Charter boat purchases

[marktre]

I've been reading for years about buying a boat through a charter company in which the boat becomes part of the charter companies fleet, the fees from charter covers your costs for purchasing the boat, and at the end you own the boat and, theoretically, don't pay all that much. Does anyone have any experience with this, advice, etc.?

Cheers.

[Johnathon123]

Been "discussed" a thousand times B4 - use the search. But if the theory worked, why wouldnt the charter companies buy the boats themselves!

[Wraith_Mac]

Originally Posted by Johnathon123

Been "discussed" a thousand times B4 - use the search. But if the theory worked, why wouldnt the charter companies buy the boats themselves!

James,
It's a business model, not a theory and it seems to have been working for years.
Simplistically, the owner gets the tax deductions on his boat payments as a business venture and the charter company gets a new boat without their own capital expenditure.
There are a number of brokers specialising in this field, usually the boats are committed to a five year plan.
As to which plan is worth it, that's up to the individual as usual.
Cheers,
Mac

[denverd0n]

The one big caveat is that the charter company will give you an estimate of how much you can sell the boat for after the charter commitment is done, in order to show you how you will make money, or at least break even. Remember that their idea of what the boat will be worth in five years (or whatever) is nothing more than a wild guess--they're just pulling a number out of the air.

They don't have any better crystal ball than you do, and they really have no idea if the market for boats is going to go up or down over the next few years. In recent years, the boat market has been seriously depressed. The charter boat owners that I've talked to have been very disappointed to find that their boats are not worth anywhere near what the charter company estimated five years ago.

Of course, if you are planning on keeping the boat when the charter contract is up, then that probably doesn't matter. But it is something to keep in mind as you are working out the numbers.

[belizesailor]

Originally Posted by Johnathon123

Been "discussed" a thousand times B4 - use the search. But if the theory worked, why wouldnt the charter companies buy the boats themselves!

+100. Been beat to death here. Search the forums.

[nautical62]

As other said, many previous threads.

My boat just came out of 7 years in charter this June. Overall, I was very happy with the experience. They took good care of the boat, paid for all the maintenance, all the insurance, all the dockage and I got about half the purchase price back in revenues. When I went to get the boat at the end of charter I was a little frustrated to find via a shake down cruise a few things that they should have addressed, but didn't, but they took care of all those issues in 2 days. Once those things were taken care of, I felt it was in much better condition than the many neglected privately owned boats I've seen on the market. I sailed the boat back from the BVIs to Florida early this summer.

Since I haven't yet sold the boat, I can't speak to the final numbers, but it seems clear to me I'm way ahead of having chartered for the same period of time. - Assuming I would have paid for the full charter myself, and that's a big question to consider. (Paying 1/6 of a charter divided among 6 friends is a very different comparison than paying for your whole family)

Charter management companies, are not in the rental business, that's why they don't buy sailboats themselves. It's like comparing a company that owns and rents condos/apartments to a company that manages condos that are individually owned. They are just different business models.

For me it looks like about 2 weeks per year will be the break even point - less than that and simply paying for a charter makes more sense - more than that and owning is cheaper.

As you look at this in more detail, some things I would give thought to:

1. Do you feel confident you will use the boat or trade 3 or more weeks per year?
2. Are you happy with the charter- like lifestyle and locations?
3. Investigate the tax consequences - I had to declare income, but also got to write off depreciation.
4. Consider any turn around or owner's time fees. - while not huge, they need to be considered.
5. Is the income guaranteed?
6. Are you responsible for any of the maintenance or dockage?
7. What are your plans when the contract ends? - At that time, is having the boat a burden or plus? Having to store the boat in some exotic location could be expensive as can be delivery fees. If you plan to sell it, do you think their estimated value accurately reflects the real market? Remember possible broker's fees.
8. What would you otherwise do, what would that cost and how happy would that make you in comparison? Would a smaller, well used boat costing a fraction of the price meet your needs? - If so, despite maintenance, etc. that might be a better option. Would you be splitting a charter with others, which keeps your share of the price down - again, that may be a better option, than taking on the whole price yourself.