Owning a boat needn't give your independent financial adviser a reason to chuckle. Elaine Bunting investigates ways in which you can keep your outlay under control
Marine financing may not cut the cost of ownership ultimately, but it’s a valuable means of extending your buying power and if you combined it with some of the other methods described here, it can be a great way of buying a bigger boat than you might otherwise be able to justify.
Nick Becker took this route when he returned from eight years working in Hong Kong and decided to buy a yacht to sail with his family.
He also wanted to defray costs by chartering his boat, so wanted a yacht that appealed equally for family cruising and to potential charterers.
He chose a Jeanneau Sun Oydssey 45, which sleeps eight people in three cabins.
It cost just over £200,000 and he took out a £100,000 loan through Barclays Marine Finance to help fund it. Barclays were “extremely helpful and competed with other quotes,” he says.
“I was surprised at the difference – I thought the rate would be the rate.
The loan is over ten years and Barclays gave me a ‘holiday’ in the first year, when I paid interest only. The whole experience was without hassle.”
Easing the pain with charter management
One way of cutting the cost of ownership and sidestepping the burden of maintenance is to put your yacht into charter management.
This can be from very small scale chartering for a few weeks of the year, to several months or more.
Having bought his new Sun Odyssey 45, Nick Becker’s next move was to charter her out in a hands-off arrangement.
“That was what really enabled me to buy a bigger boat than I might otherwise have afforded and cover the costs by chartering,” he says.
Becker looked at the yachts already being managed by Lymington Yacht Charters and concluded his would be well looked after.
He had to get the boat equipped with the additional safety gear it needed to meet Maritime & Coastguard regulations for charter yachts, but he says he found Jeanneau agents Sea Ventures helpful.
“They knew exactly what had to be done for the boat to be fully coded.”
Last season, his boat was chartered for 35 days at cost per day, earning £17,500. Out of that, Becker has to pay for mooring, insurance, financing and repairs, plus the charter management company’s cut of the fees.
He is able to block off periods of time for his own use and used his boat for 30 days between April and September last year.
“I come back on a Sunday night and I say if anything needs fixing. The boat is cleaned regularly and they arrange the antifouling, etc. They take all the headache out of it for me,” he says.
However, a yacht in charter is harder used and so has a shorter lifespan. Nick Becker says he will look at trading up in five or six years.
Sometimes, too, there is a clash between when you might want to use the boat and when it can most easily be chartered.
But overall, he recommends it. “If we could push the charter days up to 45 or 50 a year we’d really be on to a winner and I could cover more of the financing.
But basically, you get a lovely boat you can sail with your family and someone’s helping to pay the cost of it.
Owning a boat generally is a poor investment, but this eases the pain.”
Tax rules have made it less attractive to buy a boat as an asset of your company or to set up a company to buy a boat, but if your aim is to use a boat mainly for charter or instruction taking only the odd day or week yourself it makes sense, at least by avoiding VAT.
You would have to have the yacht equipped and coded for charter, which can add to the cost.
Once coded, there are scores of private charter management companies that can manage the business of charter and maintenance for you, and if you and they can work your work hard it can be turned into a reasonable investment.
The most effective way of slashing the costs of ownership and maintenance is to share your boat with a friend, a group of friends, or a syndicate of others.
Between you, you can own shares in a yacht, typically expressed in fractions of 64ths.
The advantages are many – not least that all your running costs are half or less and any repairs, additions or improvements become so much more palatable.
It also means that there are more hands to do jobs on the boat, and different partners usually offer different skills.
You may get to use your boat less, and you’ll have to reach agreement, and compromises perhaps, on everything from where you keep the boat to what equipment you fit.
But the biggest bugbear of shared ownenhip tends to be if owners have differing views of standards or budget for maintenance or improvements.
In general, the smaller the group and the closer your experience and aspirations the better it works.
The other thing to consider from the day a group starts thinking of buying a boat, is what will happen on the day when someone wants or needs to sell their share.
Will the others buy them out, or will you all agree to sell the boat?
Partnerships often run on trust or gentlemen’s agreements, but it is possible to have a contract that will cover who owns what share, how the boat will be managed, time on board is divided and how the maintenance is tackled.
A complex form of ownership whereby an overseas company buys a boat on your behalf and leases it back to you.
There are VAT and other tax advantages in this scheme as they exploit the difference in the application of VAT rules between different EU countries.
It’s a risk as some tax authorities argue that this is a tax avoidance ‘abuse’, specialist agents can make the paperwork simple and it can be financially effective but it only makes sense for larger yachts valued over £250,000 or even £500,000.
The key thing here is to get specialist, independent legal and financial advice before going down this road.
Charter boat ownership
Perhaps the ultimate in hands-off ownership schemes is to buy a charter yacht from one of the big companies such as Sunsail or The Moorings.
They will manage it in exchange for a fixed monthly income, and you get an agreed amount of time on board and the boat back after a certain period, usually 3.5 or 5.5 years.
In some cases, you may even be able to take tax deductions. For many people this is the best and cheapest way to enjoy sailing holidays with a minimum of hassle.
What happens is you buy a yacht of the company’s choice, fitted out exactly as they want it and then it’s operated by them in their normal way.
The programme allows you a certain number of weeks’ use, not only on your boat where she is lying but any similar yacht in any of the company’s locations worldwide.
This is the really attractive bit, and depending on the time of the season you choose, you could get up to 12 weeks’ use – or either take extra income by continuing to charter or by selling that time privately yourself.
After the period of ownership, the company generally agrees to buy back the boat at an agreed percentage, roll the residual value into a new contract or take ownership yourself and continue to sail the boat or sell for a better price privately.
For an owner, there’s virtually nothing to do. From boat buying and equipping to all the paperwork and maintenance, it’s all done for you, and if you put the income equation it’s one of the cheapest ways of using a boat.
So what are the drawbacks? In some ways the same.
It’s hands-off, and you won’t have the same involvement or pride of ownership as buying privately, nor will you have a free choice of yacht type.
Also, charter yachts are well maintained but punishingly used, so the secondhand value after charter will be much lower.
The advantages are very attractive, though, and there is scope for financing, deferred payments, part payments and stage payments.
Time share, or fractional yachting, is a relatively new concept in the UK, but coming up swiftly from leftfield.
It’s best thought of as a yacht sharing partnership that is professionally managed, so for a monthly fee of about £400 you own a yacht with seven others and you never have to bother with any ongoing maintenance or difficult decisions about boatbuying or equipping.
Nigel Jones decided to become a member of SailTime last year, and bought into Hufflepuff, a Beneteau Oceanis 343 based in Hamble.
As a financial consultant he could see the sense of it. “I like the fact that SailTime gives me the ability to get out on a high quality boat in good condition when I want and all at an affordable price.
Plus, I really appreciate the added bonus of having a support network in place to maintain the boat and the possibility of some social activities,” he says.
The ease of getting afloat is another big appeal – the boat is prepared beforehand and cleaned afterwards so when you’re finished you can just lock up and go.
“The ease of turning up, running through the quick routine check list, going for a sail and signing off without having to worry about where to moor the boat, and the flexible booking system makes it really easy to pick a date and just go sailing.
If I owned a boat I would only be able to afford a smaller, less highly specified boat and the mooring costs alone each month would be less than my SailTime Membership cost.
“The scheme is particularly good for sailors who want to use their boat only occasionally.”
Originally published in Your Yacht in 2006.