If you haven't properly considered the true cost of boat ownership before buying one, you'll very likely be in for a nasty shock. The cost of buying the boat is only the beginning - take these recently advertised beauties for example...
But whoa, hold on a minute!
Before you rush out and put down a deposit, first you may wish to consider a few inescapable facts relating to the cost of owning and operating a sailboat:
Having got those out of the way, and before analysing a 'real-life' example based on a 36-foot cruising boat, let's take a look at the annual components of cost (items 1 to 7 below) that go to make up the true cost of boat ownership.
The capital cost represents the amount paid for the boat, plus the cost of all additional equipment required to make her ready for sea.
On a new boat, the additional equipment required (for example safety gear, mooring lines, ground tackle, autohelm, davits, dinghy and outboard, solar panels and/or wind generator, bimini, dodger etc, etc) will be substantial, but a secondhand boat will probably have most of this included in the sale price.
Unless you've raided your bank account for the full purchase price and all the additional required gear, you'll need to take out a loan. The interest you pay on the loan is another cost to be taken into account.
A new boat will probably depreciate at around 10% in the next year, then 5% for each of the next 4 years, after which it will level off. So, for a well-maintained used boat more than 5 years old you don't need to consider depreciation as part of the true cost of boat ownership.
As a general rule, boat insurance costs around 1.5% of the boat's value. However, if you keep your boat in a hurricane zone you can expect to pay a premium - from personal experience, a substantial one! And that's if you can find a marine insurance company willing to offer cover for named storms - most of them won't.
It's an inescapable fact that you have to keep your boat somewhere and wherever that may be, someone is going to charge you for it. How much is largely a matter of geography and convenience.
For example, the convenience of a berth in a swanky marina is always going to be more expensive than a half-tide mooring in a muddy tidal river - particularly so in the case of a multi-hull.
For more on this aspect of boat ownership, take a look at 'Should I Buy a Boat?'.
Most of us like to keep our boats out of the water during the off-season as it's no bad thing to let modern GRP hulls dry out annually. Storage costs ashore are generally cheaper than a marina berth, but of course you will be faced with the cost of hauling-out and laying-up.
Other than the costs of annual anti-fouling (bottom paint) you should be spared most of these costs for the first few years of ownership if you've sprung for a new boat.
But for the rest of us, maintenance costs are very much something we have to budget for. There's always something that needs servicing or replacing.
Let's assume we're looking at a pre-owned Catalina 36 MkII from 2001. The asking price was $79,900 but we've negotiated a deal at $75,000 - subject to survey of course.
We've got $25,000 to put down and will take out a bank loan for the remaining $50,000 to be repaid over a 5 year term.
We intend to keep her in a marina year-round, giving ourselves the opportunity to maximise her use.
What will be the true cost of ownership for this boat? Read on...
1. Capital Cost
In these days of relatively low interest rates you'll be lucky to get 3% per annum on any money left in a bank account, so the loss of interest on the $25k you're about to spend would be just:
$750 per annum
2. Finance Costs
Using this On-Line Boat Finance Calculator, the total amount to be repaid on a $50k loan over 5 years at 7.9% APR would be $57,948. So the total cost of the loan would be $7,948, which equates to:
$1,590 per annum
This is a 20 year-old boat, so providing we keep up with maintenance and updating she's unlikely to depreciate at all. Annual depreciation cost:
4. Insurance Cost
According to boat insurance experts, a good ballpark figure for the annual premium is around 1.5% of the market value, which in our example equates to:
$1,125 per annum
5. Mooring or Berthing Costs
Assuming a cost of $14/ft per month, a berth in a marina such as Marinatown Yacht Harbour, Florida will cost:
$6,048 per annum
6. Off-Season Storage Ashore
Having decided on an annual marina berth, this cost doesn't apply.
7. Maintenance & Upgrades
Here we've just taken a stab at the major items - some are annual, whilst others occur after long periods:
|Anti-Fouling (Bottom Paint)||Yearly||$500||$500|
|Running Rigging||6 years||$6,000||$1,000|
|Standing Rigging||10 years||$5,000||$500|
|Deck Gear||20 years||$10,000||$50|
|Safety Gear||10 years||$500||$50|
Whilst the expenditure in some years will be relatively low, other years will be very different. In our example it would be prudent to put aside a maintenance and upgrade budget of:
$3,220 per annum
So the true cost of boat ownership in our example is estimated to be $12,233 per annum.
As an owner of a 38 foot monohull myself, I can tell you that this estimate isn't too far out!
Incidentally, a calculation any boat owner should never make is to divide this annual cost by the number of days his boat spends at sea!