How Much Does it Cost to Own a Yacht?
This is probably one of the most commonly asked questions I receive as a yacht broker. Whether you are purchasing a yacht for the first time, or you’ve owned several yachts over the years, you don’t want to end up with a boat that you can’t afford to maintain and use.
While every boat is unique and there are ultimately many factors that play into the total cost of ownership, I’ve found a simple way to structure your thinking of what a particular yacht will cost you over time.
Here’s my formula, but be sure to read further to see an example and understand each component in more detail:
{AC + FC* + MC + I + M + F + RTF + C*} – RV = Cost of Ownership
I know, I know, that looks complicated, but let’s take a closer look and break it down, and I’ve included a real-world example at the end.
AC = Acquisition Cost: This typically incorporates the purchase price, legal costs associated with the purchase, title costs, sales tax (if applicable), and transportation costs to bring the yacht to your primary marina after closing.
FC = Financing Cost: This may not apply if you pay cash for your yacht, but, if you choose to finance, you’ll need to consider your interest and fees paid beyond the principle as a cost of ownership.
MC = Maintenance Cost: This includes ongoing preventative maintenance, replacement of parts or systems when they ultimately fail, and upgrades/refits which may also add value to the yacht. When it comes to maintenance, I have a saying, you pay now or you pay later. You either pay throughout your ownership for preventative maintenance and keep the yacht in good working order so that you can enjoy the time onboard with minimal down-time for repairs, or you pay later in the form of repairs to failed components or increased depreciation and ultimately lower resale value.
I = Insurance: All yachts are required to carry insurance, to protect yourself, your guests or crew, marinas you visit, other boaters, and the environment. It’s a necessary cost, and one that has seen prices rise and requirements tighten in recent years. It’s a good idea to get a few estimates to compare before purchasing a new yacht, since coverage and premiums can vary widely. Nobody likes to overpay for insurance, but be sure you have enough coverage— a lot of things can go wrong on the water, whether you’re onboard or not, and maritime claims can rack up quickly.
M = Moorage: This can vary widely based on your specific situation. You may be in a large marina or a mooring ball. Maybe you own your own dock or are not tied to one location at all because you’re on an extended cruise. At some point, you will need to pay for a place to tie up, or anchor, and these costs should be factored in. There is also regional variability to consider if you have to haul your boat out for winter storage or hurricane storage. Moorage can be difficult to find these days, so rates are on the rise, be sure to factor this in.
F = Fuel: Unless you’re an early adopter of electric boats, you will have to include fuel in your cost calculation. Obviously, this will vary greatly based on the type of yacht you own, and how you operate the yacht. A small sailing yacht will use significantly less fuel on an annual basis compared to a high-performance luxury motor yacht, and a yacht that sits at the dock will use less than one that is cruised regularly. Take the time to think about how much cruising you plan to do, and what sort of fuel burn is acceptable to you. Once you know these two variables, you can build reasonable estimates using a fuel calculator.
RTF = Recurring Taxes & Fees: Consider any property tax, excise tax, annual registration, or licensing fees in this category. While this is not typically a large percentage of the total cost of ownership, it’s something many people forget to include.
C = Crew: Depending on the size of your yacht, you may have to pay the crew. Whether it is a part-time captain or deckhand, an occasional chef or stewardess, a delivery crew, or a full-time crew, this can be a large part of the annual operating budget and something to consider. Yacht crew salaries can vary widely based on role, experience, location, and contract structure. For the full-time crew, other employment benefits must be factored in as well.
RV = Resale Value: This can be a difficult variable to pin down with certainty, since the resale value of the yacht will be influenced by the market at the time of sale, the age at the sale, and the condition of the yacht at the time of sale. Nevertheless, by working with your broker to understand the typical depreciation of other similar yachts over time, and having a plan for maintenance and refit that you can layer on top of your anticipated length of ownership, a good broker should be able to give you a good estimate of resale value for a 5-year window of time barring things like a financial collapse or a pandemic!
Now let’s look at a real world example.
Let’s consider an 8-year-old, 2012 Ocean Alexander 72 located in Seattle, WA being purchased in 2021, that you plan to own for 5 years and sell in 2026.
AC: Purchase price is $2.2 million. Vessel is in a single asset LLC so no sales tax is due. LLC transfer fees are $6,000, title costs are $1,000, and the yacht is located in Seattle where you plan to keep the boat, so no transportation is required.
AC = $2,207,000
FC: You’ve decided to finance the purchase to free up your cash for other purposes. You put $1,100,000 down (50%) and have a loan amount of $1,100,000. Assuming an interest rate of 5% for a 5-year term, you would pay a total of $275,000 in interest over those 5 years.
FC = $275,000 for 5 years
MC: While you may be involved in the maintenance of your yacht, you are busy and travel quite a bit when you’re not aboard, so you have a yacht management company to oversee and manage the yacht while you’re away. They have service technicians for most maintenance jobs, but occasionally outsource some work; these include washing, waxing, detailing, bottom cleaning, and zincs. Their monthly service contract is $5,000/mo. Additionally, you spend around $20,000 every two years for haul out, bottom paint, PropSpeed, thruster service, stabilizer service, etc. You also budget $35,000/year for upgrades and miscellaneous.
MC = $525,000 for 5 years
I: We will assume an annual premium of approximately 1% or $20,000 per year for insurance coverage for an experienced owner with a similar sized ownership experience. The insured area will include the Puget Sound, Gulf Islands, and up to the top of Vancouver Island.
I = $100,000 for 5 years
M: We will assume your moorage in Seattle costs $24/ft/mo, and your Ocean Alexander 72 requires a 75’ slip, so your moorage cost is $1,800/mo or $21,600/yr. Let’s assume you pay $400/year in utilities for electricity and water. You also plan to cruise the San Juan Islands, Gulf Islands, and up to Desolation Sound each year, where you will be staying at various marinas and anchorages. Let’s say you stay in marinas for 30 days of the 60 days you’re cruising, at an average nightly rate of $175, so $5,250 annually. Total moorage is $27,250/year.
M = $136,250 for 5 years
F: While the Ocean Alexander has the ability to perform at up to 24 knots, let’s assume you plan to do most of your cruising at around 12 knots. Over your 60 days of cruising each year, you put on about 200 hours and burn an average of 50 gallons per hour with both engines and a generator running. This adds up to about $10,000/year.
F = $50,000 for 5 years
RTF: Washington has an excise tax (property tax) of 0.5% of the value of the yacht per year, so $11,000/year. You also have some nominal USCG and Washington State registration fees, along with some nominal legal fees for the LLC, estimated at $2,000/year.
RTF = $65,000 for 5 years
C: While you operate the yacht yourself, and don’t have a full-time crew, you occasionally hire a delivery captain to relocate the boat for you at the beginning and end of each season, and once in a while you hire a chef to come aboard to cook for larger groups. Your average annual crew expenditure is $9,000/year.
C = $45,000 for 5 years
RV: You take good care of your yacht, and practice proper preventative maintenance. You’ve continually upgraded systems, and have thorough maintenance records throughout your ownership. After 5 years, you are able to sell your yacht for $1,850,000; after you pay brokerage commissions, you net $1,665,000.
RV = $1,575,000
So let’s look at it within the formula:
AC + LC + MC + I + M + F + RTF + C + RV = Total Cost of Ownership
($2,207,000+$275,000+$525,000+$100,000+$136,250+$50,000+ $65,000+$45,000)-$,1665,000
5 Year Total Cost of Ownership Estimate = $1,738,250
Annual Cost of Ownership Estimate = $347,650
Clearly, the true cost of owning a yacht is more than the nominal purchase price. Don’t let that scare you though, if you want to make yachting a part of your life, it’s a matter of buying the right boat, and being realistic about the costs involved. Everyone will tell you that owning a yacht is not a good financial investment, and that is generally true. It can, however, be considered an investment in yourself, your family, your friendships, and even a business investment for some. What I find most important is that, by helping clients understand the numbers they enjoy yacht ownership much more because the “mystery” has been removed. Sophisticated clients who are financially capable of owning a yacht should be empowered with this information, and that is why I’ve created this tool.