Resale values - opinions from those in the business?

[marqbloq]

All:

I just went to my boat show last night. Prices ARE WAY DOWN, my guess is at least 8-10% lower than last year’s which I thought was a blowout show.

My 2 Cents from an IT Geek

 

[Dave S]

For those of you with time on your hands you might try going thru Ben Sherwoods site. I have read several articles in there that have some good information on the state of the Marine business. http://bensherwood.net/

I am certainly not an industry expert just a common sense individual looking at a massive problem with used boat resale values and customers with sufficient discretionary income to buy either new or used.

The "new" market is plagued not only with lack of customers but prices that have skyrocketed for new boats and show no signs of retreat. I don't know what types of margins the builders and the dealers have but the dealers in particular need volume to survive especially after they have cut all the staff and expenses they can to the bone. I just don't think that volume is there so that means they have to make more on each boat they sell. I think the time of deep discounts on new boats is just about over so only those customers with deep pockets will likely be buying new for some time now.

And it's also likely to be several more years before the used market stabilizes as well. More folks may have to get out of boating this year due to the economy and therefore there will be more used boats flooding the market. And all it takes is for a few of those folks to start lowering their prices and everyone else who has a similar make and model is forced to do this as well if they are truly looking to unload their boat. Until the glut of certain makes and models starts to slow there is no hope in my opinion to see used prices come back to anything reasonable compared to the price of similar new models.

And other problems could occur as well if Marinas start failing. I know it would be difficult for me to find another Marina on my lake if that happened to me. I would probably just join the long list of folks getting out of boating and would (try to) sell my boat.

And without a crystal ball it is difficult to say when this might all turn around. The RV industry is starting to show some comeback based on what I have read. Even so we need massive reductions in unemployment for people to start spending again. And typically discretionary spending items, such as boats, is among the last to feel the economic growth with customers opening their wallets again.


Dave

 

[Turtlesboat]

I see boats moving right now. Not a lot, but they are moving. Last year it seemed everything just froze.

 

[mhtimber]

Jeff

I bought my 2006 320 as repo in Sept 2008. At the time, I thought I bought it at a great price. (less than 120k, with 60 hours on it and still under warranty). I had thoughts of selling it at the end of last season and going bigger. I listed it for 115k on several websites for a few months and didn’t get one hit. It was one of the cheapest 2006 320’s on the market. It seems that I would have needed to list it under 100K just to stimulate some interest. That would mean that I would have lost of over 20k in 1 season. (people worry about fuel cost?!?) I decided that even if I found a buyer, going bigger just meant more depreciation. I decided that I will just need to "suffer" a few more years with what I have. If I decide to sell after a few more seasons and take a bigger loss I will at least feel like I used it.

Regardless of what happens to resale values what we've decided to do is keep the 320 for the long term as we really don't need a larger boat and my wife loves it; but also buy or build a smaller boat in 28' range that is trailerable, we'll use this boat for exploring new cruising grounds that moving the 320 (cruising or towing) would be cost prohibitive.

I have always wanted to build boats and have been preparing to do a large project for several years. I was originally thinking of building larger than the 320 and then moving to that boat when ready. We've now decided to build a 28' Offshore Skiff, designed by Dave Gerr, and we'll keep both boats. For the money it would take to have a trailer custom built for the 320, and then hinging the radar arch, I can pay for the materials and trailer for the 28' and then just need to add an outboard engine. According to the designer there are about 600 boats built to this design so far, many of them used in commercial fishing; if the boat is good enough for a commercial fisherman it's good enough for me!

I agree with your concerns about the economy by the way. From a macro-perspective I think the U.S. has its share of challenges ahead but I am an optimist and feel that we will adapt and grow. Innovation is driven by talent, which is rather mobile on a global scale; the U.S. population is expected to grow where other major advanced economies are projecting negative population growth. The U.S. is such a diverse and large country, it's a really great place to live and the studies show that people still want to come here. There was an excellent article about U.S. prospects in a recent edition of the Economist. The ability to attract and retain technical talent and sustain our innovative edge will be one of the key determinants of our long term success or decline; I'm betting we'll be just fine despite the bumps, hurdles and challenges that are surely ahead.

From an individual perspective, the more someone can align themselves with international business operations and find ways to interact with people from different parts of the world, the more secure your personal prospects will be.

 

[mhtimber]

How about an opinion from one who isn't in the business? I think we are going to see some big names in the boat industry fold in 2010.

I agree with your expectations of seeing brands go away or consolidate. I also like your buy-back idea.

One area that I fully expect to be a growing problem for Brunswick is the trend to really push I/O on larger boats, especially the more complex I/O like Axius, Zeuss and the Volvo-Penta IPS drive. I/Os are problematic to begin with, but now you give someone a joy stick and system that shifts that I/O say.....20 times, rapidly, to deliver that no-skill required but perfect docking, compared to say...5 shifts with a regular I/O (20 shifts being automatic by the Axius system), there's going to be some major maintenance issues on those new systems. My mechanic is already shaking his head thinking about it.

Jeff

 

[C-SIDE]

Wow, so much negativity out there. Was it over when the Germans bombed Pearl Harbor, hell no, and it isn’t over now - think positive.

I'm not in the industry and you don’t have to be to understand what will happen. Its economics!

Bottom line, yeah, if you bought new recently, you lost big time and you will not recover all those losses – sorry,but true.

Prices follow the simple laws of supply and demand. Demand increased during the silly years when someone who made $60K, had a mortgage and is raising a family could qualify to buy a $100K boat. What did the manufactures do to feed the demand - increased capacity/production as well as prices. In 2007, when demand started to slack and in 2008/2009 when demand collapsed, the manufactures were left with a huge supply of boats. The elasticity of the manufactures to adjust their production/capacity is low, i.e. inelastic. So what did the manufactures do to spur demand, cut prices. Simultaneously, they shuttered production facilities, other companies went out of business, etc. i.e. they reduced capacity.

Eventually, demand will equal supply and prices will follow. Boat prices will rebound when the supply of boats goes down - who knows when that will be. If I knew, I’d probably be very rich person.

As for financing, same concept as noted above. If I'm a bank and my capital is limited, I'm only going to lend money to someone who I know is going to pay me back, i.e. reduced credit risk. Since most Americans have no idea how to save their money and piss it away on stupid things (see example above - $60K income/$100K boat), most Americans are not good credit risks, i.e. have low FICO scores. Hence, no boat loan.

Perhaps the lack of financing is a good thing. Since most Americans can't save on their own, Banks are forcing them to de-leverage and save – that is good for the individual and for the country.

For people who are good credit risks, you will be able to get a loan.

 

[mhtimber]

...We are likely 3-5 years away from seeing the big boat supply/demand situation stabilize. And that assumes a modest recovery and some job creation.
Sorry to be a downer but that's the just way I see it.

I completely agree with you Jim. Likely we'll retire with our 320, probably even repower it when the time comes, because to do anything else with it would be to someone's financial benefit, not ours.

So, an underlying problem with the recreational boating industry, I feel, is a fundamental failure on the part of the manufacturers to create long term value for their buyers. The economic crisis didn't help but it also didn't cause this situation; to Vince's point (I believe) the glut of boats was caused by a glut of financing and the failure of boat manufactures to think in the future at what is a sustainable level of production. I'm being idealistic here I realize, but those manufacturers who fail are the ones paying the price for that short sightedness. And being one who is left holding the bag, upside down in boat, I have zero sympathy for them. Let the strong survive and bury the rest (companies that is).

Jeff

 

[CaptianWilly]

Wife and I got back into boating this past year and were very fortunate that the capitol investment was minimal to enjoy the splendor of our waterways and the great people that are part of the boating communitee. We bought used and had the resources to pay cash but it was only a little 24', not the big beautiful boats you fellows are running, but suits our needs for the time being. None the less, we didn't have to hock house and home to be here.

Being involved in the marine supply industry, Brunswick and SeaRay specifically, I can tell you that our sales to the boat manufacturers fell 65% from March to November 2009. This past month and a half sales shot up drastically. I have to believe most of that is based on pure demographics of supply and demand. Inventories of raw product were depleted to the point it was close the doors or purchase materials and keep working...if even marginally. The next couple months should be very fortelling of the industry as a whole.

Keep in mind that our illustrius leaders in Washington are going to be accountable in November. 30% of Congress and 100% of the house will be up for re-election. Remember their hard efforts 'on your behalf' when reconing day arrives. You already see plenty of them stating they will not run for re-election...I wonder why?...they voted all the perks they get for life and want out before the curtain falls. :smt021

Just my 2 cents worth!

Bill

 

[mhtimber]

Hi Dave, thanks for the link to Ben Sherwood's blog; I'll give it a read.

I agree with your assessment on the boat market.

Jeff

 

[jrock1062]

Wow, so much negativity out there. Was it over when the Germans bombed Pearl Harbor, hell no, and it isn’t over now - think positive.

I'm not in the industry and you don’t have to be to understand what will happen. Its economics!

Bottom line, yeah, if you bought new recently, you lost big time and you will not recover all those losses – sorry,but true.

Prices follow the simple laws of supply and demand. Demand increased during the silly years when someone who made $60K, had a mortgage and is raising a family could qualify to buy a $100K boat. What did the manufactures do to feed the demand - increased capacity/production as well as prices. In 2007, when demand started to slack and in 2008/2009 when demand collapsed, the manufactures were left with a huge supply of boats. The elasticity of the manufactures to adjust their production/capacity is low, i.e. inelastic. So what did the manufactures do to spur demand, cut prices. Simultaneously, they shuttered production facilities, other companies went out of business, etc. i.e. they reduced capacity.

Eventually, demand will equal supply and prices will follow. Boat prices will rebound when the supply of boats goes down - who knows when that will be. If I knew, I’d probably be very rich person.

As for financing, same concept as noted above. If I'm a bank and my capital is limited, I'm only going to lend money to someone who I know is going to pay me back, i.e. reduced credit risk. Since most Americans have no idea how to save their money and piss it away on stupid things (see example above - $60K income/$100K boat), most Americans are not good credit risks, i.e. have low FICO scores. Hence, no boat loan.

Perhaps the lack of financing is a good thing. Since most Americans can't save on their own, Banks are forcing them to de-leverage and save – that is good for the individual and for the country.

For people who are good credit risks, you will be able to get a loan.

Germans didnt bomb Pearl Harbor in WWII :huh:

 

[Vince_nj1]

Germans didnt bomb Pearl Harbor in WWII :huh:

Are you sure about that?

http://www.youtube.com/watch?v=V8lT1o0sDwI

 

[NCCamper]

It was a joke! It was lifted from a movie."Stripes" or "Animal House", I can't remember which, I think.

Happy Boating!
John

 

[C-SIDE]

Yes, it was a joke and taken from Animal House - thanks for the clip Vince nj1

 

[La Maddalena]

John Belushi - Animal House !

 

[Kameroo]

Your broker is in denial. If he is truly surprised that the recovery has taken this long he either doesn't understand the magnitude of the problems we are facing or chooses to ignore them.

Rather than being in denial, he's looking at past downturns and the recovery that follows.

He feels strongly that we've seen downturns every 10 years, and that the best course of action for somebody who currently owns a boat would be to ride out the downturn before even considering selling. His long-term outlook is that once a seller sells low, the last thing they'll want to do is jump in at higher prices when things recover. He keeps reminding people to hang-tight and ride this thing out rather than selling. He'd tell you that he can sell your boat, that's how he gets paid, but you won't like the price.

 

[ANYTIME]

Germans didnt bomb Pearl Harbor in WWII :huh:

It is a little known fact that there were two gentlemen in the Pearl Harbor attack who were in the Japanese Zero, side number 457YKH12, that had the words "Ichi-Ban" painted on its side. The pilot was Helmut Gertzner and his gunner/torpedo officer was Franz Schmitt. Helmut and Franz survived the war and have since gone to meet their maker. For what its worth, "Ichi-Ban" means Number One.

So, jrock1062 was technically correct. My source of this, in Japanese is called "Ju-Ban".

So, if you believe this, I have a nice 2008 Sundancer 310 I would like to sell you...:grin:

 

[C-SIDE]

I'm a bit of a WWII buff and did not know that - fascinating info Anytime, thanks.

Ichi-Ban is also a Japanese beer - pretty tasty, actually

 

[killerbe20]

+95 I agree, and for my opinion I believe this is one of the best post I have ever read so far on CSR. :thumbsup: Pretty well sums up what many do not realize about our economy and our dirt bag leaders.

There was a blurb this morning about Ocrama wanting to impose stiff fees on the banks to recover some of the bail out money, yet two-three weeks ago MSNBC had an article about minorities and low-income folks not using banks.

Now what do you suppose the banks will do? Why just pass this fee increase to the middle-class, it is just another pseudo-tax against the middle-class, the very ones who are the main stays for pulling us out of this economic situation.

Just disgusting :huh:

so... i wasnt the only one with the initial though "here comes increases in banking fees for the average person" when i read about that

 

[mhtimber]

Great discussion on this topic everyone, thanks very much.

Cheers
Jeff

 

[tobnpr]

So. . .have we heard from anyone in the industry yet in this thread?

I think I saw someone say "My friend who is a broker said. . ."; but beyond that I don't think I saw anything from anyone who actually makes a living in this industry.

You noticed that too, huh?...