The cons to buying a new yacht include fewer choices--only a few hundred are built each year versus the thousands that are already for sale out there. A new boat will also depreciate quicker and cost more initially.

If you choose to pursue a new sailing yacht you will find a selection of builders from around the world. Don’t overlook the impact that foreign exchange makes. If you have dollars and are buying a yacht in Euros there can be huge price swings from year-to-year. Consider buying a yacht priced in a relatively weak currency.

Used Boats Pre-owned yachts have a number of benefits that make them appealing. There’s the slower depreciation for the initial investment as well as the bigger ‘bang for the buck’ and a huge selection. You’ll also be inheriting the problems of the previous owners. There’s less curb appeal and you can expect everything to fall apart after seven years.

Charter Boats There’s a third option to consider: charter yachts. Here the costs of ownership are reduced through charter income and sometimes additional tax benefits. A professional will maintain the yacht for you. When you are done sailing just walk-away and the cleaning crew moves in. And yes, there are cons as well. The yacht will receive additional wear and tear. Charter clients have been known to damage yachts. Furthermore, most charter companies restrict the equipment you can have on board and you’ll have to leave the yacht at the charter base year-round.

All of this underscores the fact that before you buy a boat you first should define your cruising plans and know how you plan to use your yacht. Knowing how much time you want to spend on the boat can help. A charter management programs based in the Caribbean typically allows 2-to-6 weeks of owner use a year. Privately owned boats sailed primarily on weekends or short coastal-cruising voyages, and then there’s full time living aboard while blue water cruising.

There are of course other factors to consider: How many people will you be cruising with? In other words how many sleeping cabins do you need? Four-stateroom Beneteaus are usually built with a non-structural-bearing wall between the two forward cabins so it can easily be converted into a large owner’s suite. Or just use the extra staterooms as storage closets. Resist the temptation to have a carpenter substantially modify the interior. Ninety-five percent of the time this negatively affects the value of the yacht. A yacht that is suitable for charter may not necessarily be the best for a couple’s live-aboard. Many people tell me, "We will cruise our new boat for "x" months, then we will put it into a charter program". Well, then, you must go with a charter type boat (lots of staterooms and simply equipped) because otherwise, you will get hurt by high maintenance costs and low use when it goes into charter.

Pre-owned boats can bring their own headaches like this one.: fifteen coats of various bottom paints applied over each other without rhyme or reason, just waiting for a new owner with some enthusiasm for sanding.

Financing Perhaps the most important question to ask is, "How much do you feel comfortable investing in your new cruising yacht?" Often this will involve the input of a marine lender. Ask your yacht broker what lender is offering the best rates and terms. At this time, you can expect the lowest rates in recent history. Loans are now amortized over 15-20 years, require a 20% minimum down payment and, fixed rates are around 5.2- 6.5%. It’s important to note that lenders do not recognize charter income as additional income to qualify for a loan. If you have sufficient equity in some real estate then the cheapest loan is a real estate equity loan. Another tip is to get pre-approved by a lender. Getting pre-approved is free and marine loans have no points to qualify. They are all "simple interest" loans with no pre-payment penalty. If you know you will only keep the boat two-to-three-years then the "out of pocket" expense is surprisingly low. Many yacht buyers have a three-year "itch cycle." That is, they keep a boat for three years, then they "get the itch" to sell it and try out another boat for three years. If your "Beacon" credit score is less than 600 then the situation may be difficult. They like this score to be in the high 700’s or higher. Lenders also look at the debt-to-income ratio and want this to be below 35%. Use only marine lenders, as most banks do not understand the yacht lending business and don’t lend for yachts valued over $100K.

Loan interest payments are deductible as "second home mortgage interest expenses" unless you already take this deduction on a second home. Concerning "seller financing" such an arrangement may be possible in a very few, very rare cases like with some "501- c(3)" charities. But you will need 40% down and are severely limited to only the boats they have taken in as donations (it will not be your dreamboat). Ask your broker what is available here. Because yachts can be easily moved out of the country, 99.99% of all sellers will not agree to seller financing and 75% of all seller-financing deals are in default within 12 months--which is why sellers don’t like this.

When buying new, some popular models of boats mean up to a year-and-a-half of lead time.

When to Buy Because of the popularity of catamarans and certain other popular models, the builders are running about 6-to-18 months out in production availability and delivery can range anywhere from one to 3 months after that. The key is to plan ahead and start checking availability now. The final step is to talk with a yacht broker about what will suit your needs best. Do research and check for reviews. One recent monohull model was found to be "stern-heavy" and in all likelihood, you would never discover this until you either read the review or bought the boat. Request detailed specifications and brochures. Choose options and upgrades and review a purchase agreement. To confirm your order and reserve a hull, expect a deposit of 10-20%. At the closing, your final payment from your lender is due. You may also want to make an appointment to charter this model or see the new yacht of your dreams at a boat show.

When buying a new boat it pays to ask your dealer if there are any special discounts. Often boat show specials will be available before shows but not after. The manufacturers create these special discounts and the discounts will end promptly at the end of the show. Specifically ask if the builder has any unsold inventory or production slots. Ask if the dealer has any inventory they would really like to sell. Mention that you would be agreeable to have your yacht displayed at any up-coming boat shows. Often this opportunity will enable a new owner to enjoy their yacht in New England for the summer before their yacht starts chartering in the Caribbean.

Stay Tuned for the next installment of this series.