Size and age. And costs.

[tomfl]

Originally Posted by SwissMocha

Tutoring session in depreciation
Listprice: 100'000 * 1.3 * 0.75 * 0.95exp20 = 34'905.-
So the owner will NOT pay you money
Oh sorry, made a mistake
Listprice: 100'000 * 1.3 * 0.75 * 0.95exp21 = 33'150.-
Still no refund

A wise solution to determining the selling price of boats. I am confident you will be successful in finding many boats using that method. Maybe you should start advising folks looking to buy boats.

[RKsailsolo]

Originally Posted by tomfl

A wise solution to determining the selling price of boats. I am confident you will be successful in finding many boats using that method. Maybe you should start advising folks looking to buy boats.

Ok, so you don't think it's an effective formula? Just confirming as I follow and gain good insight from your posts which to me seem based on depth of respectable experience.

[travellerw]

I have another question... What is "List" price? Is this the price that the owner has the boat currently listed at? or is this the price the boat cost when new!

Either way, I cannot make this formula work. I tried 5 boats at random (all Cats) and the numbers were way way off.. If I used the new list price, then the currently listed selling price (on yatchworld) was significantly cheaper then this formula kicked out.

If I used the current price on yatchworld, then the price was ridiculously low.

What am I missing?

[StuM]

Originally Posted by travellerw

I have another question... What is "List" price? Is this the price that the owner has the boat currently listed at? or is this the price the boat cost when new!

Either way, I cannot make this formula work. I tried 5 boats at random (all Cats) and the numbers were way way off.. If I used the new list price, then the currently listed selling price (on yatchworld) was significantly cheaper then this formula kicked out.

If I used the current price on yatchworld, then the price was ridiculously low.

What am I missing?

You're missing the fact that the original formula doesn't work.

Once a boat goes beyond about 10-15 years, there is little or no further "depreciation" to factor in - they generally hold their prices from then on if they are properly maintained.

[travellerw]

Originally Posted by StuM

You're missing the fact that the original formula doesn't work.

Once a boat goes beyond about 10-15 years, there is little or no further "depreciation" to factor in - they generally hold their prices from then on if they are properly maintained.

I'm not sure I understand what you are saying.. It doesn't matter though.. I tried this formula on boats of all ages.. It simply does not work, or even get within the ballpark...

Not sure why I even tried.. There is simply no formula in a free trade market. What I'm willing to offer and what they are willing to take is all that matters.. All you can do is make your best offer and see what happens..

[tomfl]

Originally Posted by StuM

You're missing the fact that the original formula doesn't work.

Once a boat goes beyond about 10-15 years, there is little or no further "depreciation" to factor in - they generally hold their prices from then on if they are properly maintained.

There are some 10-15 year old boats that have increased in price due to a good refit. By the same token there are some five year old boats that are basically worthless.

While it is true that the price of a boat is determined by what a buyer is willing to pay I would also point out that it takes some experience on the part of the buyer to determine if a boat has been maintained.

[SwissMocha]

Originally Posted by travellerw

I have another question... What is "List" price? Is this the price that the owner has the boat currently listed at? or is this the price the boat cost when new!

List price is the factory list price when the boat was new.
And yes, the older the boat gets, the less precise the formula, because the condition of the boats will vary considerably.
The formula will only give you a ballpark figure to determine a value from a commercial standpoint. Apart from that, you will see boats, that nobody wants, so they are worthless and boats that have a market, and those will probably be more expensive. And then you have boat owners who are willing to wait for a buyer endlessly and those, who want to sell now and move on.

As mentioned before, it's a buyers market.

I give you an example for my calculation, looking at FP Belize.
The factory price in 2001 was around 320'000 EUR, so for a 2001 Belize the formula says 320000*1.3*0.8*0.95^13=170'000 EUR. I adjusted the initial write off to 20%, I admit, because the cat market seems pretty solid. There is of course no absolute thruth to such a formula, life is more complicated.

Looking at Yachtworld for Belize 2000-2002 the price range is currently anything between 130'000 and 250'000.
From here on it's looking at the boats and judging the condition and maintenance backup and wether it as the necessary gear, etc. etc. Maybe the lowest price boat indicates, that you have to invest another 100K in refit, or the seller needs cash, or the boat is in a place where nobody wants to go, or....

But to be honest, if I can purchase an FP Orana 2008 for 260'000 EUR I would not consider to buy a Belize 2002 for 250'000.

[cwjohm]

Any "formula" must allow for exchange rate. If the price of the latest model varies with exchange rate then this will flow down.

"10-15 year old boats don't depreciate". They cost large amounts to upgrade / maintain. Depreciation by a different name.

[SwissMocha]

Originally Posted by cwjohm

Any "formula" must allow for exchange rate. If the price of the latest model varies with exchange rate then this will flow down.

Agreed. However, Fountaine Pajot is a french builder, so it will be consistent looking at the Euro prices.
But wherever you live, prices will differ considerably towards your local currency.

[StuM]

Originally Posted by cwjohm

"10-15 year old boats don't depreciate". They cost large amounts to upgrade / maintain. Depreciation by a different name.

That's why I used inverted commas. By "depreciation", I was referring to the accounting concept which the OP was using i.e. an annual reduction in (sale/purchase) value as a function of age.

I agree with you completely in that upgrade/maintenance costs are a factor, but once you get past that 10-15year point, similar boats with similar electronics/rigging/engine hours etc will be priced about the same regardless of respective ages.

[cwjohm]

Agreed. However, Fountaine Pajot is a french builder, so it will be consistent looking at the Euro prices.
But wherever you live, prices will differ considerably towards your local currency.

This is exactly what exchange rate means - the variation of Euro (in the case of FP) against your own currency. This is why you cannot easily compare prices across countries.

If the euro depreciates 10% in a year against the US then in the US new prices will increase by 10% and the second hand market (for that boat) will eventually increase 10%. Commensurately, if in another country the Euro appreciates the opposite will happen.

I agree with you completely in that upgrade/maintenance costs are a factor, but once you get past that 10-15year point, similar boats with similar electronics/rigging/engine hours etc will be priced about the same regardless of respective ages.

YEs, we are in agreement.

My point is that unless you are very lucky there are no bargains. Invariably two older boats seemingly similar will not be similar because in one case the owner will spend $50K upgrading the boat and then on sell it and proudly say he sold it for more than he purchased it completely ignoring the fact that he spent the $50k. In the other case the buyer will think he did a good deal but end up spending the $50K himself.

The fact of the matter is that boats are a hole you throw money into. For a newer boat the main cost is depreciation. For an older boat the main cost is upgrades and maintenance.

If there is a formula to be had for valuing boats in my humble opinion it must involve the current price of the current model of that length boat from the same manufacturer and then invoke a depreciation/repairs and maintenance factor. I am pretty confident that in the first year deduct 15% of the new price probably down to 10% of diminishing value after that, remembering that for older boats if the seller has already spent the 10% in upgrades then you allow for that.

The only real bargains I have ever seen are in the case of distressed circumstances where the sale is forced.