Tow boat depreciation by Engine Hours

[Horton]

Does this seem right? Anyone have a better model?

 

I did a little back of the envelope calculation and it seems like a $75,000 boat depreciates at roughly $50.00 per engine hour for the first 500 hours and then drops to about $40 per hour.

 

• At the end of one season with 200 hours the boat is worth $65K +/-

• A few years later with 500 hours the boat is worth 50K +/-

• Another few years with 1000 hours the boat is worth maybe 35K +/-

 

I know the boat loses a lot of value the day it is sold – that is not what this is about.

 

 

[jayski]

@Horton based off what starting point? A purchase price? Which is a fluctuating figure between discounted promo pricing and even actual purchase pricing. Then you have to factor in location of boat, some areas get a higher value than others for used boats by a significant amount even if 'purchase' prices are similar.

 

I think you need to base your calculations on $$/hour but based on age. Due to the fact that one year old promo's sell for 'cheap' per say, retail buyers will take a hit within that first year (no different than a vehicle). In reality the promo program has bastardized the 'newer' used boat market and the new boat market to a point.

 

I think the first year $100/hour is more realistic, then $75 for year two then $50 year three and sliding each subsequent year...based off of MSRP

[Horton]

Where I am going with this a possible solution to the Promo Boat problem. Lets say there is no more promo program as we know it today. The boat owner pays 75K for a new boat and then charges $10 per tournament ride. They will recapture the deprecation and cover maintenance costs. 8 hours of tournament use equals $800 for the boat owner. If my depreciation math is close, 8 hours on a new boat depreciates it $400 and the boat owner ends up slightly ahead (until he looks at all of his other costs but lets not go there).

 

Maybe the LOC makes less but it is better than whole system crashing.

 

@JeffSurdej Comments?

[thager]

Just allow older boats and drop new engines in them!

[jjackkrash]

Once you charge for a ride (not just gas money from friends) my understanding is it is a commercial boat which impacts both warranty and insurance.

[MISkier]

And, I believe you must add USA Water Ski as an additional named insured on your policy when you pull a tournament with your boat.

[The_MS]

It all depends on YOY rise in cost of new boat. Some 08/09 196s worth more now then when originally sold

[Bruce_Butterfield]

Obviously not a straightforward answer. Another way to calculate for your new $75k boat would be what it can sell for after 1 year with:

10 hrs price =?

100 hrs price =?

200 hrs price =?

500 hrs price =?

 

Not sure if there is enough apples to apples data available so you may have to take some WAGs at the value after a year.

 

As a counterpoint, for my ‘97 nautique - considering purchase price, a $10k ZO upgrade, subtracting the sale price and 3200 hrs the ‘depreciation only’ cost was right at $6/hr.

[Horton]

Ok guys don't squirrel on me. Talking current model boats.

 

@jjackkrash you might have a point. That could be a problem.

[skier2788]

@Horton the one year I hauled the promo boat to and from tournaments it left one tournament without damage. Not sure how you calculate in scratched decals/hull and bent Bimini..... Part of the promo issue is that a lot of tournament people don't respect the fact it isnt their 75k boat.

[Horton]

@skier2788 super unfortunate but kind of a different subject. It's my point of view that the LOC should be responsible for any identifiable damage.

[dave2ball]

@skier2788 when I had a promo boat the Cheif driver check for scratches and damage prior to use. If any damage all sites paid for damages. Was not an issue. If boats are in short supply that could be a deal breaker with out a contract of some sort for personal boats or even promos.

[skier2788]

@Horton and @dave2ball I agree and the LOC did pay to repair all the damage and it was done at a professional shop. Now that the boat has a few years on it you can see every repair that was made to the gel coat. It has to be worth less now than a boat that was never damaged. Remember in this scenario we are asking people to let their personal boat be used. Most don't buy new boats very often so they will have to live with the repairs for years to come.

[dave2ball]

@skier2788 i agree and that is a huge issue among other issues when a personal boat is used at or in tournaments. I personally would never use my personal boat at any price. Not worth the risk.

[skier2788]

The way I like to frame it to people is you just bought a brand new Corvette or Porsche. I want to take it on a 800 mile trip and if it gets damaged I will have it touched up. You going to give it to me for $400-$500? I am just saying it would take more than that to get me to risk my personal asset that I paid retail for. Sorry for taking the thread off topic.

[jhughes]

Don't forget if the owner of the boat took a loan out for it they could be paying a few thousand in interest per year depending on the terms and amount.

[Horton]

@jhughes Yes that's a cost you can roll into overhead but it's kind of off topic because if you purchase the boat only for your personal use you still have to pay that interest. I'm trying to specifically identify the cost per hour or per ski ride at a tournament.

[Kelvin]

@jjackkrash Just using the boat in a tournament already raises insurance issues. The insurance I carry on my boats (from Global Marine/Chubb) has an extra endorsement which allows commercial use in USAWS sanction events (tournaments, practices, etc). You need that now if your going to use a boat in a tournament.

[Horton]

All right guys lots of interesting stuff but I'm actually trying to solve a specific problem. What is a reasonable depreciation number per hour or per 100 hours for a current model boat?

 

I don't really care about the 10 or 25 hour mark because anybody using their boats at tournaments is unlikely to sell it with only 10 or 25 hours on it. I generally see promo boats sold with between 150 and 200 hrs.

 

@jayski your number is double mine. Is that a gut reaction or did you actually put pencil to paper?

 

 

[jayski]

@Horton if I take the MSRP of my new '19 and look at the current market price at 200hrs it works out near exact in the first year, same with my previous new boat, two different brands. Obviously we are all aware that the initial hit is always more hence the sliding scale, but the first 3 years are probably the biggest hit then it starts to level off to a smaller amount.

 

Also in speaking to more than one dealer in the past the consensus on $/hr of going over the 'specified' promo hours was set at $100/hr

[Horton]

@jayski your math and logic might be right but I just can't use MSRP as a starting point. It is usually a total bullshit number. I am addressing promo boats specifically so MSRP is less relevant.

[bigtex2011]

MSRP.. that's a good one @jayski I think Jay is taking his glaucoma meds early today :)

[bigtex2011]

For me, I would be happy just lessening the blow of my yearly loss of of being in the promo program. I guess if you had a 33 person tourney and pulled a 100 rides then it would be an extra 24. in entry fee? 8.00 per ride x 3 rounds= 24.00 plus normal entry fee

 

I guess it's up to the event organizer. There's only 2 promo's in the DFW area. Ours and the Nautique. Most other lakes get an exception and run a few year old boats.

 

Maybe Horton can start an Enterprise Rental Boat franchise. 800.00 per day

 

800.00 x 2 days on weekends = 1600.

 

1600 x 30 weekends a year= 48k

 

that's a lot of carbon fins

 

"Out of town chris" could really party

 

 

[Horton]

@bigtex2011 see the boat paradigm thread. You're not far off my proposal.

[jayski]

@Horton MSRP is not a BS number, it's consistent and usable, an end sale price is not feasible, based on dealer desires, area of country etc...too many factors... and to say MSRP is BS is like saying every one of the prices of the 20,000 plus items I have in my store I have just magically pulled out of my a$$...There is ALWAYS thought into MSRP, one considers customer perception, marketplace, a starting point for dealers...Just because the majority doesn't pay MSRP does not mean it is a BS number. Almost 25 years in retail and in risk of getting a panda you are a smart guy but your off base on that : )

 

@bigtex2011 we will sit down for burritos and bevy's and I'll explain it you...

[bigtex2011]

Thanks. I need help and a vacation

[Horton]

Bump

[Jody_Seal]

Right now it is a sellers market.

Suitable boats with high hours are bringing stupid money. I sold my 17 a couple years ago and the boat just sold again with 500 more hours and a few grand more then it was purchased from me.

Boats that should sell in the $20k range are going for $30!

 

I have a customer looking for a newer MC or 200.!.!.!?

No bueno for availability..

 

How long this will last is uncertain.

[KRoundy]

The calculations at the start of this thread by @Horton and @jayski seem to make sense. If a boat loses 10K in value over 200 hours that equals 50 bucks an hour. To move this into the reimbursement realm, I think you have to take into account the cost of maintenance as well. $10 a set seems high until you really start to do the math. Older boats and the current market does mess with the calculations and really is a different topic. If we are working out what is adequate compensation for boat use, we cannot count on a wild market. That issue has to be set aside.

 

[jjackkrash]

I am not sure the current market matters for this purpose actually; low hours boats are still more expensive than high hour boats in this market its just that all boats are currently very expensive. What you can't do is compare sales prices for boats this year with two years ago and call it apples to apples, for example.