The Costs of Boat Ownership

Buying a boat is a unique expenditure, similar to other recreational vehicles, but with its own set of circumstances since its environment is the sea. The costs of ownership reflect those circumstances.

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There are many components that make up the cost of boating. Let’s deal with with them separately and then together. The components we will look at are:

Purchase price and Taxes
Financing
Dockage
Insurance
Annual maintenance and capital improvements
Operating costs

These observations are mine based upon 50 years of spending our family’s recreational budget principally on boating in one form or another. Like all recreational activities it is an expense, but a big part of that expense is acquiring and maintaining a complicated and expensive piece of equipment that is constantly depreciating. For the sake of simplicity, the costs we discuss apply to a boat that is 10 years old or less, and is either new or has had excellent care. If older or poorly maintained, purchase is lower but everything else is more expensive.

Purchase Price & Taxes

Now here is an infinitely variable element, think used canoe to mega-yacht. For a used boat, getting to the final price is a negotiation between buyer and seller facilitated by a broker; a process I describe more fully on other pages. For illustrative purposes, let’s pick a price of $200,000, which in a 10 year old boat is enough to acquire a 40 foot cruising power or sailboat in nice shape that can cruise a family up and down the East Coast and out to the Bahamas. You can do it for far less or far more but let’s start there. 

Let’s assume that you want to finance the boat because your financial advisor has convinced you that he is making far more money for you in investments than the paltry current interest rates, plus you can still deduct the mortgage payments as a second home. Your lender will want 20% down, which I would advise be a higher percentage, having tried to sell many used boats in the last recession that were upside down and the sellers were loathe to bring a large deficiency to the closing. And in a recession, the somewhat rosy expected depreciation schedule that your used car salesm….., I mean yacht broker, had provided just disappeared down the VacuFlush. So let’s at least come up with 30%, or $60,000.

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New boats are a different story. There is an MSRP price provided by the manufacturer. Usually the MSRP allows for discounting and still leaves the selling dealer with the margin they need to stay in business. I have lately become aware of some newer brands whose published MSRP is almost exactly the margin that the dealer needs to have a viable business, about 20%. Complicating this are factors like manufacturer incentives to clear the previous year’s inventory in the field, and the timing of financing arrangements at the dealer level. At some point margin takes a back seat to relieving inventory. And on top of all this, the options selected on a new build can increase the final price by 30-50%. We as a company are striving toward a method that will result in more definitive and transparent pricing on a new boat.

Taxes vary by the state and municipality. For instance, Virginia sales tax on new or used boats is 2% with a cap of $2000. On top of that many cities and counties have a personal property on boat from half a percent per $100 to several percent. Some towns are 0% so people will keep boats there and spend their money there. In the Southern Chesapeake; Virginia Beach, Hampton, and Gloucester County have no annual boat tax. Maine prohibits local governments from taxing boats and collects a nominal excise tax annually based on length. The tax on used boats there is 5%.

Financing

A Fall 2019 rate sheet from a major marine lender shows a rate of 4.5% for loans over $100,000. This rate assumes that, to paraphrase Mary Poppins, “you are practically perfect in every way.” Maybe not every way, so let’s use 5%. On your $140,000 ship’s mortgage, that is $924 per month.

Dockage

Depending on where you live and the quality of the marina and nearby amenities, your 40 footer will cost $400-$600 per month, assuming you're not leaving it in Nantucket or Newport. Electricity is extra and can be $200 per month if you are heating and cooling with reverse cycle A/C. Renting a municipal mooring would be less than half that but without the convenience.

Insurance

This can vary widely depending on the age of the boat, area of navigation, and if you are in a hurricane zone during hurricane season. Think Florida and the Gulf or Mexico. My policy kept me north of Cape Hatteras until November 1st. Typically an annual rate is 1-3% of the boat’s value for liability and hull insurance. You should have a “Agreed Value” policy so you can repair or replace the boat for the settlement check. At 1.5% your cost for your $200,000 boat is $3000 annually.

Maintenance and Improvements

Plan to spend $5000 per year to haul, paint the bottom, buff and wax the hull and deck, replace zincs, fix a few scrapes and scratches, service engines, re-bed a leaky hatch, etc. This is if the boatyard does everything. Almost all the labor can be owner supplied if you know what you’re doing.

You also need to budget for a balloon year every 3 years to make major improvements, like a paint job, engine rebuild, new sails, air conditioning units, electronic upgrades, etc.

Skimping on annual maintenance is like skipping a dentist appointment, eventually it will cost more to get your boat’s smile back. At resale, you will have to discount more for poor maintenance and cosmetics than you would have spent to keep your boat in Bristol condition.

Operating Costs

We cover changing the oil in maintenance, so the other real cost is fuel. If you’re a sailer the cost is negligible, maybe 150 gallons a year. If you running twin engines and lots of hours a planing speeds, you could be burning 50 gallons an hour at 25 knots, but a fraction of that at displacement speeds. It is in our calculation but at the low end of the scale. We are leaving food and booze out since you need to buy those whether you are on a boat or not.

Boating Costs

In a previous life, a customer's wife told the following story on her husband, who was building the umpteenth custom boat of his lifetime. He thought he should discuss it with his accountant and asked if he could afford the boat. The account’s reply was, “Sir, if you would stop giving your money away, you could afford the Queen Mary.” 

These numbers can vary widely as noted but are a good place to start. The more you can learn to do yourself, the better, but don’t skimp on keeping your boat in top shape, and I mean TOP shape. You will always come out better when it comes time to sell.


The dividends in boating are not monetary, but they can be priceless. The best way to get a return on investment in your boat is to use it!


© Peter Bass 2013-19