How to Mitigate Yacht Depreciation

Few financial outlays on recreational items can be more significant than purchasing a luxury yacht. Many consider them the pinnacle of achievement and a symbol of success and decadence. However, in most cases, it is wrong to think of yachts as investments, as they are seldom likely to gain value. Undoubtedly, they are an investment in the owners’ lifestyle and contribute hugely to their enjoyment of any free time. However, they are little more than an asset depreciating over time in financial terms.

At Simpson Marine, we have an incredible range of vessels to choose from and a team of experts who know everything there is to know about the things that help them retain value and fight depreciation.

UNDERSTANDING YACHT DEPRECIATION

When we compare yachts with other high-value assets, their value behaves more like that of a car when no longer new. We will mention some caveats and exceptions later, but like even the most luxurious sports cars, a yacht will never be worth more than it is when brand new.

Recreational objects that gain value over time are hard to come by, but we might think of things like paintings or expensive guitars. If treated carefully and not abused, those can remain almost ‘factory new’ for decades and become huge collector’s items. A working vehicle like a yacht, no matter how well-appointed and beautifully crafted, has to face the harsh elements thrown at it in the performance of its duties, and those take a toll over time.

FACTORS INFLUENCING YACHT DEPRECIATION

Because of the sheer range of models, sizes, and appointments available when discussing yachts, a formula that will account for yacht depreciation in all circumstances is impossible. It is, however, safe to assume that, as with all pre-owned vessels, several factors will play a part in any depreciation, namely:

• Age — As with any used vehicle or vessel, the older it gets, the more its value depreciates; this is almost certainly true of any modern craft. However, there may be a point where the yacht is seen as a vintage or retro commodity, which might stabilise its depreciation or even push it in the opposite direction in the case of pristine examples.
• General condition — It is hard to overstate the importance of a yacht’s condition on its value over time and the rate at which it depreciates. Hard-working, older vessels kept in perfect working order and frequently repaired will hold their value much more than newer ones that are mistreated and neglected. Seaworthiness is a critical factor in any yacht’s valuation, and anything impinging on that will show a corresponding depreciation.
• Size — Although bigger is not always better in the yachting world, it certainly helps in terms of value retention. Again, size alone is not enough to ensure a vessel will fight depreciation, but it is a significant contributing factor nonetheless.
• Manufacturer and model — Just as with any commodity, the quality and reputation of the manufacturer are critical factors in its perceived value and tendency to depreciate. Markets seldom remain confident in lesser products, and if quality lessens over time, we can expect to see faster depreciation, even if original prices stay the same or increase.
• Service history — In line with the vessel’s condition, we see the necessity for a comprehensive, well-documented service history that shows exactly what issues have been uncovered and addressed.
• Non-standard equipment and features — Although many people consider that changes they have made to their yachts should be viewed as ‘upgrades’, the reality does not always match their expectations. Some potential buyers view changes as detrimental to the overall desirability of the vessel and may prefer a ‘stock’ example so that they can make their own changes. If additional features and equipment are extras that do not affect the original status of the vessel (separate communications and navigational equipment, for example), then a slight reduction in depreciation might be seen. However, any slowing will seldom reflect the actual cost of the additional items, and it may simply be better to remove them and sell them separately instead.
• Luxury appointments — If a yacht has desirable features, those will almost certainly affect its depreciation rate and ability to hold its value. Some good examples include swimming pools, high-quality entertainment systems, state-of-the-art galleys, and more.

PRACTICAL TIPS AND STRATEGIES FOR MITIGATING YACHT DEPRECIATION

There are several ways to minimise the effects of depreciation and maintain a yacht’s value, including:

• Regular, recorded maintenance—Nothing gives potential buyers greater confidence in any vessel’s overall condition and usability than a comprehensive service record. Be sure to include any receipts for work performed and upgrades installed.
• Careful use and minimal risk-taking—Good advice, even if not trying to prevent depreciation. These luxury vessels are hard-wearing practical objects. Still, they are not designed to be subjected to abusive, neglectful treatment. The saltwater alone gives them a hard enough time as it is.
• Proper vessel storage when not in use—Securely lashed, covered yachts are more likely to survive extreme weather conditions. Ideally, an indoor shed can be used to keep the elements away entirely, but this is not always feasible.
• Strategic upgrades—As mentioned, upgrades are not always viewed as such by prospective buyers, but any you perform should be carefully recorded and accounted for.

Also, owners who sign up for a yacht care program can benefit from top-tier, regular maintenance that helps retain value and keep the vessel in good working order. An added benefit of schemes such as this is the ability to relax and be safe in the knowledge that any imminent maintenance or necessary repairs will be scheduled with no more effort required on your part. Peace of mind is a valuable commodity at the best of times, and when dealing with such expensive, luxury objects, it is priceless.

TACTICS TO CONSIDER WHEN SELLING A YACHT

When attempting to sell any yacht, it is highly recommended that you seek a professional valuation from experts who can guarantee an impartial, accurate price determination. Choose your moment carefully by keeping a constant eye on the pre-owned yacht market and watching the resale values of similar vessels. When you think the market has peaked, it is time to strike.

FINAL THOUGHTS

Any potential or existing yacht owner should pay attention to the significance of yacht depreciation if it is a factor that may cause issues further along the line. Viewing yachts as investments is a false economy, as it is almost impossible to find examples that will gain value over time, the exceptions mentioned above notwithstanding. However, we hope this article has proven that there are practical steps we can take to mitigate the speed and ferocity of any depreciation.

Responsible, careful owners can delay the inevitable very successfully with a few of the tactics mentioned, and these actions will only help further their enjoyment of the vessel while they have it. At the end of the day, a luxury item like a yacht is meant to be savoured and enjoyed for what it is: a life-changing acquisition that can bring great joy and satisfaction.

Simpson Marine prides itself on a successful history of satisfied customers and enjoys a good reputation with sellers and buyers alike. You can benefit from our expertise, experience and reputation with one quick call that could lead you to a seamless and successful yacht sale. Please reach out to us via email or WhatsApp us for enquiry, our professional team is ready to help.