Putting money in a boat offers inflation flotation
Ahoy, mates! Forget about stocks and bonds for a while and think about yachts as an investment. Nearly everything on the water -- if it has been decently maintained -- looks like a floating piggy bank. Inflation has pushed up the prices of both sail- and powerboats, making them seaborne inflation hedges. According to Walter Sullivan, publisher of BUC International, a Fort Lauderdale, Fla.-based publication that tracks prices of new and used boats as well as major industry trends, boats "have absolutely kept up with inflation . . . and in some sizes have exceeded inflation."
Mr. Sullivan, however, is quick to point out that pleasure boats don't produce any income and in fact can be expensive to maintain. There is an old sailing joke that a boat is a hole in the water into which you throw money. The joke has a true ring.
Still, as the many manufacturers at the Norwalk International In-Water Boat Show here greet potential buyers of boats, they can truthfully say it is unlikely a boat buyer will lose much, if any, money invested in a yacht.
While standing on the flying bridge of a 50-foot powerboat, the AMF Hatteras president, David R. Parker JR., tells a visitor, "If you buy a boat and hold it for more than a year, the boat will bring you more than you paid for it." Thomas Carroll, vice-president in the boat lending department at the First Pennsylvania bank, "We've found the better-quality boats appreciate about 10 to 12 percent per year, or as good as most savings accounts."
But most experts at the boat show will also quickly add that there are some caveats to buying a boat and making money on it. Sally Helme, sales coordinator for C&C Yachts, a Canadian sailboat manufacturer, points out that "buying a boat with a good brand name is extremely important." And David Perry, sales manager of Cape Dory Yachts Inc., adds, "You want a boat that will stay in style for a long time; so it's a good idea to get a cruising boat instead of a racing boat." Racing boats become obsolete quickly.
Gordon Woodland, president of Pearson Yachts, another sailboat manufacturer, says it's important that a buyer of a yacht purchase one from a company with an excellent service department."The backup a yachtsman gets is important," he tells a visitor aboard a lavish new 35-foot sailboat.
In the case of powerboats, Mr. Parker of AMF says large cruising boats with diesel engines are better investments than those with gasoline engines. A 50 -foot powerboat burn 60 gallons of diesel fuel an hour. He says a gasoline engine burns 30 percent more fuel.
Sullian estimates that about 150 brands maintain their value. He recommends that potential boat buyers visit a boat dealer and thumb through a copy of his reference, The BUC Book, before buying a boat. It's one way to determine if a boat has kept its value through the years.
One final point from Sullivan, "You can have fun on your investment as well."
In spite of continued high interest rates, the boating industry is hopeful that 1982 will be a good year. Jeff Napier, president of the National Marine Manufacturers Association, is estimating the industry will sell 600,000 units the next boating year. "We are still rebuilding from 1980," he explains, when the industry sold only 154,000 units. An excellent year would be sales of over 700,000.
Mr. Napier estimates that any sales increase at all will go quickly to the yachtmakers' bottom lines, since inventories are so low. Mr. Carroll of First Pennsylvania thinks 1982 could be a good year. He senses "a lot of pent-up demand." Some producers are back-ordered into the spring.
In fact, Don Haskell of Lancer Yachts, which has a successful manufacturers financing program, reports the company is sold out of its large yachts through the first of the year.
Mr. Woodland of Pearson Yachts believes President Reagan's new tax program will aid the industry, as the speedier plant depreciation will prompt it to design more efficient plants. And the more attractive leasing provisions in the tax bill may help those who supply chartering operations. All of the boatmakers are hoping the President's anti-inflation efforts are successful so that interest rates come down. Boat loan rates, which have remained at about 16 percent, are still considered high enough to keep some buyers out of the market.
Comedian Eddie Cantor, noting that stockholders always seemed to be rich, once asked, "Where are the customers'm yachts?"
The question would have been appropriate on Wall Street again as stock prices slumped last week. The Dow Jones industrial average fell 36.62 points, closing at $836.19, a 16-month low. Volume began to expand on the decline as investor concern mounted over the effect of the Treasury's financing next quater. The market also began to recognize that continued high interest rates will leave their mark on fourth-quarter profits. Silver stocks were pounded last week after the US government announced it would sell some its silver hoard.
Boat price* (All those listed are based prices.) Brand 1976 new price 1981 resale price 1981 new price 42' Bertram convertible $150,000 $143,000-157,000 $260,000 53' Hatteras flybridge sedan $214,000 290,000-300,000 400,000 C&C 33 $32,000 46,000 $52,000 Pearson 35 $32,000 $48,000 $64,495 Cape Dory 30 $29,000 $43,000 $46,995 Hobie Cat 16 $2,000 $2,300 $3,395
* 1976 prices are for a 42-foot Bertram with twin GM engines; a Hatteras with twin GMs; the C&C and Pearson with gas engines; the Cape Dory with a diesel; and the Hobie with "full color"; 1981 C&C is for a 32-foot diesel-powered sloop; 1981-Pearson is diesel powered. Source: BUC International.