Lack of value for our boat in todays econonmy is hard to swallow...

When buying boats (and cars to a lesser degree), you should just expect you will get very little back when reselling, it will cost you to operate the vessel, to maintain it, to even enjoy it costs money.

You should also expect when the economy takes dips, that luxury items like boats are among the first to get depreciated.

Expecting a certain value on such an item a couple of years in the future when you plan on trading it in is foolish.
 
My parents grew up in the Depression. Anybodywho went through that period looks at things ALOT differently. You tell someone from that era that you are financing a car. . and they look similar to what I give people who are bragging about their ARM interest only mortgage.

Gary asked how you value a $2M boat. Currently, I would value one at about $50K. And that would not be my initial offer.

People who are buying $2M boats probably should think about this "asset" in the same way I view a $50K boat. . . as something that may or may not have value. Because if you NEED the money - -> you sure as heck probably can't get it from there. What percentage of luxury yachts from the 1960's are still around? And if you are financed out the ying-yang to buy the darn thing -> and are counting on selling the boat to put the kids through college. . then there are other problems.
 
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I assume if you really believe your boat is worthless, then you don't insure it other than liability.
 
hmmm, good point.

I guess my goal is to try and get as close to $0 as I can when all is said and done. I don't know if that's possible, but that's my goal, minimize the amount of minus $$$.
 
Jetski's and blowboat: Liability only.
SeaRay: True. Agreed upon value. But just because you can't count on the equity in the boat. . .doesn't mean you should be stupid about things. I probably should seek to change the coverage this year. I dropped collision coverage on my cars long ago.
 
I paid cash for LadyBugs new and mentally "depreciated" her value to zero the day I picked her up - every day spent on her is like a world class vacation for me, The Admiral and the brood - there is no better family time that we spend together and that feels like all the paycheck I need out of the "asset"...

Sure I could have bought a bigger boat with a bit more leverage at the time but then I have to deal with all the agita and the nagging feeling that she isn't really mine...don't ask me why but that feels important to me

As to marine insurance...the reason I buy beyond zero value is so I can spend those great days on Long Island Sound with family and friends with peace of mind - it's a cheap way to sleep at night.
 
I paid cash for LadyBugs new and mentally "depreciated" her value to zero the day I picked her up - every day spent on her is like a world class vacation for me, The Admiral and the brood - there is no better family time that we spend together and that feels like all the paycheck I need out of the "asset"...

Sure I could have bought a bigger boat with a bit more leverage at the time but then I have to deal with all the agita and the nagging feeling that she isn't really mine...don't ask me why but that feels important to me

As to marine insurance...the reason I buy beyond zero value is so I can spend those great days on Long Island Sound with family and friends with peace of mind - it's a cheap way to sleep at night.

I totally agree with this. I paid cash for my boat as well. Not a huge investment, but it is mine without payments. Since I am usually so busy, this was a way to get together with the family/wife at a moments notice and feel like we are on vacation. Kind of feels like a vacation home at times. I could care less about the cost of the depreciation. It is simply the cost of a good time with the family that I can afford. Fun times with the family at such a low investment is well...priceless.

Damn the Torpedoes. Lets go boating!
 
I'm back... yes, I still need to school a junior engineer on aerodynamics, I'll get to that later this weekend.

On depreciation, in my humble opinion, I'm probably the most conservative here. Depreciation is something you do to assets. Assets are something you can usually use to leverage to gain more assets or even cash. In the world of personal finance, few are going to be able to use their boat in this economy as leverage. To me, that means the purchase price of the boat is a sunk cost... and in my world of personal finance, sunk costs are paid with free cash, not financed. What they cost to operate are expenses, paid for as incurred. Whatever you're able to recapture when you liquidate the boat, is an excess gain.

Why do I take this approach? Because I can sleep at night knowing that I can afford what I have, no matter what the market brings. I don't count on residual value of the boat because when times like this happen, you can't access it even if I wanted to. The money you used to buy your boat is gone. Deal with that. You have a huge chunk of fiberglass and nobody cares what you paid for it or what you think it is worth. It's just fiberglass with some rusting metal in it. If you can get someone to give you some cash for it, great... but don't count on it. And if you have a huge loan you're paying on because you didn't realize that you were putting your money into a sunk cost, that's your fault too. If it was a creative finance scheme to shift cash from one place to another so you might get a tax break, at least you have the cash to draw on... but if you were counting on some other asset to provide your loan payments, or worse yet, your job... you need to talk to some people that survived the great depression.

How's that for fiscal conservatism? In my world, the economy might be slow to expand, but it certainly wouldn't have the drops we see. We could debate forever as to which is best...

Oh where to start, where to start...

...Depreciation is something you do to assets. Assets are something you can usually use to leverage to gain more assets or even cash...

An asset is anything that has a value for more than one reporting period, generally viewed as one year. You do not need to be able to leverage it. However, what makes asets unique is that you can leverage it. Even with your definition of a an asset, a boat qualifies. You may use debt to buy a boat. You have levered the value of your boat to make the purchase. If your boat is paid off you may go out and get a loan on some portion of that value. Fianlly, if you have a paid for boat and you file for bankruptcy the Courts will order the sale of said asset. A boat is an asset. Period.

...In the world of personal finance, few are going to be able to use their boat in this economy as leverage. To me, that means the purchase price of the boat is a sunk cost... and in my world of personal finance, sunk costs are paid with free cash, not financed...

The purchase price of a boat is not a sunk cost. A sunk cost is defined as a cost that would have been paid regardless of a future decision. Getting back to the asset definition, if you sold your boat later you would receive some consideration just as you would for your car or your house. The difference of what you paid and what you ultimately get is... what for it... depreciation.

...Why do I take this approach? Because I can sleep at night knowing that I can afford what I have, no matter what the market brings. I don't count on residual value of the boat because when times like this happen, you can't access it even if I wanted to. The money you used to buy your boat is gone. Deal with that....

I have dealt with it. Doesn't change the definition of asset and deprecitation and total cost of ownership.

...You have a huge chunk of fiberglass and nobody cares what you paid for it or what you think it is worth. It's just fiberglass with some rusting metal in it. If you can get someone to give you some cash for it, great... but don't count on it. And if you have a huge loan you're paying on because you didn't realize that you were putting your money into a sunk cost, that's your fault too.

Ultimately that might be what I have. But someone really does care or there would be absolutely zero secondary market out there (even though we might be getting close:wink:.

What its really about is Total Cost of Ownership. Gary has this. Depreciation is a piece of that. Not the total value of the boat since you will get something back. What I haven't seen in anyone's TCO is (for those who finance) the tax break add back.

And before someone says it, no, TCO is not some bullSSS scheme that car dealers throw out to make it not look so bad to purchase a car. It is what it is - the cost of owning something less disposal costs over the period owned.

Oh, and Jim, if boats are not assets does that mean that 95% of real estate in the US are not assets since their collective value has been declining?
 
If you don't insure your boat, other than for liability exposure, and it sinks, then you truly have a sunk cost! Other than that extreme, I agree with John and Gary that a boat is an asset, though its depreciation may be greater in lousy economic times than in good times.

Lousy versus good times. I've recently been reminded of the fact that the average isn't necessarily normal, that economically as well as with the weather, we seem to swing between highs and lows, with the time spent 'in the middle' or 'on the average' being a very brief interval, as the variable in question swings rather rapidly from one extreme to the other, and therefore the extremes are the true norm.
 
One day we are all going to wake up dead. In reality, all we really need is food, shelter and companionship. However, the toys make it a much more enjoyable ride.

Happy Holidays all.
 
real estate in the US are not assets since their collective value has been declining?

I was always taught that RE is not an asset until the bank no longer owns it and you own it outright.

Thats the way I look at it anyway.

I guess if the value of the home is more than what you owe it could be considered an asset too, but only for the difference.

Just my opinion.
 
Bill, you got to wear the head gear on the ice and ease up on the ganja.

No and no.
:smt001


And is what I said so far off the mark?

Personally, I dont count an asset until I own it outright. If I owe money on something I dont consider it an asset. I know it isnt the set meaning of the word, but it works in it's own way for me in building wealth, and not just things other people actually own and I have a piece of.
 
The hard reality is that we are in tough economic times, unemployment is up and people just aren't spending money. The value of toys (things people want but don't need) has dropped like a rock. So many boat owners think there boats are worth $XXX but when the time comes to sell, they wonder why they can't get anyone to even call on it. I like watching and searching the power boat market and I've seen boats on the market for months, even years. People are just stuck with them until the economy gets stronger or drop the prices to attract what few buyers that are out there.
 
Just so I have this straight;

Larry Ellison was a; I believe the word used was "idiot"; for building this...






san_diego_trials_06.jpg





or this.....

050814_15.jpg

The first has no residual value.

The second has no one able to buy her.
 
Just what type of depreciation is being discussed here? AS a personal lost depreciation or as a corporate cost depreciation.

Maybe Gary knows the tax answer here, as corporations do have businesses which have planes and yachts, which they depreciate as business deductions for travel and corporate client entertainment cost.

Now as to personal depreciation, I knew full well the boat I just bought will depreciate, how much, who knows. I will not be able to deduct much tax wise, other then interest as a second home, but I could care less.

I bought the boat for me. I will just say this I will see age 60 (Providing I make it that long), far sooner then I will see age 50 again.

This is attributed to 'Omar the Persian Poet"

Yesterday is gone, the morrow is yet unborn, how sweet thy day.
When you are dead, it matters none.

The company I work for has their own "in company" aviation (Gulf stream 12's and 5's) and marine business, which is just set up as a shell for the parent company. The shell company charges the parent company for the use of these assets.

They still have both of these as well as a 58 footer a couple 65 footers (One is a Viking Sport Fisher (Convertible?)), some 31' footers, numerous Zodiacs, etc.

The 172 foot Gallant lady
americas-largest-gallant-lady-main.jpg


The latest Gallant Lady 170 footer

gallantlady.jpg


And check out this link for other pictures, the Viking, also a previous Gallant lady

Happy Holidays and Merry Depreciation! :smt043
 
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