How not to cut corners on annual costs while saving money
It’s not surprising that one of the more boorish quotes about wealth can be attributed to yachtsman and tycoon J.P. Morgan. “If you have to ask how much, you can’t afford it” became the canned answer accompanied by a condescending eye roll when the curious wanted a look behind the proverbial curtain. Yet it’s the experience of the AvYachts team, which has been selling and chartering luxury yachts to a discerning clientele for decades, that a respect for money and value are at the core of the company’s success. In fact, our Yacht Share clients embrace another view of Morgan’s comment: Just because you can afford it doesn’t mean you should spend it. Yachting and the marine lifestyle are in our veins, but we recognize it’s a high cost of entry and our clients want to keep as much of their money working for them as possible. This is precisely why we created our 50% Yacht Share program.
AvYachts understands that owning a superyacht can be a luxurious and fulfilling experience, but it also requires a significant financial investment for the initial purchase and subsequent maintenance costs. Here are a few items to consider if you’re thinking about purchasing a large yacht. More importantly, keep in mind the AvYachts solution will reduce these costs by approximately 50% when we bring two owners together. We wonder what J.P. Morgan would have to say about that?
1. Initial Cost: A large yacht can cost anywhere from a few million dollars to hundreds of millions of dollars, depending on the size and features. In addition to the initial purchase price, you’ll also need to budget for ongoing expenses such as crew salaries, fuel, insurance, maintenance, and docking fees.
2. Crew: Most 80-foot plus yachts will employ a full-time crew. The number will obviously depend upon the yacht size and other factors such as if the vessel will be available for charter. For example, a yacht such as the Westport W117/35M Raised Pilothouse will typically run with a captain plus four other crew when it is fully active cruising with the owners on board. Besides budgeting for their salaries and benefits, you’ll need to devote resources to managing them, payroll, taxes, and benefits. Larger yachts in the 250-foot plus range can run upwards of $3 million a year for crew salaries alone.
3. Maintenance: At the risk of stating the obvious, planning a maintenance budget is key before the purchase of any large yacht. A properly maintained yacht translates to peace of mind for the owner and will also ensure a higher resale value. You’ll need to budget for the routine maintenance, but also for certification updates, mechanical systems, cosmetic updates, safety updates, and even tender maintenance. There will be additional service intervals for the hydraulics and thrusters, watermakers, and the water toys such as PWCs and dive compressors. The key to a properly maintained vessel is preventive maintenance. That’s what will ensure you’re not stuck in port with a saloon full of anxious family and friends.
4. Docking: You’ll need to find a suitable base to dock your yacht, which is becoming harder and harder to find. Docking fees will vary significantly depending on your planned location(s). If you’re ticking off all the hot spots on the itinerary during the calendar year, you can expect to spend about $225,000 annually for a yacht like the Westport W117.
5. Legal: A large yacht is a complex asset which essentially is a business unto itself, and thus requires a proper legal structure and plan beyond the initial sales and purchase agreement. Crew management, where a boat is flagged, taxation processes, chartering fees and a host of other elements will require a decent level of legal representation. Don’t skimp on the legal fees.
6. Insurance: Along with creating the legal framework, insuring a large yacht is a complex process with a high degree of risk. Factors including cruising grounds, crew, liability protection, if the boat is in charter, water toys, and even the artwork on board are considered. It’s never a one-size-fits-all approach and thankfully, today there are a host of companies that can create an insurance solution for each particular scenario. Depending upon the initial value of the yacht and the overall plan structure, expect to pay from a high-five to mid-six figure for an annual premium rate.
Owning a large yacht can be a rewarding experience, but it also requires a significant financial investment. At AvYachts, our 50% Yacht Share program removes all the barriers to entry into yachting and simplifies the process. Our customers recognize the value of our individualized yacht ownership solutions.