Are boats overpriced right now

Are Boats Overpriced Right Now?

Owning a boat comes with its own set of expenses, but are you overspending today when looking to buy new? Check out the Best info about Are boats overpriced right now?

Even in spite of COVID-19’s pent-up demand, many people are reconsidering purchasing new boats as prices have skyrocketed since its pandemic outbreak.

Supply and Demand

Boating industry sales don’t follow consumer demand like cars do; instead, new boats are created based on how much customers have available to spend, and prices don’t directly reflect oil or other commodity costs like they would for cars. Although resin and fiberglass costs do broadly correlate to world oil prices, which helps keep costs in check, recent news indicates oil prices seeming to stabilize should ease the pressure off builders and reduce the need for extra markups on their boats.

Boatmakers were hindered last year by material shortages due to Covid-19 and supply chain disruption, which reduced production and inventory levels. With an economy slowdown inevitable, manufacturers will need to produce enough new boats in order to avoid factory shutdowns and keep existing dealers open; additionally, they could offer value pricing packages or encourage their dealers to sell on floor plans where the manufacturer takes on credit-card debt on behalf of its dealers.

Lower and middle-income families were hardest hit during the COVID-19 Pandemic as their businesses slowed. Prices skyrocketed for essential items, while wealthier households took advantage of asset sales surges and boat market entry that resulted in long waiting lists for new boats – but as markets moderated. Interest rates decreased, and those wait lists should begin to shrink, leading to more stable new boat pricing structures.

Oil Prices

An important factor affecting boat prices is oil price fluctuations, and while they have recently declined, their return could have an impact on boat materials used in construction as well as overall market prices.

COVID-19’s outdoor recreation boom has been an enormous boon to the marine industry, but it appears to be winding down now that demand has decreased and dealers are beginning to offer discounts more aggressively, according to D.A. Davidson analysts on Tuesday. D.A. Davidson analysts downgraded Brunswick Corp BC, +0.44%, from buy to neutral from buy, and reduced its price target from $82 to $90 on this stock.

Though some supply-chain issues that drove up boat prices have eased somewhat, others persist. Inflation remains at 40-year highs, which affects materials and labor costs, as well as interest rates, which are higher than they’ve been historically, which in turn influences demand and prices.

Even if new-boat sales do decline, shipyards will require some time to reach pre-pandemic production levels; that will make new boats more costly due to being built faster; builders would then need to spread costs associated with capital investment and white-collar wages over a smaller number of units.

Interest Rates

Buyers of boats need to consider additional factors: interest rates that will be charged on their loan are rising steadily and could remain elevated indefinitely.

Under normal market conditions, increasing interest rates should decrease demand for new boats by making them more costly to buy; this should help lower prices, but that does not appear to be happening now.

Current market dynamics appear to be driven by political and COVID issues in China, with American manufacturers turning more toward domestic suppliers for materials like aluminum and steel components, making their costs more costly than before.

Labor costs have also become an issue within the boating industry. Hourly rates have skyrocketed due to lingering effects from Covid and as workers leave or are let go altogether, leading to lengthy wait times at marinas and repair shops for service.

However, signs point towards an already diminishing market. Dealers have begun marking up boats — notably smaller models — while some builders expect their inventory levels to return to normal in early or mid-2023, as demand decreases and supply-chain bottlenecks ease off of supply-chain tiers – something which should make selling used boats much simpler for dealers as well.

Dealer Inventory

Like cars and furniture sales, boat sales boomed during the initial stage of this recession as consumers cashed in stimulus payments and savings accounts to purchase high-ticket items like yachts. Now, as interest rates increase and inflation erodes savings accounts, new-boat sales have fallen off dramatically; dealers who once effortlessly closed six-figure deals now need to sell customers on them to maintain sales volumes.

That doesn’t mean there aren’t boats out there – just that many have been purchased by people upgrading, downsizing, or experiencing lifestyle changes and have had to sell. As interest rates drop and more “pandemic boats” return to the market, availability should increase significantly.

Even without inventory available to purchase, prices won’t likely take a dramatic downward turn due to many buyers who delayed buying during peak have still made payments and won’t want to give up their investment just yet. Furthermore, boat builders cannot just stop producing; they must continue paying their staff as well as any fixed overhead expenses regardless of sales.

Boats Group recently issued a report showing consumer demand remains strong. Their midyear market index shows listed boats moving off the market faster than before the pandemic hit and prices not decreasing as quickly as some analysts had anticipated.

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