Yacht Depreciation: The Cold Hard Truth
How Much Does A Yacht Depreciate On An Annual Basis
You'd be a very saavy buyer to ask the question 'how much will my yacht depreciate over the course of ownership' or in any given year, but you'd leave yourself to be disappointed if you actually listen to the answer, because there is no set formula.
The person selling you a yacht is likely to say something along the lines of 10% the first year, 5% the second, 3% after that and so on, but in reality, that’s both lazy and incorrect. When buying and selling a yacht, the condition of your yacht as well as the market and what past buyers have paid for their yacht is to dictate a yacht’s value.
The condition; it makes sense that the yacht in the best condition will sell first since after all you’re spending a lot of money and want it to be in proper aesthetic and working order; if the condition is anything less than pristine, a buyer will have trouble justifying their purchase when other vessels they see are, and if they have the vision, they’re going to expect a major credit.
The Market; Yachts that sit on the market for extended periods of time are watched by potential buyers and brokers, and after they don’t sell, it’s natural to assume they’re overpriced or something is wrong with them. Pure market efficiency states that an accurately priced yacht will find a buyer, but too often vessels are listed too high due to owner bias, or feeling that there yacht is special or due to broker commission selfishness.
Past Buyers; Depending on the make, size and year of the build of your yacht, you’re going to want to know what the last buyer for such a yacht paid for theirs (which can be accessed through the MLS). By plotting these figures, you can develop a thorough understanding in addition to calculating a more accurate depreciation schedule.
(Let me ask you this: If you’re online at the pizza place and the person in front of you buys a large cheese pie for $10, would you be willing to pay $15 for your cheese pie you bought right behind him? Absoutely not!)
For instance, here's the recorded sales prices of a 2005 & 2006 68' Azimut.
*Data provided through recorded sales in Yacht Brokers MLS soldboats report for specific vessel sales occuring within the USA.
As you can see, the 2006 68' Azimut in theory should always sell at a higher price point in theory than any 2005, but it doesn't. Sure a 2005 may have more upgrades, may have been better maintained than a comparable 2006, which would fetch a higher price, but the fact of the matter is, if you know this information, you're not going to pay more than what the last buyer paid and you're not going to overpay at all.
The reasons why we see sales prices level out or depreciation crawl during certain intervals, is because these are buyers that were mislead by their brokers or chose to negotiate directly with the selling broker, otherwise there'd be no reason to pay the same amount someone else did two years prior.
My personal theory (which ofcourse is backed by analytics and research) is that the best value purchase a buyer can make is of yachts with a solid pedigree, that you can't see too many of them within the marina, yet you don't want to be the only one of them in the marina.
Production yachts that are bought and sold multiple times a year (ie: Sea Ray Sundancer) result in an owner reselling at a price point dictated by many others, and someone in a larger pool, will sell low.
The same is true for upstart yacht manufacturers; while excitement, innovation and a desire to be different is great, you can't trust a new boat builder to sustain their business, which if they go out of business, shrinks demand and as you guessed, resale value.
But the best advice I can give you, the reader of this article personally, is to get all the facts and numbers in front of you. If you can't get it yourself, I would be happy to help you in doing so.
Stay tuned for a follow up video on this subject on the Yacht Hunter Youtube Channel or on www.theyachthunter.com
Happy Yachting My Friend!
-The Yacht Hunter
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