New Boat Market Bubble?

G

gway84

New Member
Apr 17, 2008
8
Lake Cumberland
Boat Info
210 Bowrider
Engines
5.7
This article is being discussed on another forum and I just thought I would share with you guys. Its not very long but I agree that new boats are too expensive. When we bought our 22ft Sea Ray in 1999 it cost 40K now a boat of the same length will cost about 65K or more. With all that being said I know that you can get deals right now but I think there will have to be a price reset to where more folks will even go to a dealer to look.

http://www.boats.com/boat-content/2010/05/the-boating-bubble-economics-and-idiocy/
 
I agree 100%. I've said for years that new boats are overpriced and that is part of the reason why they depreciate so fast in the first few years. I'm amazed each time I see a new boat on the water because I know how much value it just lost.

If a boat/car/truck/RV owner had to write two checks each month, one for the monthly payment and an equal check for the depreciation the boat/car/truck/RV suffered they would begin to get an idea of how much depreciation actually costs.

The author of the article that gway84 linked to wrote: "Last year I bought a used boat myself, even though I have plenty of connections in the industry and could have gotten a sweet deal on a new boat. It’s a 22′ which cost me under $30,000 with new 2010 powerplants. The new model of this same boat currently goes for close to $90,000."

That is an unusually high drop in value, but IMHO "toys" generally drop about 20% the first year, 15% per year for the next 3 years, 10% per year for the next 3 years, then it starts to level off.

I NEVER buy new toys for that reason. I much prefer to let the other guy take that big depreciation hit and I'll enjoy the savings.
 
I don't pretend to have the answers but you have to look at the current situation we have in the boating industry to understand what is really happening.

First off, manufacturers are just starting to bring back workers and /or open factories to produce new boats. Manufacturers for the most part are only building boats to order and are not stocking inventory for orders. Most dealers have slimmed down to the bone inventory wise and will no longer stock large inventories of new boats. Their over head still has to be covered on fewer new boat sales which means they have to make more margin on each unit sold. Given all of that, I doubt you will see price "corrections" any time soon if ever. So deep discounts will be hard to find. And as soon as used inventory starts to deplete far enough (it already has on certain models and in certain parts of the country) I think the prices of used boats will rise as well. After several years of this, I think people will just have to pay the going prices if they expect to boat.

Dave
 
agree with dave.

i work in retail so people bitching about the price gets no where fast.

fact of the matter is, if you want it, you have to pay.
 
I have a friend trying to find a used 220 Sundeck, they seem to very hard to come bye and are in the 30k range, I am impressed with that. It actually has brought back value to mine. :thumbsup:
 
Gofirstclass said:
I NEVER buy new toys for that reason. I much prefer to let the other guy take that big depreciation hit and I'll enjoy the savings.
Click to expand...

Same here! Bought 3 year old and 2 year old vehicles, 11 year old boat, 45 year old farm tractor. :smt001 Now looking at 2001-'04 280DA's and can't believe what they originally cost!
 
Gofirstclass said:
If a boat/car/truck/RV owner had to write two checks each month, one for the monthly payment and an equal check for the depreciation the boat/car/truck/RV suffered they would begin to get an idea of how much depreciation actually costs.
Click to expand...

This is a really good way to illustrate the depreciation aspect.

There are a lot of reasons that new boats are so expensive. A company like Sea Ray isn't selling that many new boats per year -- we're talking low 10's of thousands at best. With those numbers you need a high margin to keep the company afloat (pun intended) and make a profit. The suppliers aren't selling as many parts because of the downturn and they need to charge more to stay in business too. I can't back this up but I heard that Mercury builds an entire years worth of engines in about 2 days. If true, that shows how few boats are really sold each year and why they are so expensive.

I did a lot of research for my boating product and I have last years national and world-wide sales figures back at the office. You would be surprised if you saw the number of new boats sold each year. There A LOT of boat manufactures that split the relatively small number of new sales. 40 million boaters in the U.S. alone and hundreds of thousands of new boats sold.

EDIT: I found the new boat sales figures for 2008 from NMMA. I don't think I have '09 figures yet but my understanding is that they dropped even lower for '09.

Sterndrive Boats: 38,500 compared to 71,100 in 2004. Average unit cost in 2008 was $46,459
Cruisers (inboard): 4,200 compared to 8,600 in 2004. Average unit cost in 2008 was $606,621
Ski/Wakeboard (inboard): 8,900 compared to 11,600 in 2004. Average unit cost in 2008 was $50,400
Outboard Boats: 151,000 compared to 216,600 in 2004. Average unit cost in 2008 was $18,513

The first 3 categories are where a company like Sea Ray primarily fall into. The outboards are your typical fishing boat that you can by at retailer like Cabela's or Bass Pro Shops.
 
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Tonka Boater said:
... I can't back this up but I heard that Mercury builds an entire years worth of engines in about 2 days...
Click to expand...

I can tell you that is false.

Outboards are made not far from me, in Fond du Lac. Sterndrives, the portion that mercury makes, will soon be made here also. If you did not know it, the blocks in a Mercury or Volvo sterndrive are purchased from GM.

Small mercury outboards are no longer made in-house. I forget the cut-off but its somewhere around 50 to 100 horse power. Above that is made in Fond du Lac, WI.
 
Presentation said:
If you did not know it, the blocks in a Mercury or Volvo sterndrive are purchased from GM.
Click to expand...

I did know this and my anecdotal information may have referred to the blocks that GM cranks out for the marine division. That was here-say and I'm not standing by my comment.

Either way, look at the figures that I posted above. Not a lot of sterndrives being built.
 
Something to keep in mind, Brunswick’s boat segment which includes Mercury Marine, Bayliner, Sea Ray, Lund, and others had sales of $2.86 billion in 2006 and just $615.7 million in revenue in 2009 with significant losses.

Boat segment Q1 2010 results: Its revenues were up 19% to $243.6 million and its operating loss was $26.7 million. So even with the cutting the boat segment is still losing money.

Some of this loss is due to plant closings, layoffs and other 1 time expenses involved in downsizing.
 
I think it is probably correct that Mercury builds all their product for new boats in 2 days... the rest of the year is building replacements for warranty claims.
 
So what all this mean to average Joe Sea Ray owner? I think, now is a good time to buy a used boat. New boats and used boat prices will be going up. If the economy does not turn around, with private sector, not government, boat manuafacturers will be going out of business, and the water ways will be less crouded...
 
Back to the original idea of this thread that boats have gotten mighty expensive I agree with this.

However I don’t agree that boats can remain ‘as is’ plus normal evolution in styles and innovations / emissions and see significant cost reductions.

The margin or profitability for the boat manufacturers is just not there.

In 2006, the peak year, Brunswick boat segment had net profit of less than 5% of sales and that number is presently negative (losing money.)

So how could they possibly say, "hey let’s cut our cost in half and that will make our sales grow and then we will make money" when sales were triple what they are now they were only making less than 5%?

If lower priced boats are what the market wants then brands like Bayliner and Stingray will grow in share.

If the market wants the new Sea Ray at a Brunswick price point without Sea Ray build quality and features being reduced there is just no way to do that.
 
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After only being in this for 3.5 years so far, there are some things with boat pricing that make me go "huh?". For example (using just the engine options on a 40 Sundancer) :

MerCruiser® T-VD-8.1 S DTS* HO Twin Gasoline V-Drives (T-420 hp - 313 kW) $4,918.00
T-VD-Cummins MerCruiser® QSB 380 Twin Diesel V-Drives (T-364 hp - 271 kW) w/ETS (in Lieu of DTS) $66,997.00
T-VD-Cummins MerCruiser® QSB 425 Twin Diesel V-Drives (T-407 hp - 304 kW) w/ETS (in Lieu of DTS) $78,141.00
MerCruiser® T-VD-8.1 S DTS* Horizon Twin Gasoline V-Drives (T-370 hp - 276 kW) $0.00

$67,000 for two Cummins diesels? I have one in my Dodge truck with 350hp that optioned out for "only" 6,000 (or there abouts). Sure, they are (basically) different power plants and have the marine thing going on. But that much??

Another example with the 48 (500) Sundancer. Four underwater transom lights for $10,333.00??

It seems like things are seriously inflated on the "retail" end, then they discount the crap out of it back down to a reasonable market price.
 
When people say boat prices are seriously inflated, keep in mind that the costs are spread over a small (volume) product line when it comes to boats. The costs to develop a product are the same no matter if you sell 100 or 1000 boats. Production costs can be controlled to a degree but the same is generally true there as well....the more you build the lower the production cost per unit. The same thing is true on the sales floor as well because dealer overhead costs can be controlled only so far so profit has to come out of fewer boat sales.

Boat prices are high for a lot of reasons but the volume (especially if the current sales are any indication) is going to keep them high. Brunswick has to make money and so does the dealer and both of them have to do it on many fewer units than they sold in the past.

Dave
 
Chris R said:
After only being in this for 3.5 years so far, there are some things with boat pricing that make me go "huh?". For example (using just the engine options on a 40 Sundancer) :

MerCruiser® T-VD-8.1 S DTS* HO Twin Gasoline V-Drives (T-420 hp - 313 kW) $4,918.00
T-VD-Cummins MerCruiser® QSB 380 Twin Diesel V-Drives (T-364 hp - 271 kW) w/ETS (in Lieu of DTS) $66,997.00
T-VD-Cummins MerCruiser® QSB 425 Twin Diesel V-Drives (T-407 hp - 304 kW) w/ETS (in Lieu of DTS) $78,141.00
MerCruiser® T-VD-8.1 S DTS* Horizon Twin Gasoline V-Drives (T-370 hp - 276 kW) $0.00

$67,000 for two Cummins diesels? I have one in my Dodge truck with 350hp that optioned out for "only" 6,000 (or there abouts). Sure, they are (basically) different power plants and have the marine thing going on. But that much??

Another example with the 48 (500) Sundancer. Four underwater transom lights for $10,333.00??

It seems like things are seriously inflated on the "retail" end, then they discount the crap out of it back down to a reasonable market price.
Click to expand...

The new boat MSRP model is a joke. I get the concept of inflating the price some to give the appearance of discounts and leaving room for negotiation. However when full retail is almost double the actual selling price Sea Ray and the other manufacturers look like used car salesmen.
 
Let's hope this causes the price for our boats to skyrocket in line whth the prices of new, comparible models.
 
Read this article today that discusses market price vs the MSRP in the automobile industry.

One of the examples given was the 2010 Jeep Commander. It has a MSRP of $31,575 but supposedly has an actual market value of $26.155.......17% less than MSRP.

After reading it I wonder if the same principles could be applied to the marine industry.

http://www.msnbc.msn.com/id/37305527/ns/business-forbescom/
 
avguy said:
Read this article today that discusses market price vs the MSRP in the automobile industry.

One of the examples given was the 2010 Jeep Commander. It has a MSRP of $31,575 but supposedly has an actual market value of $26.155.......17% less than MSRP.

After reading it I wonder if the same principles could be applied to the marine industry.

http://www.msnbc.msn.com/id/37305527/ns/business-forbescom/
Click to expand...

I didn't read you article yet but I think it's worse in the marine industry. Brunswick (Sea Ray at least) has had a history of inflating their prices by 30-35%. I've shopped other brands and everyone in my experience tends to be at least 20% over the eventual purchase price.

I think they get away with it because people are more accustom to buying cars so boat salesman love it when I guy gets them down 5% from MSRP. Huge win for the dealer and the unsuspecting dupe overpays.
 
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