What You Need to Know About Boat Depreciation
As with lots of property, boats depreciate over time. Before you purchase a new boat, it’s important to know how your investment will be sustained in the long term. Buying a new or used boat can influence its rate of depreciation. If you buy new, your boat will exponentially lose value within the first year, whereas buying used will vary based on the newness of the watercraft. Whether you are a current or an aspiring boat owner, Boatmart is here to help you understand and reduce your boat’s depreciation.
Boat Depreciation Basics
It is important to note that, in terms of depreciation, boats are not as straightforward to predict as other vehicles. Unlike cars, boats have different factors at play and the market demand is not as large. The main factors that affect the resale value include the boat’s condition, size, location, and features.
The boat’s condition, which includes its mechanical, rigging, and cosmetic condition, holds the most weight in boat depreciation. Mechanical refers to the boat’s performance and engine hours; rigging is the condition of sailboat sails, masts, booms, and stays; and cosmetics suggests the overall aesthetic.
Boat depreciation occurs the fastest during the first few years of ownership, and this trend is more drastic when you are buying a new boat. As a general rule, anticipate about 10% to 15% depreciation after the first year of use and up to 40% by the 10th year of use. This trend significantly slows after that, in which a boat’s worth averages to about $100 per foot of the boat. In addition, certain boats are more likely to depreciate faster than others.
For example, pontoon boats and fishing boats depreciate quicker than most other boats, in which their resale values drop approximately 25% to 30% after the first couple years of ownership. In contrast, sail boats and yachts depreciate slower and typically maintain around 90% of their resale value even after three years of ownership.
When you are buying a boat, consider researching different brands. Boats manufactured by popular and well-respected companies typically depreciate the least. Some of these brands include Boston Whaler, Grady-White, Bertram, Lund, and Yamaha, to name just a few.
Determining Your Boat’s Depreciation
If you are trying to figure out your own boat’s depreciation, there are a few different methods that are important to understand.
Sum of Years’ Digits
Determined by finding the cost of the boat, estimating its useful life, and how much it is worth at the end of the useful life. A sum of years’ formula is then used to calculate the annual depreciation.
Straight Line Depreciation
Computed by beginning with the cost of the boat, estimating its useful life, and how much it would be worth at the end of its useful life if you were to sell it.
Declining Balance Depreciation
Calculated by entering the cost of the boat, estimating its useful life, and finding a rate you would be comfortable depreciating it per year.
Though these methods seem similar, your accountant can help you with these calculations if you are confused.
Tips for Reducing Your Boat’s Depreciation
If you want to assuage your boat’s depreciation, below are a few tips to consider:
1. Upgrade and Maintain Your Boat’s Condition
If you keep your boat pristine and functioning as well as when you first bought it, the price of your boat can be valued higher, and you may attract more buyers. Replace mechanical and rigging components as necessary and be sure to preserve your boat’s aesthetic.
2. Add Beneficial Accessories to Increase Value
Adding helpful features and updated accessories to your boat, both internal and external, will enable you to sell it at a higher price than its market value.
3. Implement Protective Measures
Take steps to protect your boat when it’s not in use. UV from the sun can negatively affect the surfaces of your boat. Putting a cover on your boat during the summer months will help reduce wear-and-tear. Likewise, waxing your boat once a season can help minimize UV damage. Additionally, housing your boat indoors during the off-season will help prevent frost and snow damage.
Ultimately, the biggest factor to depreciation will be whether you buy a new or used boat. You should understand that the newer the boat, the larger the depreciation. Since boats depreciate slower than cars, they can be a valuable investment in the long run. If you follow the tips above, you can maintain a high return on your boat and be less fearful of your vessel losing too much value in the long term, if you do decide to sell. And, if you are ready to purchase a used or new boat, shop the nationwide listings on Boatmart.
Alex Hoyes
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