The charter yacht buying process often seems like a daunting task to first-time boat buyers. There are so many parties involved, documents to generate, and decisions to make.
In this video we discuss what happens when you buy a new yacht from a dealership. From when you put down a deposit until you receive the boat months later in the USA or in the Caribbean or Mediterranean. What is involved in, when do you pay and who takes care of warranty issues!
We have compiled an easy-to-follow checklist below to help you make this experience a smooth transaction. And if you are buying a new boat in a foreign country, we help you navigate those pitfalls i.e. after market work, upgrades and customization. We also discuss European taxes and general boat related tax information and more.
Buying A New catamaran: Ten Basic Steps To A Smooth Process
We have compiled an easy-to-follow checklist to help you make you yacht-buying experience a smooth transaction. Once you have decided on the yacht, choose a charter yacht ownership program (if applicable). and charter company who best suits your needs. Your broker / dealership will help you navigate the boat-buying process from selection, to vetting to closing, so choose wisely. Whether you use a broker or not, keep this checklist handy for your own peace of mind.
Sequence of Events for Buying a New Yacht
We mostly focus on the charter component but this process is very similar for a private buyer.
Due Diligence
- Decide on the yacht model that adequately suits you and your family’s needs.
- Use resources like catamaranguru.com that have lots of information on boat models including catamaran reviews, walk-through videos, and test sails reports.
- Decide on the partner/charter management company you will use to operate your yacht.
- Negotiate the specifications and price.
- Check with your accountant and lawyer to ensure that the charter yacht management program you choose is right for your financial situation and goals.
Yacht Financing
- Apply for financing through a marine lender or other financial institution. Get a letter of a funding approval – do NOT enter into the Purchase Agreement until you have a commitment letter from the lender.
- Check our list of recommended marine loan sources with institutions we have experience with.
Yacht Purchase
- Place the order for your new charter boat with the manufacturer. Note: A non-refundable 20% deposit is required.
- Check the Purchase and Sale Agreement and make sure that you understand it and agree with it.
Factory Delivery Date
Decide when the vessel should be at the cruising grounds to optimize income if applicable. The yacht should arrive and be ready for service at the start of the high season not during hurricane season!
Yacht Corporation Documentation
- Set up a corporation to operate the boat, usually LLC and sometimes with S -orp taxation election.
- You can initially enter into the Purchase Agreement as well as the Management Agreement in your personal capacity, but specify “or Assigns” so that when the Corporation is set up, you can assign the agreements to the entity.
Charter Yacht Management Company Agreement (charter boats only)
- Once your vessel is ordered, follow up with the charter management company. Sign the Management Agreement as well as all the Addendums with the charter management company so that the yacht can be offered for charter pending arrival.
- This is important because the lead-time will ensure that when the yacht arrives, it will already have a good number of bookings, which represent immediate income and cash flow maximizing your yacht ownership program benefits
Tax Advantage With Business Yacht Ownership (charter boats only)
- If you are in a Performance Ownership Program, you need to get all the administration and business set-up completed while the yacht is being built to create bookings prior to delivery of your vessel.
- Sign the Sales Associate Agreement
- Set up the website for your yacht charter business and decide on marketing strategies. See our recommended marketing company with yacht business marketing experience.
- Decide which boat shows to attend
- Put the word out to your sphere of influence about your boat being available for charter.
Yacht Closing and Payment
When the yacht is completed, the factory will request payment before it is released in the charter company’s care. During this closing process, the lender requires copies of the following:
- Builder’s Certificate – Factory provides this to the Documentation Agent (DA)
- Manufacturer’s Statement of Origin – Factory provides to DA
- Picture of hull identification number (HIN) – Factory provides to the DA
- Confirmation of Insurance – Normally, the charter company provides the insurance policy with the owner and lender as loss payees.
- Confirmation of your down payment provided by the charter company
- Bill of Sale provided by the charter company
Yacht Documentation Agent
- The lender will either assign a DA or the buyer appoints one – this depends on the lender.
- The DA’s responsibility is to make sure that all documents and title are correct and provide them to the lender upon request.
- The DA will register and flag the vessel with the USCG and get a certificate of registry generated – note this can take up to a month, so most yachts leave the factory on a “Running Letter” which is supplied by the DA.
Yacht Delivery
The yacht will leave with professional boat delivery crew sailing for the charter base destination. You will be given a delivery tracking number.
Work with us! Catamaran Guru is a member of the International Yacht Brokers’ Association. For more information about charter management, contact us.
