Owning a boat or an all-terrain vehicle (ATV) presents thrilling opportunities for adventure, but many enthusiasts find themselves unprepared for the financial commitment these vehicles require beyond the initial purchase. When it comes to third and fourth vehicles like boats and ATVs, the excitement of ownership is often tempered by a host of hidden costs and logistical considerations.
#### 1. Upfront and Ongoing Costs
The cost of ownership extends far beyond the purchase price. For boats, significant ongoing expenses include docking fees, maintenance, insurance, and winter storage. Docking fees alone can amount to thousands annually, depending on the location. Maintenance is another constant concern, with seasonal preparations and routine upkeep chewing through budgets.
ATVs also require regular maintenance—such as oil changes and tire replacements—plus insurance and potential property taxes. Both boats and ATVs entail much more than their sticker prices suggest, impacting the owner’s financial planning.
#### 2. Insurance and Fuel Costs
Insurance costs can be substantial for these types of vehicles. For boats, insurance may cover everything from hull damage to liability in case of accidents, but premiums can be high and vary widely based on the boat’s size and value, as well as the owner’s experience. ATVs also need insurance, particularly liability and damage coverage, which can be pricey depending on how and where the ATV is used.
Fuel costs are another significant factor. Both boats and ATVs consume more fuel than many owners anticipate, with boats, in particular, being less fuel-efficient than vehicles. Frequent outings can therefore lead to surprisingly high fuel expenditures, which can make each adventure a costly endeavor.
#### 3. Depreciation and Market Value
Depreciation is the real concern for recreational vehicle owners. Especially if financed, ouch! Owing money when you sell a toy is much less fun than the handful of hours enjoyed last summer.
A new boat can depreciate by up to 20% in its first year, with continued depreciation in subsequent years. ATVs fare similarly, with substantial value loss within the first few years of ownership. This depreciation affects the resale value and can make selling these vehicles less economically rewarding than expected.
#### 4. Real Value and Tax Benefits
Consider the story of Jake, a boat enthusiast who purchased a new cruiser for family outings. Initially dismayed by the rapid depreciation, Jake discovered that holding onto the boat longer could actually increase its value in terms of utility and enjoyment. Over time, the cost per year of ownership decreased, enhancing the real value he and his family derived from it.
Moreover, Jake took advantage of the tax code Section 179, which allowed him to deduct a portion of the boat’s cost as it was used for business purposes occasionally. This not only provided some financial relief but also highlighted how strategic tax planning can mitigate the overall costs associated with such assets.
#### 5. Storage and Transportation
While storage and transportation do pose challenges, these are often less burdensome than other costs. Secure storage is necessary to protect the investment from theft and environmental damage, but finding affordable solutions can sometimes be straightforward. Transportation requires planning, especially for larger boats that need specialized trailers and access to boat ramps, or ATVs that are best used in specific terrains.
#### Conclusion
Owning boats and ATVs undoubtedly brings joy and utility to many lives. Our family has a garage full of toys to enjoy. These dreams of adventure come at a cost. Prospective buyers should be aware of not only the initial but ongoing financial and time outlays. Enjoy!
Evan R. Guido is the Founder of Aksala Wealth Advisors LLC, a 2018 Forbes Next-Gen Advisors List Member, and Financial Professional at Avantax Investment ServicesSM. Evan heads a team of retirement transition strategists for clients who consider themselves the “Millionaire Next Door.” He can be reached at 941-500-5122 or eguido@aksalawealth.com. Read more of his insights at https://finance.heraldtribune.com/category/ask-guido/. Securities offered through Avantax Investment ServicesSM, Member FINRA, SIPC. Investment advisory services offered through Avantax Advisory ServicesSM, Insurance services offered through an Avantax affiliated insurance agency. 6260 Lake Osprey Dr. Lakewood Ranch, FL 34240. The views and opinions presented in this article are those of Evan R. Guido and not of Avantax Wealth ManagementSM or its subsidiaries. Past performance does not guarantee future results. The S&P 500 is an index of 500 major, large-cap U.S. corporations. Standard & Poor's is a corporation that rates stocks and corporate and municipal bonds according to risk profiles. The S&P 500 is an index of 500 major, large-cap U.S. corporations. You cannot invest directly in an index. An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. CDs are FDIC insured and offer a fixed rate of return. They do not necessarily protect against a rising cost of living. The FDIC insurance on CDs applies in case of insolvency of the bank, but does not protect market value. Other investments are not insured and their principal and yield may fluctuate with market conditions. Investments are subject to market risks including the potential loss of principal invested.