A great piece by Don Finkle at RCR Yachts!

So tell me why this is a good time to buy a new boat,
by Don Finkle:

Actually it may or may not be a good time, depending on your own situation. Those who are in danger of losing their job, or maybe being transferred to a landlocked area, contemplating a divorce or in financial trouble already should not be coming to see us about buying right now. However, for some of us, this is the best time we have yet seen, and we'll explain why we say that.
I am addressing those who know that a new boat is in their future at some point. You are the ones for which it is not an "if", but a "when". We have some very good arguments to be made as to why NOW is the time.

A change unlike anything I have seen before is taking place in our industry. There is a squeeze from both sides that has severely stressed builders and dealers alike. On the one hand we have a customer base which has been scared to death by the media and the loss in value in their retirement accounts. On the other we have a banking system that has all but disappeared when it comes to providing wholesale lending for dealers who finance their inventory (which is almost all dealers…who has several spare million sitting around to tie up in boat inventory?).

This has created a scenario where dealers MUST sell their stock boats because the lenders are putting a big-time squeeze on us to move any boats we have in our inventory. The longer a boat sits on the lot, the more nervous the bank becomes as they see their collateral depreciating. Then they start to hit us with principle curtailment payments every month. In addition to paying our normal interest on the inventory, now we have to start paying principle. Imagine how much fun that is when sales are slow! Of course we still have all of our other expenses, such as insurance which is tied to how much inventory we have.

So dealers are highly motivated to move their boats. Some have lost their financing source as companies such as Keybank and Textron have completely exited the business of loaning to dealers, forcing them to go out on the street and look for new financing at a time when banks are not lending. The trouble is no new bank wants to take your old inventory. Therefore we are even more motivated to clear the decks so we can make a move. While most of the dealers I know are in this situation to some degree, so is RCR. What has allowed us more breathing room than most is that we are a marina, boatyard and service company that does not rely totally on boat sales for its existence. Nevertheless we must restructure our sales business so it is sustainable in the new reality, and that means substantially lower stocking levels. So what is in stock now MUST GO!

OK, so dealers have got to dump their inventory, but that is only half the story. The builders are in the same, if not worse, situation. They can't build a boat unless they have a dealer to take it. The dealer can't take it so long as he has a boat already. And, even if the dealer wanted to take it, he can't because the bank won't loan him the money for a stock boat. So that means the builders are basically at a standstill until a dealer finds a retail buyer for a boat. Right now their pipeline is full because we dealers all have too much inventory for their current market to absorb.

As a result, the builders are digging deep to help dealers out by offering us incentives that allow us to even further reduce the price of our boats. It is not about making money right now, it is often not even about breaking even. We are selling some boats at an outright loss but the alternatives are even worse.

What this means to you, the buyer, is that as long as we have stock boats to dump you are going to buy at ridiculous prices. Your potential depreciation has been absorbed by others. You will be paying a much lower price, financing less, and of course paying less in tax. The boats we have in stock were purchased at old prices that are lower than current. You are saving every which way.

So why shouldn't I wait until maybe prices come down more? Well for one thing,
there is only so low we can go on the price because we have to generate enough cash to pay off the bank what we owe on the boat. Once the dealer and builder have kicked in all they can, that is the floor. We are at that point now.

We aren't going to order a new boat for you and sell it at a loss. The present scenario lasts only as long as there is inventory to dump. Once that is over we'll be operating in a different world. The builders and dealers are in business to make a living, and in the long run they need to sell at a profit that sustains them. Raw materials costs will go up as the economy recovers, as will interest rates. The builders are putting out far fewer boats than their most efficient production rates, so the overhead absorption for each unit out the door is higher. In the future most boats will be built to order, and that will cost more, and we will no longer be obligated to make unprofitable deals just to move a stock boat.

I am not embarrassed or afraid to tell you this, they are the facts and we have no reason to hide anything. Those who do not need to cash in their 401(k) plan right now and who have the courage to make the move will be savings thousands, often tens of thousands. As they say, "timing is everything", and right now the time is right. Figure that these opportunities do not come along every day, and the fact that the industry is riding out a Perfect Storm means you stand to gain like never before, and probably never again. And best of all, you can start to enjoy that new boat this spring, while you have the health and energy to use it.
And, when you do want or need to sell the boat down the road, you have protected yourself by buying at the lowest possible price