10 Ways to Get a 10% Discount off a $2 to $6 Million Yacht

What is more important: finding a great deal or a great boat?

Here’s how to find both



Large yachts carry small dealer margins. Getting a big discount is not easy.

Six things you should know about the new large yacht selling environment:

1. Dealer markup. A dealer’s markup on a large boat, say one of $2 million or more is not of the same magnitude as on smaller boats which typically run from 25% to 35%. Rather, boats of this size usually have MSRPs with 15% markup built in, and the percentage actually goes down as the boat gets bigger. 10% is not uncommon. For this reason, you generally can’t expect to negotiate $200,000 or more off of a $2 million boat.
   
   
2. Desperate boat dealers. If you have heard stories about how customers got great deals in the early 1990s as dealers struggled to stay in business and were just happy to pay off the bank, don’t expect that to happen again. The industry has changed. First, dealers generally are not over inventoried in 50’+ boats any more. Second, the builders and the dealers are working closely together to keep production and inventory levels conservative. Some small-volume builders go bonkers at the mere mention of a discount because their margins and that of their dealers are thin.
   
   
3. Good dealers wait for good customers. Dealers have high overhead because of property taxes, marketing costs, service and infrastructure expenses which are all spread over relatively few units annually. They need their margins and good, smart dealers (the kind you want because they will stick with you) will draw a line at some point and that’s it. There are many cases of customers grinding dealers down for a good deal, only to get less in the end. (You won’t hear about these stories at cocktail parties.) For the most part, in the 40’+ range you are not buying a commodity as you are with most automobiles. The builder can only deliver so many units per year and if you won’t pay the freight, someone else usually will.
   
   
4. Boat dealers are NOT like car dealers. While car dealers may sell you a car at 5% over invoice, or less, the fact is that they get huge rebates from the factory at the end of the year. Auto dealer “invoice, plus X” is marketing flim-flam. Also, large car dealers sell thousand of cars a year across which to spread their overhead burden. Car dealers generally have small “territories” and they sell to anyone who walks in the door.
   
   
   Boat dealers generally have larger “territories” and the builders keep an eye on which dealers are selling out of their “territory.” While boat dealers must sell to anyone no matter where they live or go boating, often the selling dealer must share the margin with another dealer who is closer to the customer. This convention makes grinding one dealer against another more difficult and in some cases nearly impossible for any significant discount.
   
   
   
5. Big boats are NOT like McMansions. Some people think that in a soft market they can negotiate the price of a boat the way they negotiate a price on a large house in an exclusive location. Hey, they are both $2 million+ and nobody needs either one, so why not?
   
   
   The reason why not is because with a McMansion you are largely paying for location which is elastic depending on supply and demand, while a boat has no location, but is simply a list of materials, labor and resources required to create and sell it. Demand might go down, but the materials, equipment and labor has already gone into the product. With new large boats there is no elastic “location value” that can expand and contract as the economy cycles up and down.
   
   
6. There is NOW a world market for large powerboats. Wealthy Italians are now going sportfishing in the Med. Residents in the Persian Gulf states are buying cruising boats in which to entertain their business associates, extended families and friends. There is emerging wealth in Russia and Eastern Europe and they are buying the biggest boats they can afford. The Dalmatian coast is possibly the world’s best cruising grounds – and new marinas are going in from Trieste to Corfu. If builders and dealers can’t get their prices in the U.S., they certainly can in Europe where the dollar has become little more than chump change. Typically, 25% to 35% of a U.S. boat builder’s construction is now going overseas.

But there are some ways to “Buy Big Boats Smart”:

1. Bet on future prices rising. The first thing you should know is that because of the rise in commodity prices boat prices are rising. Waiting for a dealer or builder to lower prices is not a good bet. A better bet is the boat you buy today will be 10%+ more 36 months from now.
   
   
2. Many European boats are subsidized in the U.S. Many major European builders have a conscious policy of keeping a presence in the U.S. during this weak-dollar currency cycle by actually “subsidizing” the U.S. price. However, with the dollar now 40% weaker than the Euro of just a few years ago, European builders are now hard-pressed to keep up this strategy. Again, the deal you make today is unlikely to be beaten in the future.
   
   
3. Compare Apples-to-Apples. While raw materials and equipment costs are nearly the same for all builders (because unit volume is so low), the number of man hours in a boat, infrastructure expenses, marketing costs, overhead burden and amounts of warranty reserves may vary greatly. When you are paying $2 to $6 million for a boat, it pays to carefully itemize and compare all standard equipment, materials, lay up schedules, hardware, dimensions (particularly beam and waterline length) and displacements. You may think your are getting a 10% better deal, then discover after the comparison that you are actually getting 10% less boat.
   
   
4. Boats loaded with equipment and electronics. Sometimes a builder or dealer will load up a boat with equipment for any number of reasons. If you find such a boat, it may be selling for a price comparable to a basic boat of another brand. There could be substantial value here. Conversely, make sure you are buying a boat with only the equipment you really want. Why pay for someone else’s notion of how a boat should be equipped when it is over-kill for your purposes?
   
   
5. A discontinued model. A model being discontinued may have a discount. This could be a good deal for you, if the boat is what you want and you plan on keeping her for awhile. Some of the strongest boats on the used boat market are ones that were discontinued. For example, the Hatteras Long Range Cruisers (built in the 1970s and ‘80s) which were built for 10 years then discontinued, are among the strongest sellers -- with robust prices -- on the used boat market.
   
   
6. Boats built in the Far East. Many respected brands are now built in the Far East where labor rates, corporate infrastructure expenses, and marketing costs are lower than with most U.S. or European builders. Their currencies are usually pegged to the U.S. dollar, which means you pay no currency premium. For the most part, all major items of equipment and raw materials are the same as going into boats built everywhere else. However, their warranties and customer service are usually only as good as the dealer from whom you buy the boat. If you have a serious or an unusual problem, you may be on your own hook. That is the trade-off. (The same goes for boats built in Europe.)
   
   
   
7. “Character” boats or unusual designs. These types of boats often can be found new for a discount because they are often slow movers. They were designed and built for people with a very sophisticated eye, for people into the nostalgia of boating in the past, or simply for people who don’t want a boat that looks like most everything else in the marina. They are often terrific boats and great values, but be aware that they were designed for a niche buyer, and when you go to sell, you too, might find them to be slow movers.
   
   
8. New boats with a “story.” If you are working with a dealer with integrity you can usually believe the “stories” that they have from time-to-time as to why a particular new boat has a lower price. For example, unfortunately, some people wait too long to buy a new boat and actually die between the time they ordered or paid for the boat and the time it was ready for their use. In many cases, their estate is so eager to divest itself from the responsibilities of boat ownership that it is willing to sacrifice the deceased’s investment, just to avoid out of pocket expenses. Boats with “stories” appear more often than you may think – but finding one in your size, type and price range may not be so easy.
   
   
   
9. Consider smaller engines. The quest for speed in large offshore boats is losing momentum as fuel prices rise. Most boats can only go fast when the seas are relatively flat, anyway. Going fast in rough or choppy conditions is about as good for your yacht as driving your Lexus over speed bumps at 100 mph. It’s nice to have the power to get up on a semi-plane and go 20 knots, but do you really need to go 35 or 40 knots? Think long and hard about this one because smaller engines can save you a lot of money.
   
   
   
10. Consider single engine vessels. There are probably more single engine cruising boats on the market now than ever before. Most are built in the Far East, in Maine or the Pacific Northwest and more and more new cruising boat buyers are giving them serious consideration for the first time. Generators or auxiliary engines can provide “get-home” power a number of ways. Not only do you save on the acquisition, but also on the monthly operating cost.