New boat sales are down.
And if you believe the hype, that’s OK because it’s just part of the cyclical nature of the marine industry — five years up, five years down. That’s just the way it goes.
One segment of the industry that doesn’t believe in such hype is the pre-owned boat market. For the past 10 years, the pre-owned market has been one of the most consistent, predictable segments of the marine industry, selling between 900,000 and 1,100,000 units each year. And according to Info-Link Technologies, whatever percentage dip or climb the new boat market sees, the pre-owned market drops or rises about half as much.
Through a study conducted by Info-Link, the National Marine Manufacturers Association says there were more than $11 billion in sales of used boats and outboard engines in 2005. Sadly, a relatively small portion of that money actually makes its way into the marine industry. And it appears that many dealers don’t want any part of this primarily driveway-to-driveway business, except when it comes to taking in a trade to sell a new boat.
Manufacturers, understandably, oftentimes view pre-owned boats as the competition.
But in a time when there is so much focus on growing boating, maybe it’s time the industry pay attention to such statistics as these: 75 percent of first-time boaters enter the recreational pursuit thru the pre-owned market; and 50 percent of all new boat buyers had purchased their previous boat pre-owned. In the words of Info-Link’s Peter Houseworth, by overlooking the pre-owned market, “it’s kind of like we’re ignoring half of the universe.”
Many of Boating Industry’s Top 100 dealers have found ways to make pre-owned boats work for their businesses, both as a revenue stream and as a way to entice more people into boating. More than one out of every three boats this elite group sells is previously owned, and we discovered myriad best practices while making our way through their applications.
Over the following pages, we’ll take you on a step-by-step tour through a series of best practices that can help any dealer wrap his mind around how to find success in the pre-owned boat market. Hopefully something here will help you realize the potential this market has. Because the odds are pretty good that, no matter what happens with new boat sales by the end of this year, there will still be nearly three times as many pre-owned boats sold.
Know when to hold ’em
One of the keys to dealing in pre-owned boats is knowing which product customers will want to buy and which product doesn’t fit with your customer base.
Some dealerships aggressively seek out product to resell, combing newspaper classifieds, local marine publications and neighborhood driveways for potential new inventory. Park Boat Company Powersports’ (Ranked 38 in the 2006 Top 100) salespeople actively review these sources to find specific boats for sale that may fit a customer’s needs. If the dealership finds one that it thinks will work, it works through its brokerage department to try to put together a deal for the two parties.
For a more targeted approach, some dealers keep a list of prospective pre-owned boat customers and alert them when a pre-owned boat fitting their specifications arrives. White’s Marine Center (Ranked 89) created a pre-owned boat prospect book to capture customer interests. If a customer is looking for a pre-owned boat the dealership doesn’t have, salespeople note the customer’s contact information and a detailed description of the boat he or she would like. “When we trade for a boat, we usually have four to eight prospects to call from the pre-owned boat book,” says Craig White, general manager.
Most dealerships will take trades to grow customers into new boat buyers. Those with an open trade policy can end up with product they know won’t fit their market. To combat this, Marine USA Inc. (Ranked 56) auctions or sells boats that don’t meet its pre-determined boat criteria to local handyman shops. Similarly, Boat Town, Inc. (Ranked 49) has a policy to wholesale any boat worth less than $10,000. And if Slalom Shop Boats and Yachts (Ranked 6) doesn’t feel good about reselling a boat, it will seek out wholesale bids for it. Marine Connection Inc. (Ranked 43) uses its export resources to take trades not marketable in its area, but that are valuable in another part of the world.
Determining at what price to take a boat in on trade can be a tricky job, the end goal being to make the trade worth a customer’s while and simultaneously maintaining a decent profit margin at resale. There are probably as many formulas to determine trade-in value as there are boats, but many of the Top 100 Dealers turn to a handful of basic tools for this task.
Industry pricing guides such as NADA Guides and the ABOS Marine Blue Book are great resources. Many Top 100 Dealers, including MacCallum’s Boathouse (Ranked 94), use the books as a jumping off point, typically using the boat’s low wholesale price and subtracting for necessary repairs.
Looking to your market can also guide setting a trade-in price. Apopka Marine (Ranked 82) notes a potential trade’s retailability before valuing it. And as a Canadian dealer, Rayburn’s Marine World (Ranked 55) tries to keep ahead of what U.S./Canadian dollar trends are going to do to the pre-owned boat market.
The Internet can also lend a hand in gauging trade-in value. Although salespeople at Taylor’s Boats, Inc. (Ranked 11) don’t use Web sites before assessing a boat, they do visit sites such as boattraderonline.com to verify the price they calculated is in line with other similar boats being sold.
Some Top 100 dealers opt to gather all these resources into a trade-in pricing form. Gordy’s Lakefront Marine, Inc. (Ranked 15) includes notes from Web sites, NADA, ABOS and the results of sales team polls on its form. All values are then subject to shop inspection.
Including a shop evaluation as part of a trade valuation is always a good idea. Wear and tear is inherent in previous use. Subtracting for necessary repairs and maintenance helps bring a trade closer to its actual cash value.
Get customers involved
When gathering specs for a potential trade, have the customer fill out an evaluation form for their boat. Not only will you get their perspective of the worth of their boat, but they might also alert you to the boat’s possible problem areas before a service inspection.
Woodard Marine (Ranked 32) uses its customer trade evaluation form two ways: to help customers understand and validate their trade value and so the dealership can judge the trade’s actual cash value more accurately. The dealership asks its customers to rate their boat’s engine, upholstery and cosmetic finish, among other things, on a scale from 1 to 10.
Hall Marine Group (Ranked 4) also has a trade-in evaluation sheet, which covers the condition of the gel coat, interior, engine hours and more. Although the dealer’s salespeople fill out the form, it is always completed with customer input. Doing so gives customers a realistic view of their boat’s value, and thus the amount of trade allowance they might receive when purchasing their new boat.
Buckeye Marine (Ranked 28) adds a stipulation at the end of its customer-completed trade evaluation. Just like with tax forms and other formal documents, it asks if the information the customer provided is truthful and that they completed the form to their best ability. This note often prompts customers to go back and change part of their assessment before signing it.
Let’s see what you’ve got under the hull…
Taking a trade without a service inspection can lead to increased dealership cost and reduced margins.
Pre-trade service inspections can help ensure getting a quality product for its next owner. That’s the mindset at Marine Center of Indiana (Ranked 50). It checks boats before trade because “we won’t take a boat into stock we believe constitutes a poor investment for the next buyer,” says Michael Hoffman, president.
Performing service inspections can help dealerships better value a potential trade. Going over a boat will alert parties to any repairs and maintenance that will be necessary for the boat to put it in sellable condition. Lynnhaven Marine (Ranked 24) inspects all boats, motors and trailers mechanically and cosmetically before arriving at a final cash value. An inspection before trade means the cost of repairs can be built into the deal.
Using a professional marine surveyor can be a sound way to assess what repairs and maintenance a boat will need. Staten Island Yacht Sales (Ranked 33) uses a professional surveyor. The dealership uses the report the surveyor creates to give its Shape Team an outline of what to look for when they go over the boat from top to bottom.
Sea Ray of Cincinnati, Louisville and Lexington (Ranked 59) goes beyond its service bays to make sure a trade is worthy. It takes potential trade-ins out on the water in the summer to check how they run ahead of time. The dealership uses a hose test in winter.
Having a set service inspection checklist can help inspections go faster and can be used as a record to show potential buyers, particularly when the sheet acts as a work order for repairs to be made following the inspection. Six Top 100 dealers who provided information about their lists averaged 37 questions. The lists cover everything from engine compression to gel coat to smoothness in shifting.