Discover everything you need to know about yacht financing in our comprehensive guide. From understanding loan options and leasing agreements to budgeting for your dream boat, we provide expert tips and insights to help you secure the best financing for your yacht purchase.
Whether you’re a first-time buyer or looking to upgrade, navigate the world of yacht financing with confidence and make informed decisions.
Raising the cash
Whether you are buying a new yacht direct front the yard or through an agent there is always scope for negotiation over the price.
Buying new
Price reductions on new yachts will not be given if you do not ask and may be disguised as an upgrade in specification or having some of the charges that do not appear in the headline price knocked off the bill.
Wrangling over money may appear a lot of trouble but a 3 or 4 per cent reduction on a five- or six-figure bill is always worth having. So don’t be afraid to haggle, especially in the current economic climate.
Buying second-hand
Begin by checking that the asking price is within the going rate. In the USA there are a variety of publications, called Blue Books, listing typical prices for second-hand boars. Each Blue Book has its own system for calculating second-hand prices and their answers can vary by as much as 20 percent.
To help close a deal, sellers will produce the higher figure to show what a good bargain you have driven and cynical bank managers prefer using the lower figure when working out how much they will loan against the boat’s value. Wise buyers begin their negotiations around the lower figure.
In the UK and many other countries there is no Blue Book system. All you can do is check the asking price in the sailing press small ads. Or, if the boat is still in production, make some allowance for annual depreciation. Depreciation is greatest in the first three or four years and stops after a maximum of about ten years. Beyond that, variations in second-hand value depend entirely upon the boat’s condition. Whether the boat is in good, fair or absolutely awful condition, work out your own figures for the cost of renovation.
Prices for the same boat can vary by region or country and it may be worth adjusting your prices to allow for this and widening your search.
Capital budget
With luck, you ought to recover much of your capital when you come to sell, but if you intend to finance the purchase through a loan then the repayments must be included in your annual running cost figure.
Companies specialising in providing finance for the yachting market are often described as marine finance houses. They offer marine mortgages of about 50-80 per cent of the boat’s value, probably based on the lowest valuation, for between five to ten years on a fixed rate.
To qualify for a marine mortgage it is normal for a yacht to be registered. In the UK this means the Part 1 Register and not the cheaper Small Ship Register. Putting a previously unregistered second-hand vessel on the Part 1 Register requires evidence of ownership covering the last five years. Part 1 Registration lasts for five years and the finance company can put the mortgage on the ship’s papers, making it impossible to sell the boat without their agreement. Registration costs must be included in your budget.
In the USA, a marine mortgage is called a “preferred” mortgage, and if a boat is registered with the Federal (as opposed to state) authorities, a preferred mortgage can appear on the documentation in exactly the same way as a marine mortgage in the UK.
When looking for a loan, what you want is a (low) fixed interest rate loan with no penalty for paying off the loan early. What you actually get can be very different. Lenders normally expect a down payment; the greater your deposit, the cheaper the loan.
If loan repayments take your annual budget beyond a sum that you can reasonably afford then consider looking for a cheaper, smaller boat. Alternatively, you could take advantage of the fact that the longer the term of the loan, the lower the monthly repayments, and extend the loan period to bring the monthly repayments down to an affordable level.
Take this option with caution. Longer loan periods mean a higher final bill. You could end up paying back twice or even three times the sum borrowed and if it is likely that you will sell within the first five years then financing the purchase of a yacht over ten or fifteen years is not good sense.
Revenue budget
The revenue budget is the day-to-day running costs, including loan repayments if you have borrowed money to buy the boat, and once spent revenue costs, unlike capital expenditure, are not recoverable.
Annual running costs have more to do What size of boat do you need? What hull material?with a boat’s size than its purchase price. In theory, for the first few years new boats ought to have lower running costs than older boats but this does not mean that they are maintenance free. Hulls still need cleaning and antifouling, brightwork requires varnishing, engines servicing and sails valeting. On older boats there needs to be a sensible rolling programme for replacing or upgrading equipment as it reaches the end of its useful working life.
Before you rush out and buy, work through the annual running costs by putting your best estimate of what you can afford to spend against each element. If your figures are wildly different from what you realistically will spend then scratch around until you have a satisfactory explanation for the discrepancy. When you have found it and corrected your figures what you now have is your best estimate of annual running costs and the question is, can you afford them? If not, you need to make savings.
An obvious start is a cheaper berth. Finding a cheaper berth brings serious savings. More time at anchor rather than in marinas during your summer cruise cuts costs as do money saving ploys during the annual refit.
Calculating annual running costs | ||
---|---|---|
Berthing | Maintenance | Other costs |
Annual berthing fees | Haul-out fees | Insurance |
Hidden haul-out extras such as jet washing the hull and renting a cradle when out of the water | Updating and replacing personal equipment | |
Paints, varnishes, cleaning and painting materials | Travel to and from your home to your boat | |
Servicing engine and other equipment such as stern bearings, hull, deck fittings, liferaft and EPIRBs | Club membership fees | |
Replenishing stocks of spares including filters and fan belts | License fees and harbour/river authority charges | |
Replacing and upgrading equipment that has reached the end of its useful working life | 10-15 % contingency fund |
Shopping around can produce lower insurance premiums but savings from these and items like personal equipment are minimal compared to those from berthing and maintenance.
Realistically, the maximum savings you can make on your annual revenue budget will not exceed 30-45 per cent of your initial budget. If this does not bring your expenditure into line with your pocket then you must consider downsizing. If you wish to race, this may mean racing dinghies instead of larger, more expensive club racers. If you cruise, then buy a smaller boat.
Where to find your boat
There are thousands of second-hand boats of all shapes, sizes and pedigrees for sale, and with a little wishful thinking, they can all be made to sound the perfect boat for you. If you are not specific about what sort of boat you want then your search, like that for the Holy Grail, will be an interesting, colourful, costly but ultimately unsuccessful quest. Write down the specification of the sort of boat you are looking for and stick to it. It saves time, money, wasted effort and disappointment.
Word of mouth. In your local sailing scene you may hear of a boat you know, like and consider suitable coming onto the market. If it meets your specification then this is probably the simplest, safest and surest way of buying a second-hand boat but check the boat and the deal on offer very carefully first. A deal going sour between mates is a great way of losing both a friendship and cash.
Yacht clubs and marines
Yacht club notice boards always carry home-made ads for local boats. There is a good chance you will either know the boat, its owner or someone who does. Unravelling its previous history is simple. Walking round marinas and boatyards you may see the boat you want with a “for sail” sign and contact number in the window.
Boat sales. Occasionally, marinas and yards organise second-hand boat sales where brokers and boat owners with boats to sell can display their wares. Sometimes you will find special offers on the price or attractive finance deals to hurry you into a quick decision. Some of these events concentrate on a particular type, class or make of boat. If it does, and it is the sort of boat that you are interested in buying, then this is a good opportunity of seeing a lot of your type of boat together and acquiring a feel for the market. You do not need to buy on the day. Following up possible deals a day or two later may place you in a better bargaining position.
Yachting press. Most yachting magazines contain a section of small ads for second-hand beats which are updated each time the magazine is published. Some magazines contain nothing but adverts for second-hand boats. Stick to magazines that cover your type of sailing.
Yacht brokers
Yacht brokers have lists of boats they are selling on behalf of someone else. They advertise some of the boats on their current list for sale in yachting magazines which gives you a good idea of the type of boat they specialise in selling. If none of the boats currently on their books is what you want then they will use their contacts with other brokers to search for a suitable boat.
To encourage sales of new boats, many dealerships take an owner’s present boat in part exchange. In this way they build up a stock of second-hand boats and combine selling new boats with a brokerage service for second-hand boats.
A broker’s services should be free to buyers with the broker’s fee being paid by the seller. It is important to How to Choose a Boat Broker: Tips on Yacht Sales, Consignments, Fees, and Trade-Insselect a broker who specialises in the sort of boat you wish to buy. This should be clear from their adverts and, if possible, use a local broker that you can speak to face to face. Ideally your broker will be a member of a professional body such as the Association of Brokers and Yacht Agents (ABYA) in the UK or, in the USA, the Yacht Brokers Association of America. There are also state associations such as the Florida Yacht Brokers Association, and the California Yacht Brokers Association.
A good broker takes time to discover your sort of sailing and if inexperience or ill-informed ambition is leading you towards an unsuitable type of boat they gently guide you back onto the right track. Then, when you have found a suitable boat, they guide you through the Expert Tips for Negotiating a Boat Purchasepurchasing process. They have one eye on repeat business. A poor broker, thinking only of his commission, begins asking how much you are prepared to pay and goes through his books looking for boats at the top end of, or even a little beyond, your budget whether they are suitable or not.
The internet. Enter “second-hand boat” in any internet search engine and you could face thousands of entries. Restrict choice by specifying:
- Type of boat by class, manufacturer and age.
- Length of boat.
- Price range.
- Country/region where boat is based.
- Construction material: wood, GRP, aluminium, steel or ferro-concrete.
- Monohull, catamaran or trimaran.
- Rig.
Buying abroad
Yachting magazines frequently carry adverts for yachts based in exotic locations and the internet opens up the entire world of second-hand boats. Prices overseas sometimes appear extraordinarily cheap but there are pitfalls.
How do you check whether the boat is as described? Is the boat debt free? What flag is the boat currently sailing under? Where is it registered? Is there a language problem which may lead to inconvenient misunderstandings? Which country’s laws apply to the sale? Do you appoint a local agent to represent your interests? If so, how do you find one you can trust? How many distant yachts can you afford to check out? How do you find a trustworthy surveyor? If you buy a boat abroad then how do you bring it home? Will there be import duties and taxes payable when you do? Does the boat meet your national construction standards? Is there any realistic scope for redress if you have been deliberately misled?
Read also: Reasons Why You Should Buy a Boat and the Financial Side
The answers to these questions vary from country to country and they all have cost implications over and above the asking price of the boat. Only once you have checked all this out and done your sums will you know if buying a boat abroad brings you worthwhile savings.
When buying abroad, do not unquestioningly accept the seller’s unsupported word on any point. There may be no intention to deliberately mislead but the effect is the same. He may, for example, not have heard of your national construction standards or the EU’s RCD directives and when asked whether the boat complies with the regulations say “Yes”, assuming standards in all countries are the same. Or claim his boat is registered, and it is – but only with his local harbour authorities.
Whether purchasing at home or abroad there is a danger that the hunt for the right boat becomes an end in itself. You keep looking for the ideal because however close you have come to ticking all the boxes on your wish list you know that the yacht for you is still out there … somewhere. Only you can decide how far you go and how long you spend in your search.
Is this boat suitable?
Once you have a list of boats that appear to meet your needs, you must weed out those that do not merit the time, effort and expense to travel and view them. Looking at boats is costly in both time and money and you wish to be sure both are well spent. The process begins by working through a detailed inventory, photographs of above and below decks and particulars of where she is berthed, sailed and wintered.
The inventory
It is sometimes possible to download this information from adverts on the internet bur these photos are often postage-stamp sized and at a resolution that makes detailed examination impossible. The inventory that goes out with the advert sometimes amounts to no more than four or five items or catch-all phrases like “full instrumentation”. What you need are decent-quality photos, the make and age of everything in the sail wardrobe, full details of the sail-handling systems, engines, winches and deck hardware, electronics, autopilots, galley equipment, liferaft and a list of every item being sold with the boat.
It is a good idea to ask for this information even if you are buying a new boat, especially a “sail-away” version. You may be surprised how little equipment “sail-away” includes.
The inventory is also a clue as to the owner’s type of sailing. A boat that has made bluewater cruises should have windvane self steering, wind or solar generators and heavy ground tackle. There should be dodgers and pramhoods to protect the crew when they are in the cockpit and a bimini or cockpit tent to make life more comfortable at anchor or in harbour.
If these items are not on the inventory, have they been sold separately? A racing yacht should have a large inventory of sails. If not, why not?
The photographs are a pointer to her condition but use them with caution. Pictures may not lie but every photograph misleads if only because it is selective. Photograph the cabin of a small 20-footer from a dozen different viewpoints with a wide angle lens and it is easy to believe that you are looking at a multi-storey gin palace. Just as interesting as the pictures the seller is happy to provide are those areas that have not been photographed.
Where is the boat berthed?
Where a boat is normally berthed helps you to decide how often she is sailed. If it is a three- or four-hour drive from the owner’s home or place of work then claims of sailing two or three evenings a week, every week, are suspicious. Statements that the boat is sailed three or four thousand miles every season are questionable, A good cruising average is 100 miles in 24 hours. Most sailors are hard pushed to find time for a two-week cruise and half of that is spent in harbour. It would be exceptional to cover 1 000 miles during the average summer cruise and claims of another two or three thousand miles sailing at weekends stretches credulity beyond breaking point.
If a boat is kept on a drying mooring then is it on sand or mud? If it is sand then during every tide there will be times she bumps with every passing wave until she is properly afloat or fully dried out. The bigger the wave, the greater the thump. Years of this thumping does the hull no good.
Winter laying up
If her hull is GRP and every winter has been spent afloat then the possibility of osmosis is above average. A couple of days lift-out each year to scrub and antifoul does not leave a lot of time to give tender loving care to underwater fittings. How is the boat winterised? If the winter is spent ashore, is this in a yard or under cover?
First contact
The first point of contact is usually a phone call. How you approach this discussion is a personal matter but remember it is a conversation, not an interrogation. Try to avoid asking one question after another but it may help to ask the same question at different times in slightly different ways. You have the common ground of sailing and questions can be slipped in as you talk about cruises you have both made and boats you have sailed.
An obvious starting point is to ask why the boat is up for sail. How long has the boat been on the market? Where is it lying? When did he buy the boat? Was it then second-hand or new? If second-hand then how many owners has the boat had? Is the seller buying a new boat? What sort and why? Is he giving up sailing.
Learning about the seller
Some important questions that need answers: What is the owner’s experience of sailing? His usual sailing grounds? How long has the present owner owned the boat How many boats has he owned? What sailing has he done in the last two seasons? What was his longest non-stop passage in this boat? What was his longest cruise? When and where to? How many were aboard? What was the worst weather he has sailed in? How did the boat behave?
Learning about the boat
Clarify any inconsistencies between what appears on the inventory and claims of sailing experience and maintenance regime. If it is a GRP boat ask about the condition of the gel coat. Has the hull been treated for osmosis? If a wooden boat is presently stored ashore how long has it been out of the water? Is it under cover? Salt water does not rot wood but rainwater does. Wooden boats left ashore and not under cover are likely to have problems with rot. If it is a steel boat how has the hull been treated? When was the hull last painted? With what kind of paint?
Where does he keep the boat during the winter? Ask what annual maintenance is carried out on:
- Hull including deck, hatches, windows. Have any of the windows replaced? Have they ever leaked? Seals on windows over ten years old are suspect.
- Spars and rigging: when was the standing rigging last replaced? Remember that insurance companies do not like standing rigging much over ten years old.
- Hardware such as winches, pumps, electrical wiring and control panels, galley and electronics. Instruments age quickly and finding spares can be a problem. For example, locating electronic charts in a suitable format for older chart plotters may be impossible. Parts for older equipment may be unobtainable.
- Steering system.
- Stern gland, propshaft and flexible coupling.
- Engine and fuel system. What was the date of the last major overhaul?
- Sails; when were they last valeted?
- Batteries; batteries more than a couple of years old need replacing.
Who carries out this maintenance? If maintenance is done by a yard, can you see the receipts for the work? Major maintenance such as an engine overhaul ought to be supported by receipts. An engine overhaul includes work on the cylinder head, valves, injectors, sea-water pump, fresh-water pump, oil pump, fuel pump, exhaust system, drive system and all senders and sensors like those for oil pressure and water temperature. You need to see a bill detailing the work, not a letterhead with a single, solitary figure for the entire job.
Have there been any modifications? If so, what are they and who carried them out? Has the boat ever grounded? If so, when, where and what was the outcome? Has there been any major damage? If so, what, how was it caused and who repaired it?
Sellers have an understandable and natural tendency to gloss over defects, especially faults that may scare buyers. Minor defects are another matter. Boats of the same class of a similar age all suffer from much the same problems and claims that any boat is free of faults are too good to be true.
Look for consistency within the answers and with the information you already have. Some contradictions may be obvious, others less so. A boat that has passed through several owners with none holding onto it for more than a season may have a defect, not immediately apparent to new owners but which is sufficiently serious for folk to cut their losses and run when they do find it.
Dealing with brokers
Brokers may be reluctant to put you in direct contact with the seller. They may worry that you intend to cut them, and their commission, out of the loop or that the owner, less skilled in the art of selling, may say something that scares you off. If this is the case then explain that you are considering taking a look at the boat but that you have some questions you would like answered first so you do not make a long journey only to discover that the boat is obviously unsuitable for your needs. If the broker insists they have the answers (it is very unlikely he has the detail you need) then ask for his answers in writing, adding that if he is aware of any information which even distantly suggests that the boat is not exactly as claimed then this should be included.