My finances, my projects, my life
August 16, 2022

Thinking of buying a yacht? Key things to consider

  Compiled by myLIFE team myWEALTH March 29, 2022 15

The yacht business has been a rare beneficiary of Covid-19 pandemic restrictions. Sales have boomed as people dreamed of the freedom of the seas after months confined to their homes. However, buying a yacht is a serious commitment and can be just as complex as buying a home on land – and often more expensive.

The type of yacht you buy will very much depend on the type of sailing you want to do. The right yacht for sailing holidays with friends and family may be very different from an explorer vessel that needs to have long range capabilities and to operate in difficult conditions or a classic yacht prized for its beauty, but perhaps not its practicality. The type of activity you prefer will determine the vessel’s size, the number of berths you need, the amenities on board and whether you need an onboard spa or beach club.

There are boat finder tools online to help with your search. However, for first time buyers or for higher investments, it is advisable  to employ the services of a yacht broker to help find the right option, though expect to pay a brokerage commission  for the privilege. Once you have a clear idea of the size, type and extras you need, you should be able to get a better idea of what you can expect to pay.

Operating a yacht is an expensive business, even when it is not in use. Mooring rates vary with size and can run to thousands of euros a month for large yachts in expensive destinations, like Monte Carlo.

The expensive extras

Operating a yacht is an expensive business, even when it is not in use. Mooring rates vary with size and can run to thousands of euros a month for large yachts in expensive destinations. A mooring in Monte Carlo costs around $4,000 per night, and up to $100,000 for a five-day stay during the Monaco Formula 1 Grand Prix, that is if you will have the chance to find one.

Winter storage is another potentially high cost. Time in dry dock for maintenance or repairs also needs to be factored in, along with day-to-day expenses, such as petrol, cleaning and insurance. Large yachts  need a professional crew, either permanent or reduced temporary during down-time (according to “Safe manning” regulation), so yacht owners will need to factor in recruitment and employment costs. There are online tools to help calculate these expenses, too, but specialized yacht management companies offer these professional services.

Where to buy

The choice of where to buy a yacht may depend on the extent to which you need someone to guide you through the process. Buying direct from the manufacturer or from a private seller can save money, but the latter option does not afford the same protection as buying through a broker or a dealership.

Sellers should allow you to perform a sea trial before you buy, and at the least it is worth trying to charter a similar yacht before you commit to a purchase. This allows you to test it out with a fixed cost and minimal time commitment. Some brokers will allow you to charter yachts of a similar model to the one you’re interested in buying.

While chartering can help pay for some expenses, it is not a magic route to low-cost yacht ownership.

It goes without saying that the usual rules of large purchases apply to buying a yacht as well. Be wary of apparent bargains – heavily discounted vessels could turn out to be money pits in the longer term. It is also worth being cautious when sellers promise that buyers can recoup much of their costs by chartering. While this can help pay for some expenses, it is not a magic route to low-cost yacht ownership.

The buying process

Once you have found a suitable yacht, you will make an offer that is presented to the seller. As with property purchases, there may often be some negotiation on the price before a final transaction is agreed. The sale agreement is an industry-standard contract and outlines the price, along with the timing for a sea trial, survey and completion. It should also include a full inventory.

Surveys for yachts are complex and can take a week or more to complete, depending on the size of the yacht. A good technical condition survey will examine the yacht out of the water as well as in it. The sea trial is usually conducted at the seller’s expense and will take up to four hours. The buyer will be testing the general seaworthiness of the vessel, but also noise and vibration levels and motion (pitch & roll).

The buyer should have insurance in place at the time the contract is finalised.

Once these steps have been taken to the buyer’s satisfaction, they will pay a 10% deposit. In normal circumstances, this will be forfeited if the sale is not completed on the agreed date. The contract may allow time for necessary repairs uncovered by the survey to be remedied. The buyer should have insurance in place at the time the contract is finalised.

Financing your purchase

It is possible to take on a loan to buy a yacht in the same way as for a house or apartment. With interest rates at historic low levels, this has become an increasingly popular choice in recent years. Yacht financing is typically provided for a term of between 5 and 7 years, and is handled by specialist marine lenders, in the context of a global wealth management relationship. Pure asset finance is also available for smaller transactions at specialized equipment finance institutions, but they will generally consider the loan as a stand-alone transaction and not within the broader context of the borrower’s global patrimonial situation.

The right option will usually depend on the amount you want to borrow, with some lenders only providing larger loans. The various providers of marine finance use different formulas to calculate the maximum amount they are willing to lend. Usually, borrowers will need to provide a part of the equity for the purchase cost from their own resources.

Yacht ownership is undoubtedly a luxury, and it is difficult to justify ownership as opposed to periodic chartering of vessels on cost grounds alone. However, the prospect of taking to the open seas in a yacht that offers the same intimacy as your own home may lure those with spare cash to take the plunge, especially after the privations of lockdown. But it is a complex and potentially risky process, and buyers must always go in with their eyes wide open.