Second hand makes the market tick
Maintaining a healthy second-hand boat sector is vital for the overall growth of the boating market, says Darren Vaux.
Second hand boats have always been an important part of the pathway into boating for new boaters and the means by which existing boaters extract value from their existing boat for their next second hand or new boat purchase. Value, integrity and good boating experiences for boaters who live in the second hand boat space are essential for the long term health of our industry. Whilst there has been a focus on consumer protection in dealing with second hand brokers, the time has come for a more strategic view to be taken on the life-cycle of boats and boaters, and how we maximise the retention of boaters within recreational boating.
There are a wide range of factors that influence the current second hand boat market.
It is now over a decade since the GFC began to bite. During the period 2008 to 2013 boat manufacturing was hit hard and the volume of new boats built fell dramatically and some brands were lost. As a result, the volume of second hand boats available that are 5-10 years old (typically the peak age for demand) is low and prospective purchasers are forced to look for boats that are 10-20 years old. Consequently, the value of these older boats has increased in recent years and the new owners of these boats are experiencing the relatively greater cost of ownership (relative to purchase price) associated with the ownership of an older boat. Maintenance costs have also increased as a factor of increased OH&S and environmental compliance around the waterfront and shortage of specialist trade skills in marine repair.
As the fleet ages, the demands on surveyors for pre-purchase and insurance purposes increases. The older the boat, the potentially longer the list of issues that arise under survey. This has two key impacts. The risk in undertaking surveys for surveyors has increased and as a result surveys are becoming longer and more qualified. Secondly, inexperienced boat buyers are often scared away by the complexity of the issues identified and the potential cost of rectification. Buyer education is becoming an increasingly important part of the boat brokers job. Consequently, routine maintenance and good maintenance records are an increasingly important part of maintaining the value of used boats.
The boater’s life-cycle
The life-cycle of the boater is changing. Historically boaters would enjoy a lifetime of boating engagement, often more than 20 years, across a range of boat types and sizes depending on their stage of life. Increasingly, boat owners are going through a boating phase before moving onto, or from, an RV phase or an overseas travel phase or a cruising phase. These are our real competition. If boaters now engage with boating for less than 10 years it means we need to get more boaters into the system to maintain the same level of participation.
Increased connectivity and mobility mean that most people’s available time for recreation has both decreased and fragmented over time. Our attention spans and the blocks of time we dedicate to hobbies and experiences have become sporadic. We all know that time on a boat is great for the body and soul and we need to work hard in selling this vision and cutting though the noise. In doing so we need to more fully embrace new pathways into boating, be it boating clubs, share boating or peer-to-peer platforms that make it easy to go boating or experience the boating lifestyle.
Protecting the asset
One of the key reasons people sell their boat and get out of boating is they don’t use the boat any more. They either run out of time or the experience just doesn’t meet their expectations for a whole range of reasons. Boating isn’t that easy, it requires effort to get out on the water and pack up at the end of the day so the experiences out on the water need to make it worthwhile. Two things happen when boats aren’t used. The servicing intervals stretch out or are ignored and the boat (particularly if stored on water) starts to deteriorate when left exposed to weather without use or care. This typically goes on for a while until the decision to part with boat is made, at which point there are a range of issues to be dealt with to ready the boat for sale. There is often a reluctance to spend further money on the boat, leading to the inevitable challenges when the boat goes to survey.
This is a key challenge for brokers in managing their vendors as it can often take the loss of a sale through the survey process for vendors to fully understand what it takes to achieve a sale. As an industry we need to educate our boat owners that maintaining their boat and recording maintenance are key steps in protecting the value of their asset and making it saleable.
Private sales though online market places represent a large component of the transaction volume of second hand boats. This is an area where the industry has limited touch with the consumer and their boating experience. Consumers don’t have the same protections and can be left with poor experiences or products that prejudice their view of boating. In the past the industry has attempted to create a dealer/broker only portal for the sale of boats that gives consumers access to the benefits of dealing with reputable deals and brokers. It didn’t work at the time, perhaps it was too early, but with the change in market dynamics it may be time for reconsideration as it is in our collective interest to maximise the consumer experience across the board.
Classic cars have seen a dramatic rise in interest and value over recent years. Cars in need of restoration attract high prices with enthusiasts often prepared to spend hundreds of thousands of dollars on projects. We haven’t (yet) seen the same phenomenon with boats in any broad market sense.
Over the last 20 years or more, the car industry has also faced increasing requirements to build in recyclability into original designs. Cars are designed to be disassembled; boats are not. What is the serviceable life of GRP boats? We are seeing the earliest of these now reach the end of their serviceable life and the challenge and expense of disposal of the hulls and superstructure of these vessels is becoming a problem as the last owner of the boat is usually the least financially capable of dealing with the problem.
There are a few factors to consider here. The industry needs to recognise and plan for dealing with end-of-life boats. We need to consider whether there is the potential to use recycled content of GRP in new boats and set targets for it, and we need design new boats for future maintenance, refurbishment and recyclability. We need to take a whole of life approach to the manufacture of boats recognising the importance and role of the first and subsequent owners of the boat in the long term health of the industry.
A robust second hand market is essential for the long-term health of the boating industry. It is essential for new boat sales as it reduces depreciation and provides liquidity for the disposal of boats and dealer trade-ins. It is the pathway into boating for the vast majority of new boaters and, as the market dynamics continue to evolve we, as an industry, need to develop new strategies to ensure their experiences deliver all the positives the boating lifestyle has to offer so we retain them as future customers.
About the author
Darren Vaux is a director of the Boating Industry Association, vice president of the Marina Industries Association, director of the award-winning Empire Marina Bobbin Head in Sydney, and the Australia, NZ and Pacific Islands representative for bedsonboard.com.
The article was first published in the April-May 2018 issue of Marine Business magazine.