, and insurance.

These are going to vary somewhat from area to area, but, since slip space, bottom painting, rigging, and such are levied on a per-foot basis in most boating areas, it is easy enough to run them down and add them up. In our area, western Long Island Sound, the operating costs of a fiberglass Comprehensive Collection of Common Sailboat Rig Types and Designsauxiliary sailboat run about $150 per foot per year. This includes insurance and summer and winter space and presumes that the boat owner does only the basic cleaning of the boat and waxing the hull.

In other areas of the country, this figure is going to vary – indeed, it is a good deal lower in eastern Long Island Sound, only sixty miles away.

If you are able to do things like painting the bottom of your boat yourself, maintaining the engine, washing and storing the sails, and so forth, you can reduce the annual upkeep cost of an inboardpowered 30-footer to quite small proportions. Here is how the annual expenses break down in western Long Island Sound, one of the most expensive areas in the country in which to own a boat:

 
Now, obviously, many items here could be done by you, the owner. For example, you could build the frame for the winter cover, or, for that matter, leave the boat uncovered – fiberglass is very durable, remember. You could also paint the bottom, prepare the engine and water system for winter, and put the engine and water system back into commission in the spring.

Such savings can be approximated:

 
You might also find a boatyard in which you could store the boat without taking out the mast and, instead of at a slip, keep the boat on a mooring or join a yacht club in which these things are included. Many yacht clubs, even in our area, have annual dues of less than $600.

To return to the investment part of boat ownership, you saw what you were likely to recover if you held a $50 000 boat for three years. Suppose you bought a boat and, for one reason or another, wanted to sell it after one year. What would the numbers look like then? About 15 percent less than you paid for it – roughly $7 500. Again, this is the spread that a buyer would need in order to choose the used boat rather than a new one.

This 15 percent figure is an interesting one because it is the down payment usually required by companies that specialize in boat financing. Apparently they, too, figure that about 85 percent of the coast of a sailboat would be recoverable even if the boat had to be sold within a year of purchase.

Many people are surprised to find that you can finance so much of a new sailboat. Not only that, loan terms are quite commonly seven to ten years. It is actually easier to buy a boat than a house. I know that many people feel it is practically immoral to finance something like a boat, but the fact is that most boats are financed (although not normally to the full 85 percent), often by the very people who could put the whole chunk of capital into the boat if they wanted to.

I suspect these individuals have their money working in places where it grows more rapidly than the interest they pay to borrow on the boat. Too, I am sure that the financing institutions have a very low loss rate on sailboat financing. For instance, during the eleven years I was in the boat selling business, only one boat sold by our company was repossessed. And the financing firm not only was able to sell the boat, it recovered every nickel it was owed.

Some boat financing works very much like car financing: the interest you pay is called «add-on» interest and the true interest is higher than the nominal or stated rate. An example is the easiest way to explain this: suppose you have decided to buy a 30-foot production fiberglass sailboat and the investment required, including tax, is $50 000. You are going to pay $10 000 down and finance the remaining $40 000 for ten years. The nominal interest rate is 10 percent add-on. Here is the way the numbers work out:

The total interest of $40 000 is now added on to the $40 000 you are borrowing, and this is what you are actually paying:

Since you are going to be repaying in monthly installments, there will be 120 monthly payments in ten years of $666,67 each.

The thing to notice about this type of interest is that the amount of interest does not decline as you repay the loan. It is always $40 000. Since, in effect, you only have use of half the money (because you repay as you go and not all at once at the end of the ten years), the equivalent simple interest rate is nearly double the nominal rate. Thus, borrowing at 10 percent add-on is approximately equivalent to borrowing at a simple interest rate of 18 percent.

Due to the fact that sailboat prices are now at the level of many houses and are nearly equivalent to homes in terms of the risk to the lender, financing is available at simple interest for very long terms, just like home mortgages. In any case, I learned How to Choose a Boat Broker: Tips on Yacht Sales, Consignments, Fees, and Trade-Inswhile a broker that it is best not to pay attention to quoted rates, but simply to find out what the payments are, multiply by their number, and subtract the principal. This will tell you the amount of interest you’re paying and let you find the best deal quickly.

One other question you must ask the financing company is whether there is a prepayment penalty. You need to do this because you will probably not keep the boat as long as you think: you’ll be moving up in two or three years. So, ask for the payoff number at two years and at three years. If there is a prepayment penalty clause, you’ll often find you owe more at the end of two or three years than you originally borrowed!

Now is the time to see if you can get a better deal. Whatever the result, make a note of the amount, date, and person who gave you the payout number for future reference (or use).

Naturally, there are less expensive ways of financing a boat. Among them are the following:

1. Taking advantage of the increased value of your house to remortgage it, thus borrowing the money at simple interest with a very long-term repayment schedule.
2. Pledging stocks or bonds as security for the money. Again, this is borrowing at simple interest.
3. Pledging a savings account as security and borrowing at simple interest rates against that.

These alternatives are appealing because the interest is usually about one-half of the effective rate with add-on. However, in the event you default, the lender under the above three options has either your house, your bonds, or your savings account. You end up with the boat.

Under the add-on method, the lender ends up with the boat and must go to the bother and expense of selling it to recover his money. Thus, because his risk is higher, so is the interest he charges.

At the risk of striking a negative note, this seems like an appropriate place to advise that, before you get involved in the whole process of looking for and buying a sailboat, you very squarely ask yourself which you like more, money or sailing. You might be surprised at the number of people who immerse themselves in boat hunting and obviously never face this question until the crunch comes: they’ve found the ideal boat for them, they can afford it, but it means taking X out of the savings account. At this final moment, they discover they love the money in the bank more than they can imagine loving the boat in the water. Talk about frustration and a waste of time!

Presuming you have crossed this hurdle, let’s move on to another money item which comes up in buying a boat – sales taxes and what is involved if you decide you want to avoid them.

Briefly, if you own an auxiliary sailboat, you are required by law to register it either with the state in which you will principally use the boat or with the US Coast Guard in whose district the boat will be principally used. If you register it in a state that has a sales tax, you will have to pay tax to that state. Thus, the only way to avoid sales tax is to register your boat with a state – or a state in a Coast Guard district – where there is no sales tax.

One state that does not have a sales tax is Delaware. But if you, for example, buy a boat in New York from an individual and register it in Delaware, you should know that Delaware will require a statement from you to the effect that Delaware will be the place where you will principally use the boat.

So, unless you are willing to lie, there are great difficulties in trying to avoid sales tax. And, with all states scrambling for revenue these days, you can bet it is going to get more and more difficult. In addition, some states, such as Connecticut, have personal property taxes, which are levied annually.

Taking the long view of this problem, it seems foolish to me to go through contortions to avoid tax. After all, one of the reasons you’re buying a boat is to avoid some of the hassles of modern life. Why leave yourself open to a potential future hassle with the government?

A boat is one of the few things in this world that you can own outright, so make the most of it and don’t give the tax group a chance to get their hands on it. Render unto Caesar and get on with enjoying your boat.

Putting Your Priorities in Order

I made the statement that «a boat must be a boat before it is a cozy den». Now I want to expand on this a bit.

A boat lives in an element – water – alien to man, and when you set out in a boat, you trust your life to it in a way that you don’t in a car or other land vehicle. What are inconveniences in land travel are very often the stuff of tragedies at sea.

For instance, the loss of motive power in a car means a more or less extended stay on the side of the road. Inconvenient, but not particularly dangerous. The Self-Survey Criteria for the Rigloss of the rig in a sailboat is extremely grave.

Similarly, a sudden squall with high winds and rain may mean that the motorist has to pull to the side of the road until it passes by. But a sailboat has to make progress in these conditions and must cope with them directly and without shelter, ft seems obvious, therefore, that some things must be sought first in a boat and others relegated to lesser priority.

By this I do not mean to say that a sailboat has to be a Spartan, sterile machine – not in the least. A boat can be a good, strong boat and a cozy den. But, given a choice between a strong structure and beautiful woodwork, common sense says that you have to choose the structure first, since that’s what you’re really going to sea in.

To reduce this concept to an absurdity, imagine a steel boat with a couple of pipe berths lined up next to a boat with a hand-rubbed mahogany interior and a papier-mache hull. In which are you going to set out to sea?

That example is occasioned by the tendency I have observed over the years for people to judge a boat by its interior. This is very much like judging a book by its cover or a house by its kitchen. After all, the people who are building houses and boats are not fools. If kitchens sell houses and interiors sell boats, it’s going to go there at the expense of other things.

It is possible to have a strong boat and an interior that is a work of art. But remember, art is expensive and, if you basically want only to go sailing, perhaps you can do without that part of yachting.

In any case, the set of priorities I suggest is this:

• crucial importance:
• good design;
• strong hull;
• strong rig.

• high importance:
• layout;
• good engine;
• good plumbing;
• good electrical system.

The problem is to come up with some ways that you, using your own observations, can form an accurate judgment of these factors. We’ll deal with first things first.

Design

This is probably the most difficult thing for a newcomer to sailing to assess, since the overall design of the boat is the result of a blend of compromises among:

• speed,
• room,
• looks,
• handling,
• cost, and many other factors.

After you’ve messed around with boats for a few years, you will develop a critical eye. But, assuming at this point that you are a relative newcomer, here are a few ideas:

1 Find out how long the model of the boat you are looking at has been in production and how many have been made. The serial number of the boat is usually stamped on a metal plate mounted in the cockpit. If you find out that the boat you are looking at has been in production for, say, five years and you’re standing in number 1 000, that’s a lot of boats and a healthy market life.

For sailboats of 26 to 35 feet, an average yearly production of fifty or more units and four years of continuous production indicate a very good market acceptance. If the boat were a bad design or had cranky sailing characteristics, it might reach a high level for one year (due to an exceptionally low price, perhaps), but it just wouldn’t hang in there year after year.

2 Certain designers consistently produce good boats. By this I mean that the boats sail well and do not have bad characteristics, such as a vicious weather or lee helm. Sometimes it happens that the execution of these designs by the builders leaves something to be desired – but more of this in later chapters. Here are some people and companies I consider to be good designers of production fiberglass boats:

• Carl Alberg;
• Ted Brewer;
• William Cook;
• Cuthbertson and Cassian (C & C);
• Dieter Empacher;
• Halsey Herreshoff;
• Ted Hood;
• Bob Johnstone;
• Bruce King;
• William Lapworth;
• Charley Morgan;
• Gary Mull;
• Peter Schmitt;
• William Shaw;
• Sparkman and Stephens (S & S);
• William Tripp.

3 Stand in the cockpit of the boat and try to determine if the designer made adequate provision for moving around on deck. Are the decks wide enough to go forward on? Is the cockpit large enough for the number of people who can reasonably be expected to go cruising on the boat? Remember, you spend a lot of time in the cockpit of a sailboat. To this end, are the coamings high enough to provide reasonable back support and comfort?

4 Go below and see if the layout is a workable one. One test I always apply is to ask myself if there is a comfortable place to sit or sleep in heavy weather. This means there should be at least one berth midship or aft, where the motion is least in a seaway. It may require a leeboard on one tack, but it shouldn’t require converting from a dinette. This is one reason I like boats with tables that fold away against a bulkhead – such a layout usually gives two berths port and starboard in the middle of the boat. No matter which way the boat is heeled, you can rest.

The above considerations pretty well rule out any but an aft galley in the general size range we’re talking about (26 to 40 feet). In larger craft it becomes possible to locate the galley elsewhere. But for smaller boats, the aft galley is practically a must. It can be on one side or spread on both sides.

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The reasons for this are that the cook has access to the cockpit for passing food and for communicating, the heat from the stove vents through the companionway, there is a large flow of fresh air for the cook, the cook does not block the passageway through the boat, and he can readily brace himself in place, using either a webbed belt or the companionway ladder or both.

Admittedly, these remarks leave very little flexibility for the layout, but I think this is proper and is due to the fact that the layout is dictated by the realities facing a craft that must be lived on, dined on, and slept on while in motion – often violent motion.

Having said this much about design and layout, I am going to digress into a description of how a fiberglass sailboat is made and then cover the remaining points on the:

• hull,
• rig,
• engine,
• plumbing,
• electrical system.

Author

Olga Nesvetailova

Freelancer

Literature

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