Realities of the Boat Sales Business in the Recession

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2008 RecessionThere are many trends that are severely hampering the boat sales business.
I’d venture to say it’s never been this difficult, though that’s debatable having seen the Savings and Loan crisis.  Unfortunately, this is going to be a problem for a long time to come, probably somewhere along the line of two years.

Here’s what’s happening:

  • The number of boat repossessions per month is astronomical.  I hear it’s as many as 2,000 per month along the East Coast.  That’s enough to fill a whole bunch of marinas month after month.  Naturally, this has caused an extreme degree of conservatism on the part of boat lenders.
  • The single biggest problem out there is the inventory of repossessed boats.  What do you think happens to them?  Well, it works like this.  The banks take back all these boats.  They put them on consignment, but they don’t sell.  So a boater goes into the dealership to buy a boat and he won’t qualify.  Ah… but that’s where the problem begins!  He won’t qualify for the boat he wants, but lookee here… the bank is willing to sell some boats out of their inventory for 50 cents on the dollar!  Best of all, they’ll provide the financing for it.  Why not… it moves it off their books.  So the result is that until the boat repossessions stop flowing and the banks work out their inventory, the boat brokerage business is effectively dead.  Sure, some low level of sales will occur, but it’s not like it’s pure profit.
  • The sales talent has virtually left the industry.  What few salespeople remain are on commission only.  If you were a top salesperson, you long ago left the business and I doubt you’re coming back.
  • As for credit scores, it’s not about credit.  Deals are getting turned down with some incredibly high credit scores, as in 730 and above.  You could be a Doctor or a Lawyer. How is this happening?  It’s called the debt to income ratio.  It doesn’t matter that you have a paid Mercedes in your garage and you’ve paid every bill on time in your entire live… if your debt is too high relative to your tax returns, forget about it.  This won’t change until the inventory of repossessed boats is eliminated from the banks.
  • The services you see advertised are the same, but they most definitely are not.  Mechanics and other personnel have been let go in droves.  Everywhere you go, the businesses are operating on skeleton crews.  That’s a lot of top talent that isn’t coming back to the business.
  • What happens when a dealership cuts payroll to the skeleton crew level, puts nothing back into the marina and still has to cut costs?  There’s only one thing to do.  Contract it out.  Contract out most of your repairs, eliminate the parts department and buy only when needed… and hope that quality doesn’t suffer.  That’s fine if you’re a dealership without a major league reputation, but those that spent decades building it up and have won awards really have a tough choice.
  • Of course, other dynamics have to turnaround.  The unemployment rate has to decline substantially.  People have to start feeling good about spending, although I’d say there’s a whole lot of stigma toward big purchases that will last well beyond when Mr. Obama says “the recession is over”.  Also, banks have to stop being so deadly serious about about the debt to income ratio and even ease up on the credit score.  Easier said than done.

So there you have it.  As this recession has taught everyone, it’s not about you, your business or your credit.  It’s all about the banks, isn’t it?

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