SINGAPORE – With so many islands to explore around Singapore and the allure of having the freedom to sail farther away, owning a boat can seem like a luxurious way to relax from the hustle and bustle of the city.
During the coronavirus pandemic, boat ownership can also be an opportunity for staycations and a chance to chill.
With recent news about new superyachts and expensive charters, boats have become a status symbol for the ultra-wealthy.
But how much does it really cost to own a boat? And is it more feasible to just rent one instead?
Cost of owning a boat
Owning a boat is extremely expensive and because it is a depreciating asset, you will rarely get back what you paid for if you decide to sell it.
Because of the high price of new yachts, most people tend to get second-hand ones.
For instance, while the average cost of a new yacht is $1,219,884, the average used boat costs $683,783, but it can be priced as low as $67,500 – less than a car in some cases.
Of course, there are many things that can affect the price of the boat and some used boats can cost more than a million dollars.
Typically, the price will depend on the size of the boat, the age, the interiors and other specifications such as technologies used for the boat and labour costs.
In addition to the upfront cost of the boat itself, you will also need to account for insurance, maintenance, petrol, berthing, licensing and registration costs.
A common rule of thumb suggests that you should budget 2 per cent of the original sale price of a new yacht and 7 to 10 per cent of the purchase price of a second-hand boat a year for upkeep.
However, boats older than 15 years will need much more maintenance (roughly 14 per cent of the purchase price).
Other estimates suggest annual expenditures of up to 20 per cent of the boat’s purchase price.
That said, there is no definitive formula to how much you should expect to spend a year on maintenance as it depends on your individual circumstances and the condition of the boat.
Lastly, are you hoping to have a crew? In this case, you can expect to spend an additional $35,000 to $70,000 in salary costs a year for a 50-foot boat or $300,000 in salary for a four-person crew for a boat of about 70 feet.
Cost of yacht rentals and charters
Renting a yacht can be surprisingly cheap if you split costs with a group of people. For instance, even if you charter a yacht for the standard four hours with a group of five people, each person will pay only an average of $72 to $87 an hour, depending on the day of the week.
If you want to save even more, you will have to wait until the current pandemic restrictions are over. This is because some charters allow for groups as large as 30, reducing your average cost to $19 a person an hour.
Of course, if you plan to charter a boat for just two people, the costs will proportionally increase.
The average price to charter a standard yacht for a day in Singapore is $1,660.
If you want to increase the duration of your rental, some charters will let you pay extra for each hour (average of $292 an hour).
If you want to do an overnight stay, some companies will let you do a two-day, one-night stay or three-day, two-night stay for $5,000 to $8,000.
Of course, there is also a luxury superyacht charter that can cost a few hundred thousand dollars for a week.
A few people in the yacht business recommend that prospective owners should try renting a boat for a week or so before committing to a purchase to see if it is something they want to commit to.
Renting vs owning a boat
As we have seen, buying a boat can rack up significant upfront and annual costs. It will also take a while for you to recoup those expenses even if you charter your boat on the weekends.
For instance, renting out your 40- to 50-foot second-hand yacht every weekend (Saturdays and Sundays) and charging the average prices discussed above will lead you to recoup the purchase cost after 18 years. That is not even including the maintenance, repair, renovation and berthing costs you will need to pay every year.
However, renting a boat every weekend can also add up significantly – roughly $37,034 a year. If you want to do week-long trips on luxury yachts, then you may end up spending hundreds of thousands of dollars in costs a year. At this point, it will be cheaper to just buy the boat.
In this case, really committed sailors can potentially opt for a smaller, simpler boat in the price range of $200,000 to $300,000. The annual costs will be less than that of renting a boat ($22,894 to $32,894 a year) and you can charter it out a few times a year to help recoup the purchase costs.
Furthermore, owning a boat gives you freedom to go wherever you want, whenever you want. So just like owning a car, the true value of owning a boat provides something that is hard to quantify.
Buying a boat is complex, due diligence is key to saving
If you are committed to buying a yacht, it is imperative that you plan your budget carefully. If you need to take out a personal loan to fund the purchase, compare interest rates carefully to make sure you are paying as little as possible on interest rates.
You should also stick to boats you know you can afford, since personal loans are generally capped at a certain multiple of your monthly salary or a limit of $150,000 to $200,000.
It is important not to forget about maintenance costs and to take into consideration the state of the boat you want to buy.
While you might be enticed to buy an older yacht because of the lower price, the repair and maintenance costs may end up being significantly more than you bargained for.
It is good to compare yacht club memberships and berthing rates. Some marinas can give discounts of 20 to 30 per cent if you commit to berthing there for two to three years.
Others may give discounts on getting your licence as well as perks for being a member.
As with any expensive purchase, it is important to save where you can so that you can maximise your value.
• The writer is a senior research analyst from ValueChampion Singapore, a consumer research and personal finance comparison firm.