Budgeting the Cost of Boat Ownership

Each person finds their own way to make things work. The point is to go into it with an understanding of what you're getting into and a plan to make it work for you. There's not a right or wrong way except the risk of not knowing being prepared for what one is doing. There are no magic formulas or one size fits all answers. It's like the rest of life. A couple mentioned retirement. We always had it in mind so when we could, we did for the most part. However, I know people who their job is their hobby, they enjoy it more than anything else in the world and they'll work forever. Probably the most dramatic example I'd point out is Warren Buffett. He doesn't work for the money. He'll never retire.

Agree there are a lot ofdifferent ways to make it work...I do however believe there is a wrong way!
We have friends that have owned 5 boats...always bought new and financed. Never having paid obe offthey always rolled over the (upside down) balance. 4 of the 5 were Tiaras.. They had good taste!
At one point wanted to get out of boating but couldn't sell and pay it off.
They can't pay for vacation cruises so put it all on plastic and worry about it later..
Usually end up withdrawing from 401k or IRA to eventually pay off the cards.
Not knowing or caring about true costs is OK if it doesn't create a problem but head in the sand when you clearly can't afford it is a problem...at least in my book.
Lots of ways to get on the wayer qnd enjoy the good life w/o having the biggest, newest, and most expensive boat in the marina.

I agree generally that its best not to leverage/borrow to purchase these toys - especially if buying new. We are currently looking at boats to purchase one (been boatless for a while now). Plan is to get a fully depreciated mid/late 80's Taiwan trawler, keep it in Columbus,MS on the Tenn Tom Waterway. That's about two hrs from our home. From there we plan to cruise the TN River and other inland rivers, maybe go down to the coast. And then do the Loop for a year or two. We will not be full time liveaboards. Plan is to then sell the boat after 4-5 yrs. So my plan is to put down 10-20% and finance the rest - I have plenty of low cost credit available. I could pay cash, but I can borrow at 4-5%, and I'm earning much more than that via investments. I know I'll probably take a haircut when selling - but maybe not - I'm pretty handy re woodworking/mechanical/elec and will be able to make improvements. But a brokers fee will probably eat that up. As long as you are disciplined, leverage can work well.

FoxtrotCharlie said:

but I can borrow at 4-5%, and I'm earning much more than that via investments.

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Don't bet too heavily on that continuing to be possible. Over the long term it has generally been but there are repeatedly significant periods where it isn't likely. For many years now, we've been able to earn more, but I never bet on that to happen the next five or next ten years.

BB - point well taken. But we are not talking about really big money here - boats we've seen that would work well for us - 40' TT's - sell for $55-80k. I can get 5-7 yr fixed loans at those rates, but you are correct that the investment returns are not guaranteed - except for some older, higher rate bonds I still hold

It is amazing how much one can save for some months or several years what one would otherwise spend to accommodate/maintain a boat previously acquired. If one isn't able to do this, one can't cover ownership costs of the boat in question.

I find it amusing that that folks will stand up on a soap box and tell others that they should never finance something as expensive as a boat.

I have no problem admitting that I financed our boat. Heck it cost way more than my house, and I wasn't ashamed that I had to finance that.

Yes I could have saved dilligently through my 50's and bought the boat with cash right before my planned retirtement.

Instead I have been enjoying, and improving the boat for five wonderful seasons. In four more seasons I will have it paid off and will have had a fantastic time using the boat all those years I could have been saving, and dreaming of someday owning a boat this size.

Instead of "keyboard cruising" my wife and I have been actually cruising, having spent over 60 nights aboard last season alone.

Frankly thats allot funner than checking my bank balance, hoping for "someday". Sitting behind my keyboard while others go to sea.

Nope, no regrets at all.

I second "You can't take it with you"

"Have never budgeted for any boats I have owned, and probably never will. I went thru your list as it pertains to my newly purchased boat and stopped at $80k outside of purchase price If I had numbers like that in front of me before I thought about doing what I'm doing. . .I wouldn't have done what I have done "


Cool Beans - How could that possibly be? We have followed you on the other site thru your purchase and saw no evidence that it would be anywhere near that amount.
What the heck happened?

I chuckle at the house is different than a boat and ok to finance comments. You finance a house in most cases because you don't want what you can afford. So you finance what you want, not what you need.

For those that will say, "the house appreciates and the boat depreciates", you will do far better buying a small house and investing the monthly mortgage, than the appreciation over time of the house. So, do what works for you. For the record, I didn't finance mine.

Ted

ksanders said:

...
Nope, no regrets at all.

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ksanders said:

I find it amusing that that folks will stand up on a soap box and tell others that they should never finance something as expensive as a boat.

I have no problem admitting that I financed our boat. Heck it cost way more than my house, and I wasn't ashamed that I had to finance that.

Yes I could have saved dilligently through my 50's and bought the boat with cash right before my planned retirtement.

Instead I have been enjoying, and improving the boat for five wonderful seasons. In four more seasons I will have it paid off and will have had a fantastic time using the boat all those years I could have been saving, and dreaming of someday owning a boat this size.

Instead of "keyboard cruising" my wife and I have been actually cruising, having spent over 60 nights aboard last season alone.

Frankly thats allot funner than checking my bank balance, hoping for "someday". Sitting behind my keyboard while others go to sea.

Nope, no regrets at all.

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My opinions on financing a boat are as follows. As a husband and wife team, in the best of times, mainly health related, I don't see a real problem. But over time I have seen total nightmares by mainly the wife, becoming a widow and having the burden fall upon her to deal with unloading the boat when the pair is no longer a team. If you are over mortgaged and or just want to get out from under it, this becomes a REAL problem.

And even with kids, rarely do they even have a clue about the financial details either. Most don't even care as their interests could be 180 from their parents too. We could only hope that the husband and wife tag team knows of all the details.


I willing to bet that few boating couples have the same job descriptions either. So both knowing it all is probably not going to be the case. So I think it is really something to consider when talking about financing or paying cash for a boat.

Mmmm.. Just donate the boat to a worthy cause and be done with it.

"For those that will say, "the house appreciates and the boat depreciates", you will do far better buying a small house and investing the monthly mortgage, than the appreciation over time of the house. So, do what works for you. For the record, I didn't finance mine."


Not nearly the way it worked out with us but glad it worked for you.

" If you are over mortgaged and or just want to get out from under it, this becomes a REAL problem"


Not of you can just write a check and pay the loan.

But then again

BandB said:

Don't bet too heavily on that continuing to be possible. Over the long term it has generally been but there are repeatedly significant periods where it isn't likely. For many years now, we've been able to earn more, but I never bet on that to happen the next five or next ten years.

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Historically the markets have returned more than 7 percent annually for the last hundred years. For my retirement I am betting on making at Least 4.5. Still slightly more than some loans.

markpierce said:

Mmmm.. Just donate the boat to a worthy cause and be done with it.

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You can't donate the boat that still has money owed though.

I don't have a problem with anyone financing anything, just don't do it if it's going to create undue stress in your life. Each person needs to know their own capacity for dealing with debt, both financially and emotionally.

If people didn't finance boats, the boat industry wouldn't exist. Probably 95% of the small boats, under 30' or so, are financed. As people move up, most are still financed. But most cars are and most houses are.

ksanders said:

Why not???

Simple fact is that we are all going to grow old, and we are all going to die.

If you have plenty put away for a nice retirement, why not spend the rest?

We all get this one shot at life, and the old saying is true... You cant take it with you.

So why not put the excess in a boat, or a RV, or spend it on good whiskey, or whatever else you want...

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Yep, no hearse's with roof racks pulling U-Hauls at the cemetery!

Scratchnsaw said:

My opinions on financing a boat are as follows. As a husband and wife team, in the best of times, mainly health related, I don't see a real problem. But over time I have seen total nightmares by mainly the wife, becoming a widow and having the burden fall upon her to deal with unloading the boat when the pair is no longer a team. If you are over mortgaged and or just want to get out from under it, this becomes a REAL problem.

And even with kids, rarely do they even have a clue about the financial details either. Most don't even care as their interests could be 180 from their parents too. We could only hope that the husband and wife tag team knows of all the details.


I willing to bet that few boating couples have the same job descriptions either. So both knowing it all is probably not going to be the case. So I think it is really something to consider when talking about financing or paying cash for a boat.

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So really you are defining two problems and I agree with you on both counts.

First is that we need to not over finance a boat. The concept here is that you should be able to realistically sell it, including brokerage fees, etc... for more than you owe... Great advice.

Second is that couples need to protect each ther in case of the untimely demise of one of them. That isn't boating related but also a prudent practice.

No issue at all with what people choose to do with their own money, so long as it is not coming out of my taxes!!
But for the record, my Selene 47 (1999) was in good condition when acquired in 2006. Because the vessel was owned in an LLC, I actually kept detailed records of all expenditures (incl. fuel, bottom paint, etc) during 8 years of ownership. Much/most of the repairs/maintenance I did myself and we did not undertake any major modifications. Largest single expense was rebuilding the TwinDisc tranny (approx $4000). I included dockage, winterization, storage etc.

Including depreciation at sale and brokerage costs the average ownership cost approximated just under $40K/year for a vessel valued at $400K at sale. I think many owners have no idea what it really costs to maintain a larger vessel, and I think I actually did it "on the cheap". We finally sold the boat, not because of the cost, but because it became too large an obligation of time and we wanted to pursue other activities. During our ownership period we put 1,500 hours on the main engine, lived aboard/used the vessel for approx 65 weeks, and cruised the East Coast and the Bahamas.
We certainly have no regrets and thoroughly enjoyed the time we did own the vessel.

Reading through the many post on this budgeting topic, I can make several observations. What I call fixed costs are not always related to boat value. Example: slip or mooring fees … a 40’ covered wet slip in my area is $300 a month … doesn’t matter if boat is worth $35K or $350K but if boat is worth $35K the yearly cost is already over the 10%. Engine and generator maintenance costs are related to number, displacement, accessibility, location. Not boat value. If engine service is DIY then only material costs are involved. My 200 hr engine service cost for engines/trans/gen, materials only, is $250. The receipts I have from the PO, in Forth Lauderdale, indicated $800 for the same service. This is a large cost difference. A raw water impeller change costs me $60.00 not $400.00. I feel sorry for my PO, as indicated by the receipts I have, he paid out over $42K for service and repairs in 2 years. Over $10K for re-do of things he did not get done correctly the first time. He did not know!! A new boater can work up an ownership budget but must also be diligent that he/she is truly getting what they need and pay for.



I don’t budget for my boating. If I need it, it gets done. If I want it, I search for the best pricing, and get it. If I was not DIY, I’m sure it would be different.

ksanders said:

We don't budget.

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Ditto...I can't even place a $$ amount on what I get out of boating. I've never regretted a single dollar..(and there have been plenty)

I have a general idea what the yearly cost will be, not from tracking cost but from paying the tab every year. I enjoy living on my boat so whatever the cost I'll pay plus I do the large majority of maintenance labor myself.

smitty477 said:

"Have never budgeted for any boats I have owned, and probably never will. I went thru your list as it pertains to my newly purchased boat and stopped at $80k outside of purchase price If I had numbers like that in front of me before I thought about doing what I'm doing. . .I wouldn't have done what I have done "


Cool Beans - How could that possibly be? We have followed you on the other site thru your purchase and saw no evidence that it would be anywhere near that amount.
What the heck happened?

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Nothing happened, I hope my post didn't imply that My response was in context to BandB's original post and list of things to budget for. I used my boat as an example, and made a rough estimate based on her list. Unless I misread the list, it basically asks you to eventually plan on rebuilding/replacing everything on the boat. When I estimated a rebuild/repower it really throws the budget into a whole 'nother category for me. Outside of major engine work or catastrophic drive train issues, the budget looks a lot more friendly


Kind of like River Cruiser, I just have a pretty good idea of what things will cost me outside of a catastrophic failure. To be honest, I'm not sure I could ever come up with anything I'd consider a budget for boating. . .there's too many variables

Chrisjs said:

No issue at all with what people choose to do with their own money, so long as it is not coming out of my taxes!!
But for the record, my Selene 47 (1999) was in good condition when acquired in 2006. Because the vessel was owned in an LLC, I actually kept detailed records of all expenditures (incl. fuel, bottom paint, etc) during 8 years of ownership. Much/most of the repairs/maintenance I did myself and we did not undertake any major modifications. Largest single expense was rebuilding the TwinDisc tranny (approx $4000). I included dockage, winterization, storage etc.

Including depreciation at sale and brokerage costs the average ownership cost approximated just under $40K/year for a vessel valued at $400K at sale. I think many owners have no idea what it really costs to maintain a larger vessel, and I think I actually did it "on the cheap". We finally sold the boat, not because of the cost, but because it became too large an obligation of time and we wanted to pursue other activities. During our ownership period we put 1,500 hours on the main engine, lived aboard/used the vessel for approx 65 weeks, and cruised the East Coast and the Bahamas.
We certainly have no regrets and thoroughly enjoyed the time we did own the vessel.

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If this thread aims to help newbies then Chris's post nails it.

So, negotiate a purchase price, cost out what the survey says needs to be repaired and thats the starting point. Then allow 10% pa. It probably wont be right, but near enough to avoid stress.

I am in the don't budget camp, no finance either. I do know what my refit cost. I could probably add up what I have spent since then but have not done it. If curiosity gets the better of me (will also need some wet & windy non-boating weather !) I'll let you know.

cool beans said:

Kind of like River Cruiser, I just have a pretty good idea of what things will cost me outside of a catastrophic failure. To be honest, I'm not sure I could ever come up with anything I'd consider a budget for boating. . .there's too many variables

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Variables are the spice of life for budgets. Budgets do help you understand them better. Even those who don't formally budget, do the thought processes and have a pretty good idea. Yes, you read write on considering major work like rebuilds, but I don't suggest over-considering it. Just be aware that down the road it is possible. Have some idea how long the engines you have should go without. Then think what you would do if it was needed. I know one person whose plan is that it would be a two year process for them. They live on their boat and if they didn't cruise during those two years they could pay for it. So, it would just be a temporary setback. He said he might even work part time to speed it alone. Still it wouldn't be death to his life on the water or to cruising.

We look at it as spending less money every year we don't have major expenditures and then a major expenditure just balances things out. We just don't get carried away over the years we save money.

I also think for new boaters, that Chris has a pretty realistic post that reflects our experience. I feel like the 10% guideline is a little light for some circumstances. In Chris's case he had a pretty late model and well built boat and still got 10% of price per year into the boat. I saw a reference earlier in this thread to late 80s boats and I think in that case perhaps the chances are pretty good that you will be over ten percent.
A lot of this depends on how you view your caretaker role during the period that you own the boat. If you take the view that you are going to manage the boat in a way that it will still be a pretty serviceable and relevant boat in a decade or more then you might be over 10% to keep the boat in that kind of shape.
We have had Klee Wyck for five years and have put in around 75% of her original purchase price to own and keep her. I think even though she was well cared for previously, she is in better shape now than when we first came to be her caretaker. I expect she will still be a wonderful classic ship 20 years from now.
I would not have wanted to think this through all that much before we bought her. We are not budgeters in this part of our life.
Just know that big boats are pretty expensive to keep and you should be prepared to roll with that and still be happy.

I have heard the 10% rule for 30-40 years. I wonder how long that rule has been around?

I do wonder about the accuracy of the 10% rule, especially for power boats, because there is so many variables on the purchase price of the boat. Anywho, one of the best books about cruising is, "The Voyager's Handbook: The Essential Guide to Blue Water Cruising" by Beth A. Leonard. A big part of the book is about money issues and this is what the book says,

"brokers selling boats over 50 feet say you will need to budget an amount equal to annual depreciation—on average about 10 percent of the cost of the boat per year over the course of a ten-year voyage—to maintain the boat’s resale value."

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There are several discussions on the Cruising Forum, Cruisers & Sailing Forums, about cruising budgets where people have posted years worth of data which makes interesting reading. One cruiser is spending about 40% of their budget on the boat but that includes insurance, moorage/dockage, fuel, entry fees, flags, parts, new equipment upgrades, etc. I can't remember if they have stated the purchase price of the boat.

One person on CF spent $10,000ish on new rigging and $20-30,000ish on new sails. The sails were very high end though and for a 50-55 foot boat. That amount of expensive would seem to get you to the 10% mark pretty easily.

Later,
Dan

IMO - Pay cash for boats and cars/trucks/motor cycles. Then use and/or enjoy! Be sure to purchase at good price and sell at good price. Take care of those items and have them amply insured.

I could calculate near to the dollar what every item I have costs per year. But why bother... except for TD reasons; even that can be close guess!

Regarding costs beyond initial purchase and commissioning of a boat: For rough rule o' thumb - 15 to20% of original cost is what you will annually spend on keeping a boat. That does not include fuel cost if you do much more than 150 engine hours per year.

Boats cost money - period! Enjoyment to the degree that a boat provides usually costs money - period.

The fact that we here are pleasure boaters that luv our boats is priceless - PERIOD!!!