Ten Insider Hacks for Negotiating a Great Deal On a New Boat

BOAT SHOWS ARE EXCELLENT VENUES FOR NEGOTIATING THE BEST POSSIBLE DEAL ON A NEW BOAT, BUT SIMILAR TACTICS CAN BE USED AT OTHER TIMES, AS WELL

Oct 14, 2023

INTRODUCTION

The tips shared here are conveyed to you by one boating enthusiast to another, solely for informational purposes. They are in no way warranted or guaranteed to produce the desired results. That said, I hope and expect they will, in fact, be of genuine use to you. After all, insight into the realities of sales situations often pays cash dividends. Fair winds, safe harbors, and good hunting! ― PLF

1. Before the show, develop a clear idea of what you expect the boat’s mission to be.

Understand that the broader the boat’s mission, the more expensive she will be overall. And that is not the end of it. The broader her mission, the less well she will perform for any given subset of functions that may, in fact, be critical to your primary objectives. The goal in detailing a mission is to end up paying only for what you need and require and not for features you won’t need and are likely never to use.

For example, if you will likely use a prospective boat for day trips 95% of the time, a boat with a full cabin and accommodations will generally cost more to buy and operate than a vessel built strictly for day trips. Moreover, the cabin boat will not make as good a fishing boat as an open or T-top center console model.

2. Understand the difference between MSRP and Average Selling Price.

MSRP (or Manufacturer’s Suggested Retail Price) is, as the term suggests, a target retail price set by the manufacturer of the boat. Many people think that the MSRP necessarily bears a relationship to what it costs the manufacturer the boat, but more often than not, it doesn’t. The MSRP is usually set in relation to what the manufacturer sees as its primary competition in the market.

The Average Selling Price is what, in most circumstances, you can buy the boat for from a dealer. The difference between the two represents a “discount” from MSRP. However, don't make the mistake of fixating on how big the discount is. What really counts when comparing two prospective boats to one another, is the actual purchase price. That is, if boat A is directly comparable in all respects to boat B, but has a significantly higher MSRP, the bottom line may be that boat A still offers less value per dollar of price paid ― even if you can negotiate a higher discount from MSRP. Therefore, it's essential to keep good notes so that you are always comparing oranges to oranges (i.e., same or very similar size, power, and other features).

3. How much is the dealer discount?

Obviously, the dealer pays less than MSRP for the boat he sells to you. The difference between MSRP and what the dealer pays is referred to as the dealer discount. On production boats, the dealer discount is usually between 20% and 25%. In some rare cases it may be as little as 15%, and some rare cases, manufacturers may give their stronger dealers additional volume bonuses that boost effective discount to 28% to 30%. It’s important to keep the dealer’s margin in mind because that is what, more than anything else, governs what you may be able to buy the boat for.

4. What is the dealer’s margin on options and accessories?

Sometimes, boat manufacturers extend to the dealer an additional 5% discount (form MSRP) on factory-installed options and accessories. When this is done, it’s in order to provide the dealer with additional opportunity to build profit into a retail deal, since, speaking candidly, the dealer margin on a new production boat is pretty thin to begin with ― especially given the costs to the dealer of floor-planning (financing inventory), cleaning, maintenance, secure storage, warranty, and insurance.

In order to assess whether you have the prospective purchase price down as low as it can reasonably be expected to get, you also need to try to determine if the dealer is picking up an additional $5K or $10K (or maybe even more) on your options and accessories package. And if so, it’s not out of order to seek to recover for yourself at least 50% of that “bonus” margin. That said, you cannot reasonably expect a dealer to sell you a boat at, or at less than his or her cost, except perhaps in special circumstances, one of which we'll talk about later.

5. Understanding “allowances” (on built-to-order boats).

When buying a boat that will be built-to-order, allowances sometimes appear as line items in the sales contract. The idea is to preliminarily define a cost that is not yet fully determined ― for example, an electronics package that has not yet been fully specified or ordered by the buyer. Thus the use of allowances in a sales order is an entirely reasonable procedure.

However, including one or more allowances in a build-to-order contract really turns it into a kind of estimate. Therefore, when a sales contract contains one or more allowances, it’s essential to have a specific, albeit preliminary bill of materials (BOM) attached to any included allowance. For that is the only way to judge whether the allowance is sufficient to pay for what you will eventually want to include.

Keep in mind that, if the BOM attached to the allowance is nowhere near what you want eventually to include, then it is likely the final delivered price will end up being more than the nominal total price shown on the sales contract.

6. How do boat show sales incentives work, and are they real?

Yes, boat show sales incentives are real. There is a significant cost involved in moving a boat to a show and then moving it somewhere else after the close of the show. How much exactly depends on how far away the manufacturer is from the show involved and whether the boats leftover after a show will have to be moved to other than a local dealership location. Either way, it’s always a case of high cost versus higher cost. Consequently, both the boat's manufacturer and the dealer involved are incentivized to sell the boat at the show, rather transport it to somewhere else when the show is over. And that works to your advantage when negotiating a boat show purchase, provided you are aware of it and how important it can be.

7. What day or days of a show are the best for negotiating a deal?

Obviously, at a boat show, you’re looking to capitalize on the reluctance of exhibitors to transport their boats long distances back to either a dealership or to the factory. Which might reasonably lead you to conclude that the last day of the show is the best day on which to push to close a deal. But played correctly, you might find that the first day of the show works just as well, or even better. Here’s why.

Waiting for the last day of the show gives the seller(s) time to accumulate a longer list of “hot prospects”, and that might lead them to want to work those prospects after the show ― especially if the manufacturer and the dealer involved have managed to make a few to several sales during the show. In my experience, negotiating seriously on the first day of the show ― before anyone really knows how things are going to go ― presents a pricing opportunity for an assured, decisive buyer, particularly if you make clear to the seller that they can continue to show the boat for the remainder of the show, provided only that you have a firm, fixed, deposited agreement to take delivery of the boat when the show closes. Keep in mind, as well, that it doesn’t harm a seller to be able to say his or her product is so hot, one sold the very first day of the show.

8. When are the new model of interest coming off the mfg production line? And when will they be available at the dealer?

Production boatbuilders often make improvements to their products on a running basis throughout the model year. Which means that it is important to know not only the nominal model year of a boat you’re considering, it’s also important to know when during the nominal model year that boat was actually manufactured. And it’s important to know when the next boats in the current or next nominal model year will be arriving at the dealer.

Note that USCG regulations allow for a 14 month model year, beginning June 1 and ending July 31st of the following year. This allows boat manufacturers the flexibility to close out old model production while beginning the new model year. However, what it also means is that a new boat of the current model year could actually be more than a year old, a fact that, if it applies, marks that 13- or 14-month old “new” boat for a deeper discount from MSRP. Otherwise, why not just wait for the next shipment of new models to come down the pike?

Still another reason for seeing if you can find out when a boat was actually built during the model year is when it's been on "floorplan" financing. When boats are floor-planned, their purchase from the manufacturer by the dealer is financed by a third-party lender. The transaction is somewhat complicated to detail fully, but for our purposes here, you only need to understand that floorplan lenders generally want to see inventory make a full turn annually, that is, old inventory changed out completely for new inventory every year, even if the cash generated by selling the old inventory goes right back into financing new inventory.

The floorplan lender doesn't concern itself with whether the dealer makes a profit on sales, only that existing inventory does not "age" more than a year. Which puts significant pressure on the dealer holding over-aged inventory to cut a really attractive deal in order to move it.

9. Be prepared to write, at least, a hefty deposit check, but don’t let your emotions take over.

You never truly know whether a dealer is going to accept a skinny offer until he or she is faced with the proffer of a solid deposit. So, if you’re serious about buying a boat at the show and thereby realizing the potential savings involved, you need to come prepared to pen a substantial deposit check, say, 10% - 20% of the purchase price, depending on how big the price tag is.

Moreover, if you are to achieve what we’ve previously referred to as a “killer deal” on a boat, you need to learn to recognize and resist high-pressure selling gambits. Like, “… this one’s going to sell by this afternoon.” Or like, “… there are two other buyers for this one in the wings, just waiting for their wives get to the show so they can see this baby.” To mention just a few.

The selection and purchase of a new boat is an emotion-driven life experience. And you may feel that if you don’t buy a given boat right now, you’ll miss a once-in-a-lifetime opportunity. Well, if you really want to make a great deal, keep reminding yourself there will always be another boat. Because there will be, especially when it comes to production boats.

10. Some savvy negotiating tactics (and how to use them).

My favorite is what I call “The recalcitrant spouse”. Over the years, My wife and I have pretty much perfected and used this gambit in all manner of buying situations, including when negotiating on boat purchases, but also in the case of major expenditures such as automobiles, real estate leases, and so on. It works like this …

One spouse takes on the role of an enthusiastic would-be buyer, while the other shakes his or her head no, no, no and lets it be known that the price is too high and that the boat is deficient in some feature or features. This performance needs to take place in the open, but nominally private conversations between the purchasing “partners”. The tactic is effective in knocking sales professionals off their stride, if for no other reason than it creates an unfamiliar sales scenario in which one partner wants to buy and the other doesn’t, primarily but not exclusively, because of price. The recalcitrant spouse gambit allows you, as the “good cop” to accept all of the arguments the salesperson brings to bear, while blaming the other spouse for being irrationally stubborn. Which leaves only price to haggle about.

Another favorite of mine is to make sure that you are conspicuously carrying the brochures of the major competition to the boat you're interested in buying. And BTW, having some scribbled notes on those brochures helps bolster the salesperson’s perception that you are talking seriously to his or her competition.

Finally, a more extreme, but again useful tactic can be to have a cell call triggered during your discussions over the boat you want, in which you say something like, “Well, yes, that's really an attractive price. But I’m tied up right now, and I won’t be able to come by until later....” You can then turn back to the salesperson for the boat you want and say, "Now, where were we?"

Granted, some of these tactics are less than forthright. But the fact is, whatever you might do along these lines to improve your negotiating edge is far less devious than what the marketers and the sales guys may have already done or said with respect to the boat you’re looking to buy. So personally, I wouldn't lose too much sleep over it. For all is fair in war and dealing on a boat purchase.

― Phil Friedman

Postscript: Want to talk during one of the major boat shows or otherwise? Direct or email message me at: ➡️[ phil@portroyalgroup.com ]⬅️

As well, please note the assertions and opinions presented here are not in any way intended or represented to be legal or business advice. They are a distillation and expression of more than two decades of accumulated practical experience in the recreational marine industry, as VP-Operations for Hansen Marine, a multi-location Hatteras/Bertram dealership and chain of boatyards on the West Coast of Florida; followed by several years as the President and CEO of Palmer Johnson Yachts, a major world-class megayacht builder and shipyard; and more recently as General Manager and Director of Manufacturing for Tartan-Legacy Yachts, a long-established production manufacturer of sailing and motor yachts. ― PLF

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