From Boat Test: Is Now The Time To Buy A New Boat?

Newscasters are virtually all saying that we are in unprecedented times, and for the nation that is true – but not for the boat industry, economically.  It goes through these financial tsunamis with great regularity. To name a few: the 1973 oil crisis, 1979 19% interest rates, the 1990 10% luxury tax, the 2000 Dot Com bubble burst, the 2008 meltdown, and now the COVID-19 pandemic. Every time macroeconomics takes a hit, boat buying, and the boating industry is staggered, sometimes nearly KO’d.

But, if history is any guide, there is now a window of buying opportunity that will not come along again until the next economic rise and fall. And, when that happens again, in all likelihood, prices will be 20% higher than today, if not more.  Find out why the window of opportunity won’t last long…

A Boat-Buying Opportunity

When the economy shutters or the stock market drops, so does consumer confidence. Even the wealthy pull-in their horns. In such times, boat-buying is the last thing that most people think about. Then, boat production drops to a dribble or stops, over-leveraged builders go out of business, financially-weak dealers close up – and for a period of time, new (and non-current) boats become a bargain. Then, the boating industry is just trying to survive and raise cash.

We are now in one of those periods of “Boat Buying Opportunity,” but this time around is different.

Is now the time to buy a boat?
(l to r) S&P chart: The top of the Dot-Com bubble, when second mortgages began to get tight, the collapse of Lehman Bros., our current location.


Why This Time is Different

Historically, in boom times, boat companies overbuilt and crammed inventory down dealers’ throats. Then, when the music stopped, boats were sold at cost by dealers to pay down debt or were repossessed by banks and sold at below cost.  That happened after the 2008 meltdown, and it took the industry the better part of four or five years to sell-off of 2007 and 2008 inventory, depending on the brand.  

But most of the surviving boat builders and most of the dealers still open (about 50% of them were left) learned their lesson well.  For the last 12 years, many builders have not started building a boat until they had a dealer or retail order. Dealers kept fewer boats in inventory. Some dealers even bought their boats instead of using bank floor planning loans, thus avoiding the danger of leverage.

Responsible builders have monitored dealer inventory closely to avoid a glut of supply. The result is, generally, there is no large overhang of boating inventory among most brands. And, from what we have seen, dealers are staying cool – so cool, in fact, that as we called around during the lockdown, most weren’t answering their phones. Dealers with too much inventory are, generally, new ones that didn’t get the opportunity to learn the hard way. Here is a target of buying opportunity – if you like the boats.

Secondly, because boat building is considered non-essential, state governments forced them to shut down, which is something that has never happened before.  Most stopped operations for nearly two months.  Nevertheless, some boats managed to get sold during the two months and no replacements were built. The result is that inventories diminished somewhat.

Thirdly, unlike all previous economic setbacks, this time people want to use their boats to get out of the house. There is actually positive psychological pressure to go boating. The last few weekends, boat use in Florida has been far greater than in the last several years.  As the weather warms up in the north, the same thing seems to be happening.

Fourth, the family trips to Europe, to resorts and other expensive summer recreation that can run into tens of thousands of dollars if done on a 5-star basis, are out of the question. Front row and skybox season tickets are out.  Concerts, theater, race car events, etc. are not alternative places to spend cash and relax or be entertained. Many of the recreational options that have drained people out of boating are now closed or unattractive.

Fifth, used boats, which have compelling prices when they are from 5 to 12 years old, are in short supply – because not many were built during the Great Recession. Later model used boats are not so cheap.

Buying Opportunities  Now

Today, there definitely are good boat buying opportunities – not because boats will be sold cheap, but because in the months to come, inventories will have been picked over and not replaced.

Some builders are running spring deals as they most always do – with robust incentives.  And, we predict that these healthy discounts will last for the next couple of months, again depending on the brand and its inventory levels.  But once current inventory is off everyone’s books, good, new boats will be in short supply.

The Post COVID-19 Paradigm

Starting noweven most small boats will be built to order. Dealers will not be betting on the Come. Builders of large boats will build a few for boat shows, but that’s it. And, all boats — large and small — will be more expensive.

Large, new express cruisers, flybridge models, convertibles and motoryachts will also not have much bench strength.  When you see a boat you like, our advice is to buy it, there may not be any more unless you order one built.

Fiberglass center consoles, bowriders, dual consoles and he like over 26’ from the premium brands that are on the market now, will be the last ones at this price point.

When it comes to new boat buying, the last of the good old days are now.