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Boat Shows - Power or sail:

Used prices are low, but for how long?

If brokerage sales are the harbinger of better times in the boat business, the market began to show signs of recovery in June and July, when more used vessels were sold in the United States than in the same months of 2008.

Buyers should be prepared for negotiating.

Member brokers of (owned by Soundings parent Dominion Enterprises) reported that overall unit sales in June increased by 10.5 percent over June 2008. While the numbers for sailboats were still declining, those for used powerboats were up sharply, especially in the segment of 36 feet and under. The pattern continued in July, reports, when total unit volume was up 8.4 percent.

That means this fall could be a great time to buy a used boat, say brokerage executives. “This is a 10-year low in the used-boat market,” says Chet Pawlowicz, president of Martin Bird Associates, an Annapolis, Md., yacht brokerage. “The bottom has fallen out. I have never seen it this low.

“Customers need to realize that asking prices are approximately 20 percent lower than they were only two years ago, and many sellers will not go any lower,” says the veteran of 30-plus years in the boating industry. “They’d rather hold on to their boats.”

In a normal year, Martin Bird sells between 85 and 105 brokerage boats, power and sail, mostly between 30 and 60 feet. Since the beginning of summer, Pawlowicz says, volume has increased to 70 percent of normal. Down East-style lobster yachts, trawlers, and cruising sailboats have been the biggest sellers, he says.

While builders have been busy helping dealers clear out inventory so they can restart idle production lines, brokers are hoping the first shoots of a recovery might herald a sustained turnaround for a used-boat market that “has been soft for the past five years,” as one of them put it.

“It’s better than it was, for sure, but we don’t see any quick sales,” says Klaus Kutz, a broker for Passage Yachts in Alameda, Calif. “People who know boats and have the patience and skill to negotiate can get very good deals.”

Glenn Walters of Eastern Yacht Sales in Portsmouth, R.I., concurs. “In July, we had more sales than in the previous nine months,” he says. “There is some pent-up demand in the market, and now is a great time to get the right boat for the right price.”

Experienced boaters who know what they want can find gems, brokers say, provided they are patient and do their homework. Walters sees a “resurgence of sail,” while powerboat business is not as robust, “except for smaller boats.”

Whether or not the recovery in brokerage sales has enough steam to carry over to next spring will depend on several factors, such as consumer confidence and available financing, experts say. Customers on solid financial footing with good credit histories should have no problems obtaining boat loans, they say.

Lending standards, however, are “back to the more traditional style,” as Walters puts it. A down payment of 20 percent and proof of income and other assets are the norm again.

Most of the deals going down have been in the $75,000 to $150,000 range, Pawlowicz says, and a surprising number of buyers have paid cash.

Some brokers report seasonal shifts in the return of their customers. “We had a very good second quarter,” says Kathy Jordan of Jordan Yachts in Fort Lauderdale, Fla. “But it has been slower since then, because we are approaching hurricane season and insurance companies have increased rates.”

Jordan says there also has been a drop-off in European customers, who had been raiding U.S. brokerages for vintage boats that were more affordable here because of the weak dollar. But the global recession also took a toll on confidence among European consumers.

What sort of negotiating bandwidth can a used-boat shopper expect, with asking prices already near historic lows? “One of our broker/dealers in California tracks the differential between the asking and sales prices of used J/105s,” says Jeff Johnstone, president of J/Boats in Newport, R.I. “Historically, sale prices averaged around 95 percent of asking prices. Now we are at 90 or 91 percent.”

Quality boats with limited production runs will retain their value better than models that flood the used-boat market, brokers say. Popular boats can be problematic for sellers, because there are so many of them out there, and someone inevitably bails out and drops the price.

But a seller’s nightmare could be a buyer’s dream. “Low asking prices mean higher values,” Pawlowicz says. “Large selection means more choice. If someone wants a boat, he’ll get a boat.”

See related articles:

- Boat shows - Buying season

- Boat shows - If you can afford it, you can buy it

- Boat shows - New sailboat models

- Boat shows - New powerboat models

This article originally appeared in the October 2009 issue.